Study: Autos Bankruptcy would be 'Catastrophic' to U.S.

Washington DC December 9, 2008; The AIADA newsletter reported that a bankruptcy filing by two of the Detroit Three would cost taxpayers more than four times what they would pay if Congress was to give them a $30 billion bridge loan, according to a report released by Anderson Economic Group and BBK, an international business advisory firm.

The study found the job loss would reverberate through the national economy, causing damage that would be "unequivocally much higher than the losses from company restructuring with the help of federal bridge loans," the study concluded.

The number crunching calculated that the bankruptcy of two automakers (assuming they would go into Chapter 11 and then be liquidated in Chapter 7) would cost taxpayers $65.9 billion over two years. That includes: $19.8 billion in lost federal income tax; $20.5 billion in lost social security tax; $5.1 billion in lost state income tax; $2.4 billion in lost state sales tax; $3.6 billion in lost property tax; $800 million in state unemployment tax; $8.3 billion in benefits paid out from the unemployment insurance fund; and $5.4 billion in underfunded pensions.

That total compares with a $16.4 billion cost to taxpayers if the government provides a $30 billion loan, with half of that amount paid back. According to a Detroit News story, if General Motors Corp. and Chrysler LLC were to go bankrupt, as they have claimed is likely without an emergency loan, the study estimated more than 1.8 million jobs would be eliminated, as well as corresponding losses in tax revenue.