Fact-checking the Ohio Auto Bailout Claims
President Obama and other Democrats are staking Ohio on the auto bailout. If they win here, it will be because they convinced Ohio voters that the economy is improving on President Obama's watch and that Ohio is leading the way as a result of the auto bailout. They're willing to give him another four years to do the same with the rest of the country.
Obama and his Democratic cohort in Ohio have made some bold claims about the success of the $80 million federal bailouts of General Motors (GM) and Chrysler. President Obama
told an audience in Dayton that, "If Mitt Romney had been president when the auto industry was on the verge of collapse, we might not have an American auto industry today." In a
campaign speech in Toledo in September, Obama said that, “The American auto industry supports one in eight jobs in this state.” This number has been so widely reported that it is never questioned.
In a campaign ad, Sherrod Brown claims that the bailout “helped protect 848,000 Ohio jobs” and
in a recent debate, he credited the auto bailout with Ohio’s improved unemployment rate, saying, “These are real jobs and real people that's [sic] a big part of the reason that before the auto rescue, well in early 2010, the unemployment in this state was over 10.5%, now it's under 7%."
Not everyone agrees with these rosy jobs reports. In a September interview with the
New York Times discussing the improvement of Ohio’s unemployment numbers, Ohio Gov. John Kasich said the Democrats’ numbers are inaccurate:
“But you look at the numbers. I mean, it’s like 700 direct auto jobs. Give them the benefit of the doubt — throw in a couple thousand. But we’re almost at 100,000 new jobs. So I’m glad the auto jobs are here, but let’s not try to paint a scenario that’s not accurate.”
On October 23rd, Kasich told Greta Van Susteren on Fox News that the state had actually lost automotive jobs:
“If you want to look at the auto jobs, we’re actually down 500 auto jobs. So of the 112,000 jobs that have been created, we’re thrilled with the auto industry, that it’s here, there’s been investments, and that even though the footprint is smaller, it’s still strong. I love that. But the numbers just don’t bear out and people should understand that.”
Since the country’s most coveted swing state may be won or lost on the issue of the auto bailout, it’s important that we weigh the numbers in the campaign speeches against the published data related to the auto industry.
Democrats are Cooking the Books on Ohio Jobs Numbers
Claim #1: The Auto Industry Would Have Collapsed Without the Auto Bailout
The president claimed that “The auto industry was on the verge of collapse,” and claims in his Ohio campaign ad that, " "Without President Obama's rescue of the auto industry, Ohio would have collapsed." The fact is that only GM and Chrysler were on the verge of collapse. Ford, Honda, Toyota, Nissan, Mazda, Kia, Hyundai, BMW and Mercedes Benz managed to navigate the same economic conditions GM and Chrysler were laboring under without needing bailout loans. In May of 2008 GM and Chrysler accounted for one-third of auto sales in the U.S.
Auto jobs certainly represented a large percentage of the industry and their “collapse” would have had a serious impact on the economies of auto-dependent states. But saying (or implying) that the entire auto industry was on verge of collapse, or worse, that "Ohio would have collapsed" is an enormous exaggeration
. In addition to the implication that all auto manufacturers would have been affected rather than just those representing one-third of U.S. auto sales, the statement also implies that the automotive sector would have collapsed and disappeared completely. That wasn’t an option being discussed at the time. If the bailout had not occurred, Chrysler and GM would have gone through a structured bankruptcy and like other companies who find themselves overextended and heavily in debt, they would have been forced to make some painful decisions, many of them at the expense of union members and pensioners. The bailout avoided many of those difficult decisions, or rather, kicked them down the road for now.
Regardless, Chrysler and GM would not have vaporized into thin air under the traditional bankruptcy scenario. Ohio Senator Rob Portman wrote an
editorial in the Cleveland Plain Dealer last week defending Mitt Romney's structured bankruptcy plan for the auto giants: “Romney's goal was to see these companies shed excess costs, clear out old debts and regain their competitive edge, so they could keep building cars and making payroll.” The
former president of Chrysler recently said that Romney's plan would have left the companies "better positioned to provide the long-term job security for their employees that only true competitiveness can guarantee, and to grow, adding thousands of new high paying American jobs." Under either scenario, GM and Chrysler would not have gone out of business, though it is fair to debate how they would have been impacted under the various bankruptcy proposals.
Fact: The "entire auto industry" was not on verge of collapse and the entire state of Ohio would not have "collapsed" but for the federal auto bailouts as structured by President Obama.
Claim #2: The Auto Industry Supports One in Eight Jobs in Ohio
The next claim is that the “American auto industry supports one in eight jobs in this state.” As previously stated, this statistic is cited frequently by campaigns, politicians, and the media and is never questioned. However, the numbers just don't add up. According to a September, 2012
Ohio Department of Jobs and Family Services report, “Ohio's nonfarm wage and salary employment decreased ... to 5,187,600 in August.” So we know there are around 5.2 million jobs (total) in Ohio. One in eight of these 5.2 million jobs would be 12.5%, or 650,000 jobs that the auto industry would support if the “one in eight” claim were correct. A February, 2011 report on
The Ohio Motor Vehicle Industry from Jobs Ohio said, “The Ohio motor vehicle industry directly employed almost 120,000 workers – 1.8 percent of all employees in the state.” This is far below our target number (650,000), but then the report goes on to list a cluster of industries related to capital equipment, parts, materials, and facilities:
- An estimated 37,400 workers in Ohio made goods incorporated into motor vehicles, bodies, trailers and parts, or that were used in the process. Examples of the former include windshields and windows, springs, nuts, bolts, bearings, valves, electronic parts, paints and metal coatings, adhesives, and sealing devices. These were often made of steel, aluminum, glass, rubber, plastics or other chemical products. Examples of the latter include capital equipment and paperboard products.
- About 4,100 more non-manufacturing goods-producing jobs – notably in construction – depended on presence of the motor vehicle industry here. Altogether, 161,400 goods-producing jobs in Ohio – 2.4 percent of the total – were directly and indirectly related to motor vehicle production.
Jobs Ohio then adds service sector jobs that are tangentially related to the auto industry:
“An estimated 237,100 – 3.6 percent of all workers – were in service industries related to motor vehicles goods, notably including (but not limited to) transportation, warehousing, wholesale and retail trade, financing and insurance, and repair.”
The report concludes that “Combining the impact of the manufacturing and service clusters means that a total of six percent of all Ohio workers –398,500 of 6,615,100 – were directly and indirectly depended [sic] on the motor vehicle industry cluster for their livelihood.”
So at most, 398,500 jobs (120,000 directly related) are affected by the auto industry rather than the claims of 650,000 (one in eight). The number is inflated by over 250,000.
The 2011 Jobs Ohio number for “all Ohio workers” is much higher than the 5,187,600 cited in the ODJFS report as “nonfarm wage and salary employment,” so we cannot make an exact comparison. But even if we use the lower ODJFS number of 5,187,600 total jobs in Ohio, with 398,500 of them being auto-related, the Democrats' numbers don't add up.
Fact: The highest possible percentage of jobs related to the auto industry in Ohio is 7.6%, far below President Obama's and other Democrats' claims of one in eight jobs, which would be 12.5% of jobs in the state, or around one in thirteen.
Claim #3: The Auto Bailout Protected 800,000+ Ohio Jobs
Next is Sen. Sherrod Brown’s claim that the auto bailout “helped protect 848,000 Ohio jobs.”
The concept of protected jobs is an elusive target. There is no way to know what might have happened under a scenario than never actually occurred. Anytime a claim is made that jobs were “saved” or “protected” it’s important to view the claim with the understanding that there is no way to prove whether or not it is true. And at the time of the bailout there was no scenario being proposed that would have resulted in GM and Chrysler completely disappearing from Ohio. It's important to also consider that GM and Chrysler only accounted for 30% of the auto market, so at most, 30% of auto-related jobs (119,550) would have been affected (see previous point).
Fact: There are at most 398,500 auto-related jobs in Ohio, so the claim of 848,000 saved jobs is wildly exaggerated on its face. Even if Sen. Brown were to include all auto-related jobs in the state, no reasonable person could conclude that all the jobs related to the non-GM/Chrysler 70% of the market would have disappeared if Chrysler and GM had not been bailed out, even under the bizarre scenario of both of those companies completely disappearing from the state.
Claim #4: The Auto Bailout is Responsible for the Drop in Ohio's Unemployment Rate
Democrats, journalists, and political pundits have bandied about various versions of Sherrod Brown’s claim that, “a big part of the reason that before the auto rescue...the unemployment in this state was over 10.5%, now it's under 7%.” Ohio has enjoyed a lower unemployment rate (
it’s actually 7.2%) than many other parts of the country, though it is still too high, with 400,000 Ohioans still out of work. The Bureau of Labor Statistics provides historical employment data for the automotive industry, so we can at examine how the industry was affected during the period of the government bailout and the aftermath. The BLS does not calculate all the jobs that are indirectly connected to the auto industry, but their statistics give us a snapshot of the conditions in the state:
State: Ohio Area: Statewide
Supersector: Durable Goods
Industry:
Motor Vehicle Manufacturing
Data Type: All Employees, In Thousands
State: Ohio
Area: Statewide
Supersector: Durable Goods
Industry:
Motor Vehicle Parts Manufacturing
Data Type:
All Employees, In Thousands
In January, 2008, at the height of the auto bailout crisis, when GM and Chrysler were negotiating the terms of their bankruptcy with the federal government, there were 99,800 jobs in Ohio in the motor vehicle manufacturing and parts sectors. By August of 2012, the number of jobs had decreased to 74,700, a loss of 25,100 jobs. Again, this number does not include indirect jobs related to the automotive industry, such as insurance companies, auto repair shops, retail establishments, etc. But it’s difficult to imagine a scenario where motor vehicle and parts manufacturing jobs decreased and gains were realized in other sectors of auto-related jobs. There is no reasonable way to conclude that automotive jobs (and therefore the auto bailout) are improving the state’s unemployment numbers when the state has actually lost 25,100 jobs in this sector.
Fact: Claims that the state’s unemployment numbers have improved due to gains in the automotive industry as a result of the federal auto bailout are false.
Claim #5: Mitt Romney Would have Let the Auto Industry Go Bankrupt
This claim isn't a result of the Democrats' poor math skills, nevertheless, it has been an important factor in the Battle for Ohio. A centerpiece of the Obama campaign in Ohio (and other Democratic campaigns in the state and across the country) has been that Mitt Romney would have let GM and Chrysler go bankrupt. An ad running in Ohio says just that, leaving out the fact that the car companies did, in fact, file for Chapter 11 bankruptcy:
Man #1: "Without President Obama's rescue of the auto industry, Ohio would have collapsed."
Man #2: "Mitt Romney would have just let us go under. Just let 'em go bankrupt."
Mitt Romney: "That's exactly what I said. The headline you read which is 'Let Detroit go Bankrupt.'"
Woman: "For him to say, 'Let 'em fail...'"
Man #2: "How you say something like that is just beyond me."
Narrator: "Mitt Romney. Not one of us. "
This has been a grand deception in Ohio. For starters, the headline "
Let Detroit Go Bankrupt" in Gov. Romney's editorial was actually chosen by
New York Times editors, likely to cast Romney in a negative light. Since then, Democrats have led voters to believe that while Mitt Romney would have let the auto companies go bankrupt, by omission they have led voters to also believe that President Obama's auto bailout did not result in bankruptcy. This is completely false, but most voters don't know it because Democrats don't use the words "bankruptcy" and "auto bailout" in the same sentence unless they are attacking Gov. Romney. Further, they have falsely led the public to believe that Romney did not favor any government role in the restructuring of the auto companies.
Sen. Rob Portman dispelled these myths his
Cleveland Plain Dealer editorial last week titled, “A Tale of Two Bankruptcies.” Portman wrote:
“The fact is that in spring 2009, President Obama actually did take General Motors and Chrysler into bankruptcy. So when the president claims that Mitt Romney wanted the carmakers to undergo bankruptcy, he's describing his own policy...
"...To save those jobs, Romney proposed a restructuring plan -- backed by a government safety net -- that would have put GM and Chrysler back on their feet. He called for new management and cuts in executive pay and perks. And he proposed that the federal government provide a path forward for the carmakers by backing up loans to help them after bankruptcy filing and assuring car buyers that warranties would be honored.”
FACT: The Democrats have been deceiving voters on the issue of the auto bailout bankruptcy for months and continue to do so. They do this despite the fact that even the liberal-leaning PolitiFact has debunked it.
Conclusion
Ohio is Ground Zero in this year’s presidential race and also has several of the country’s most contested congressional and senate races. Part of the Democrats’ strategy in the state has been to convince Ohioans that the state would have been devastated without the auto bailout, which President Obama, Sen. Brown, and nearly every Democratic congressional candidate supports and which Gov. Romney, Senate candidate Josh Mandel, and most Republican congressional candidates have opposed. Moreover, some candidates and many in the media have claimed that the state’s improved economy and plummeting unemployment rate should be attributed to the auto bailout. For the most part, Republican candidates have not argued with these assertions. Governor Kasich has been one of the lone voices in the wilderness saying that the claims and numbers are overstated.
In studying government reports on jobs in the state, the only realistic conclusion is that the Democrats are overstating and, in some cases, wildly exaggerating their claims. Worse, many of their claims are outright deceptive. While the state would have certainly been negatively affected by a traditional bankruptcy for GM and Chrysler (without the $80 million government bailout), the imagined doomsday scenario in which the companies would have been vaporized, along with 800,000 jobs, is the stuff of magical campaign thinking. Or perhaps good old-fashioned fear-mongering. In the worst case scenario (a scenario never proposed by Gov. Romney) if both GM and Chrysler had disappeared completely and taken with them every last auto-related job corresponding to their 30% share of the market, around 120,000 jobs would have been lost. Most certainly, this would have been devastating for the state and individual families. But it is irresponsible to prognosticate that an
entire industry (or an
entire state) would have
collapsed with the loss of these jobs. In addition, Gov. Kasich claims to have added 112,00 jobs since taking office in 2010, so the state may not have been significantly worse off in raw job numbers.
Democrats are using the auto bailout to take credit for the improved unemployment numbers in Ohio when the jobs statistics tell a completely different story. This has created a false narrative that may affect the outcome of campaigns across the state, including the outcome of the presidential election, which could have dire consequences for our country.
Words and numbers matter, and in this case, they don’t add up.
Cross-Posted at
RedState
