Was the Auto Bailout Worth It?

David Kiley says yes (via Ritholtz):

The GAO is merely doing its job as watchdog on government spending. Even though the benefits are clear, there are still plenty of pundits and politicians who have doubted the value and propriety, even the constitutionality, of the government bailouts of the two automakers two years ago. Two years in, and they are still complaining. Critics are entitled to their ideology about letting free markets determine the fate of private companies. But the White House and auto companies should not have much trouble defending the wisdom of not letting GM and Chrysler, representing more than a quarter of the U.S. auto industry, collapse into liquidation, which would have created chaos and vast unemployment in the most important manufacturing industry remaining in the U.S.

Both automakers are here today, building cars, mostly in the Midwest, and re-hiring thousands of workers, because the U.S. government kept both companies, in the midst of the meltdown of financial markets in 2008 and early 2009, from being chopped up piecemeal. The rescue of the two automakers also kept hundreds of auto parts companies from going bust. The U.S. auto industry is still the spine of the economies of Michigan, Ohio, Indiana, as well as being important to other states including Pennsylvania, Illinois and Kentucky.

In all, the Center for Automotive Research (CAR) in Ann Arbor, Mich., reckons the government's bailouts of the U.S. auto industry spared more than 1.14 million jobs in 2009, and prevented "additional personal income losses" of nearly $97 billion in 2009 and 2010. Another 314,400 jobs were saved in 2010. The research organization based its conclusions on the potential impact of auto-industry collapse for jobs at U.S. automakers and suppliers, and ripple effects on the economy at large.

The legion of critics of the bailout is quite a gallery: from Presidential hopefuls Rep. Michele Bachmann (R-Minn.) and Mitt Romney (let's see if he sticks to that when he campaigns in Michigan this year) to the more thoughtful, if still stubbornly incorrect, Dan Ikenson, associate director of the libertarian Cato Institute's Herbert A. Stiefel Center for Trade Policy Studies.

Of all the decisions made during the financial crisis, this was probably the most controversial.  I don't see how they could have let GM and Chrysler go under at that time.  It wasn't ideal and it wasn't pretty, but I think it worked out for the best.  If those two companies failed, and they dragged down a bunch of parts suppliers with them, we'd have had a tremendous mess on our hands.  As the article goes on to say, the banks weren't healthy enough to try to finance GM and Chrysler as they entered bankruptcy, so the government was the lender of last resort.