After receiving a $49.5 billion taxpayer funded bailout during the last financial crisis, a bailout that cost U.S. taxpayers $11.2 billion and led General Motors (GM) to subsequently make more than $22 billion, GM is now warning that it will move more production overseas.
The auto giant isn’t showing much gratitude for everything the U.S. taxpayer did to save it.
In 1953, GM CEO Charles E. Wilson stated during a congressional hearing in which he was being considered for secretary of Defense: “I thought what was good for our country was good for G.M. and vice versa.”
{mosads}My how things have changed. Since 1955, GM has ramped up its overseas production of cars. Today, GM produces a significant number of its vehicles outside of the U.S., ships them to the U.S. and sells them to U.S. taxpayers.
Some of these include the Cadillac ATS, Cadillac CT6 plug-in version and Buick Regal, among others. GM isn’t the only “American” automotive manufacturer making vehicles it sells in the U.S. outside of the U.S.
Lincoln assembles a mere 17 percent of its vehicles sold in the U.S. within the U.S. while Chrysler assembles a still meager 33 percent of the vehicles it sells in the U.S. within the U.S.
Interestingly, some foreign automakers assemble a much higher percentage of the vehicles they sell to U.S. taxpayers within the U.S. Acura assembles an impressive 71 percent of its U.S. sold vehicles within the U.S. followed by Toyota at 61 percent and Nissan at 55 percent. As we celebrate Fourth of July, which companies are really the most patriotic?
What can the American taxpayer do? They can look for vehicles assembled in the U.S., which oddly enough would often mean buying more foreign brands. In this increasingly connected world of global production, it is time U.S. taxpayers look beyond the company name to where vehicles are being assembled.
Congress and the president also have a key role to play. Under the recently passed tax bill, companies like GM can move more production overseas, reduce its American workforce, increase its foreign workforce and benefit from the same recently passed tax cuts as companies increasing production in the U.S. and hiring more Americans — talk about a bad deal for the American taxpayer. There is an alternative.
The recently passed tax bill handed out corporate tax cuts like candy with no regard for return on investment (ROI). Companies firing Americans received the same tax cuts as companies increasing hiring in America. It is time Congress and the president fix this massive mistake.
Under the Solutionomics’ ROI based tax plan, companies that hire more Americans each year would keep the recently passed tax cuts. Second, companies that don’t hire more Americans would see their tax rates go back to the previous rate.
After all, if the purpose of the corporate tax cuts was to generate more American jobs, then let’s at least make sure we are getting the jobs we were promised in return for the massive increase in deficits placed on the American taxpayer.
Third, companies firing Americans would have their tax rates increased above the rate that was in place prior to the most recent tax cuts. This third point would directly address GM’s threats of moving more production overseas.
If GM reduced its American workforce, its tax rate would increase to a level above what it was before the recently passed tax bill.
GM is free to operate as it sees best for its shareholders, and the U.S. is free to operate its tax policy as it sees best for the American taxpayer. It is time Congress gets a better return on its investment as opposed to merely hoping for a return on its tax cuts.
Given that taxpayers lost $11.2 billion in the bailout of G.M., shouldn’t taxpayers be receiving discounts on GM cars as opposed to threats of moving more production overseas? Instead, GM is sending a very unpatriotic message this Fourth of July week.
Chris Macke is the founder of Solutionomics, an economic think tank. He has advised the U.S. Federal Reserve by providing market updates and implications of monetary policy changes on asset valuations and market distortions, and he’s a contributor to the Fed Beige Book. Follow Solutionomics on Twitter: @solutionomics.