WASHINGTON — The U.S. auto industry’s problems will cost taxpayers plenty whether or not the government helps Detroit.
Just walking away and letting the struggling Big Three automakers go under would drain government coffers by about as much as the $14 billion package — which passed the House on Wednesday night but faces considerable opposition from Senate Republicans — and perhaps much more, according to outside analysts.
The costs would come from lower tax collections by federal, state and local governments and the payment of extra unemployment, pension and other benefits to unemployed or retired auto workers.
There’s sharp disagreement among outside experts about exactly what an auto-industry failure would look like and how much it would cost taxpayers. But what’s clear is that while no one knows how much government aid the Big Three will ultimately need, inaction would also be expensive, assuming automobile production drops and more workers lose their jobs.
“It’s possible to push arguments like this too far, but there is still a net cost” to government without taking action, said Lou Crandall, chief economist for the bond-market research firm Wrightson ICAP in Jersey City, N.J. “The question is whether the social objective you’re pursuing is worth that net cost.”
The Center for Automotive Research, a nonprofit organization in Ann Arbor, Mich., estimates that if Ford Motor Co., General Motors Corp. and Chrysler LLC stopped making cars next year but returned to 50 percent production in 2010 and 2011, it would still wipe out nearly 2.5 million jobs next year.
The center, which gets a small portion of its budget from auto companies, says 239,000 of those jobs would come from the Big Three, 795,000 from their suppliers and 1.4 million from other jobs created by the spending of autoworkers and suppliers’ employees. The number of lost jobs would decline to 1 million by 2011.
Those lost jobs would cost government $50 billion next year, the center estimates.
