Inaction on Big 3 would cost taxpayers billions

The result: 453,000 lost jobs in the first year from the Big Three, their suppliers and spin-off jobs, Heritage estimates. Beach said this would mean a 2009 cost to federal taxpayers of just over $13 billion: $12.7 billion in tax collections and nearly $600 million for unemployment insurance, food stamps and other expenditures.

“The impact is significant but not large,” Beach said. “The government has well-developed programs to handle things like this.”

Conservatives aren’t alone in doubting the U.S. auto industry would vanish for lack of a federal lifeline. Without U.S. assistance, auto companies would shrink but “it’s not likely that if there’s no bailout that all the jobs would go away,” said Jim Horney, director of federal fiscal policy at the liberal-leaning Center on Budget and Policy Priorities.

A pair of Michigan consulting firms say an automaker bankruptcy would be four times more expensive to taxpayers than a government bailout that allows the companies to restructure.

If two of the Big Three declare bankruptcy and are forced to liquidate, federal and state taxpayers would lose $66 billion in the first two years alone, according to a study by Anderson Economic Group of East Lansing, Mich., and BBK, a business advisory firm in Southfield, Mich. That scenario — which envisions the loss of 1.8 million jobs — includes costs of $20 billion in lost federal income taxes, $21 billion in payroll taxes, $6 billion in state income and property taxes, and $5 billion in unemployment benefits.

A $30 billion loan in which half is repaid and the government gets a stake in the companies would cost $16 billion, with far less in lost revenue and higher spending to support unemployed workers, according to the firms, whose clients have included auto manufacturers.

Warily eyeing the auto industry’s problems is the Pension Benefit Guaranty Corp., the federal corporation that insures the defined-benefit pensions of 44 million American workers, including autoworkers.

Even without a failure in Detroit, the PBGC has about $11 billion more in liabilities than it holds in assets. In an interview, Director Charles E.F. Millard said the red ink could grow, depending on what happens to the automakers’ pension funds.

“It’s possible that in a bankruptcy scenario, the deficit of the PBGC could more than double,” he said. “It’s also possible the PBGC would not be affected.”

The PBGC receives no taxpayer funds and is financed by fees on the companies it insures and other sources. A dramatic worsening of the corporation’s finances, along with growing numbers of people drawing pensions from it, might force lawmakers to consider taxpayer assistance.

More on autos bailout | General Motors

Also in msnbc.com business Answer Desk: TARP break even? Not very likely Companies look for alternatives to the holiday party Your Career: Think twice before giving the boss a gift Answer Desk’s John Schoen chats about unemployment   Video: Gatorade to discontinue "Tiger Focus" drink

MORE FROM AUTOS

Autos Section Front

Auto industry turns to Europe for direction   Congress tries to broker auto dealerships deal Mercury tops list in customer satisfaction Jaguar named top luxury brand for satisfaction VW buys 49.9 percent stake in Porsche Latest Toyota setback: Claims engines stall Auto industry shows a pulse at L.A. show Whitacre steers GM onto new path Pontiac hits end of the road   Los Angeles Auto Show 2009 Autos Section Front   Add Autos headlines to your news reader: