Since the Bush/Obama bailouts of General Motors in 2008 and 2009, respectively, the government has been badgered by fiscal conservatives and business-minded people to divest of its shares in General Motors. Unfortunately, as Rick Newman writes at US News, losses to the taxpayers could near $40 billion even as divestment begins taking place.

Back in June, a paper by Heritage Foundation Senior Labor Policy Fellow James Sherk found losses to the taxpayer were entirely due to special treatment given to the United Auto Workers (UAW). According to Sherk in an e-mailed statement on Dec. 20, “Virtually none of these losses were necessary to keep GM operating; they came from subsidizing union compensation. The taxpayers spent over $12 billion to give the United Auto Workers far better terms than bankruptcy law calls for. Had the government not given the UAW preferential treatment it could have kept GM running without losing money.”

At the end of the day, the auto bailout has at least three major flaws with it that highlight why bailouts are at best risky policy, and too often horrible policy. Consider:

1. As Sherk pointed out in his paper, and as he told me in an interview shortly after the paper came out, traditional bankruptcy procedures were not followed by the Obama Administration. When the government is in charge, rules often don’t matter, and in this case the UAW got special treatment that put it above investors.

2. When then-CEO Ed Whitacre said GM had paid back its government loans in 2010, it was quickly found out this was a lie. Yet Whitacre was not held responsible for this manipulation of taxpayer trust, including his appearance in this April 2010 ad.

Again, when government is involved in this way in the private sector, one has to look under every rock to make certain all facts are being presented.

3. Taxpayer losses are unacceptable when it comes to bailouts. First, the free market does the best job of deciding which companies survive. Second, should government wish to bail out special interests – whether it be through subsidies, straight-up bailouts, tariffs, etc. – it should do its duty to taxpayers and make certain losses are not realized.

According to Newman, losses on the GM “investment” will be around $30 billion in this first round of divestments. In the end, losses could be billions more. Which means while millions of Americans struggle to find jobs and provide for their families, the federal government’s friends at General Motors are sitting pretty.