by Rep. Ron Paul
Last week, General Motors finally declared bankruptcy. Many in government thought $20 billion in taxpayer dollars would save the company, but as predicted, it only postponed the inevitable. The government will dump another $30 billion into GM and take a 60 percent controlling interest for it.
Public officials are now involving themselves in tactical business decisions such as where GM’s headquarters should move and what kind of cars it will build.
The promise that this is temporary and will eventually be profitable is supposed to ease the American people into accepting this arrangement, but it is of little comfort to those who remember similar promises when the American taxpayers bought Amtrak. After three years, government was supposed to be out of the passenger rail business.
40 years and billions of dollars later, the government is still operating Amtrak at a loss, despite the fact that they have created a monopoly by making it illegal to compete with Amtrak. Imagine what they can now do to what is left of the great American auto industry!
In a truly free market, GM would get your money one way and one way only – by selling you a car you want, at a price you are willing to pay. Instead, the government is giving public money to a private company in spite of the market signals it has been sending.
Throwing money at GM does not stop it from being an engine of wealth destruction; on the contrary, it simply gives it more wealth to destroy.
Had it been allowed to fail naturally, the profitable pieces of GM would have been bought up and put to good use by now. The laid off employees would likely have found new jobs and all that capital would be in private hands, reinvested in companies that produce products demanded by consumers. Instead, we are all poorer now.
Political pressure, rather than the rule of law, is deciding how to divide up the remains of GM. The bondholders had billions in retirement savings invested in the company, and though they were entitled to nearly three times as much as the United Auto Workers, the bondholders were left with just a 10 percent stake compared to the union’s 17.5 percent stake. For their 60 percent stake, taxpayers have a future of constant bailouts to look forward to.
Comingling public control of private business is known as fascism. While today’s politicians may feel emboldened with all their new power, history will only repeat itself as all this collapses on itself.
It is the height of hubris for bureaucrats and politicians to attempt to control the market and the freewill of the American people. In the end, the market always wins out.
Maybe one day future generations will wise up and allow free markets to function and thrive without the albatross of government around its neck. For now, it looks like those in charge have not learned the lessons of the past, and have doomed us to repeat those mistakes once again.
Ron Paul is a republican member of Congress from Texas.
June 9th, 2009 at 3:13 am
Ron Paul you are correct again! You predicted the bankruptcy would come regardless of what Washington threw at it and here we are. I will never buy a car produced by GM. The product is inferior and now that the government has stepped in making the decisions the cars can only get worse.
June 9th, 2009 at 3:46 am
Right you are, Jared. And, of course, nothing in the constitution authorizes the federal government to engage in this kind of activity. They seem to be making it up as they go.
June 9th, 2009 at 5:25 am
I’m with you. I have always bought GM cars - always. But I think I will not do so anymore, so long as it is owned by the feds.
June 9th, 2009 at 7:43 am
Wrong. Amtrak has been a pretty large success, using federal subsidy more efficiently than either our highways or our airports - and as science shows us, clean and green trains are going to be essential to the future of transportation in this country. The private sector with its profit driven model has shown no interest in contributing to the development of passenger rail and technology, therefore the government has stepped in to save this valuable resource for the good of the populace. I think you are confused as to the meaning of fascism. The fascist corporatist state can only be reached by libertarian values which allow big business to augment its power to the point where it is ascendent over our government. If anything, the influence of oil companies and defense contractors during the Bush years is the closest this country has ever come to fascism. There is plenty of historical precedent for the government purchase of a portion of GM, and in no case has it led to the development of fascism. Aren’t you supposed to be a doctor?
June 9th, 2009 at 8:06 am
Another eloquent piece by Dr. Paul. He has such a gentle way of framing ugly truths I think.
“Had it been allowed to fail naturally, the profitable pieces of GM would have been bought up and put to good use by now. The laid off employees would likely have found new jobs and all that capital would be in private hands, reinvested in companies that produce products demanded by consumers. Instead, we are all poorer now.”
June 9th, 2009 at 10:30 am
Amtrak is a success? Well, I guess if someone put me in charge of purchasing a honda accord for my office, and I spent $150,000 to get one, in some ways you could say that I successfully purchased the car. But, overall, I think that would be a complete and utter failure.
Monopolies aren’t the definition of success.
June 9th, 2009 at 11:11 am
Fascism in Europe dictated private enterprise decisions only with respect to the war engine and the use of people who were not members of the “master race” as slave labor. What quarrel did business have with Franco?
Dr. Paul, namecalling is beneath you. I happen to agree that GM should have been pushed into bankruptcy without the feckless intervention of vast government spending. But why label that mistake (and the Obama Administration) as fascism?
And why place all of the blame on government? It was GM that adhered to decisions made since the time they sequestered the electric car that they would rather go bankrupt than produce a utile vehicle that could be operated sans internal combustion engine. That entire course of decision making was irrational.
Fascism was evil, but only the Nazi’s were truly (and remember ONLY OCCASIONALLY)irrational.
June 9th, 2009 at 11:14 am
“Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power.”–Benito Mussolini
June 9th, 2009 at 2:15 pm
To Chris Robbins…
Getting a subsity after 40 years is the definition of failure. Needing subsidies means there is not a profit, but a loss, of which the subsities are meant to make up for that loss.
There are also reasons why the private sector does not invest in rail… Not enough people WANT it (in REAL numbers, not politicized numbers), and because the government has a monopoly on it.
Nough said.
As for fascism, the defining charicteristic is pseudo-private property, but government gets the final say on what is done with it. This is the opposite of freedom through property rights… That means government PRIVILAGES… not INDIVIDUAL RIGHTS.
Your principles are fuzzy, sir.
June 9th, 2009 at 2:55 pm
might what to watch this little clip …. Newsweek Editor Evan Thomas on MSNBC’s Hardball with Chris Matthews
http://www.youtube.com/watch?v=37B_nOdRTAA
June 9th, 2009 at 6:24 pm
Chris,
you really think Amtrak is a success?.. it’s been on the government ventilator for 40 yrs and still can’t seem to muster up enough passengers to support it’s self… Anyone else see Amtrak as a raving success? anyone having to wait at Railroad crossings for Amtrak?.. or are you waiting for privately owned railroads?.. I live next to a train station 200 miles from Seattle.. I see Amtrak roll through about once every three months..almost empty. Amtrak has no future unless the federal government keep putting the defibrillator on it.
June 9th, 2009 at 6:52 pm
If the Supreme Court rules in favor of the government takeover of GM, and the sanctioned theft from secured bondholders is upheld, it signals to everyone in the world that no private enterprise is safe in America. What bondholder would want to invest anywhere in America if their invested stake is constantly subject to the whims of the federal government?
If the Supreme Court fails to do the right thing, you can expect to see an exodus of investors, effecting a steady acceleration of failing businesses, and more bailouts that are de facto takeovers. It would be a self perpetuating death spiral of our economy.
One has to seriously ask if the fiscal policy of this current administration and Congress are not reckless but deliberate. I have a hard time trying to rationalize this behavior as just being merely actions of the galactically stupid.
It’s a crisis invented and they are the solution to their own problem.
June 10th, 2009 at 5:44 am
Our republic must defend itself from these increasing acts of congressional extortion, judicial aversions, and these intensifying threats of executive force.
Many of our individual rights are intertwined, and would become instantly, and irrevocably unfastened, were we to be found without these precious protections of our republic, they could easily be dissolved by a force that has grown to become vengeful in its intent to be independent of it.
June 13th, 2009 at 7:41 pm
Rather than labeling something as “facist”, which implies some sort of failed 20th Century political ideology, why not use a more objective term like “totalitarian” ?
But, seeing as we have already succumbed to Godwin’s Law with practically the first step, perhaps our surviving children’s children will eventually enjoy some form of farfegnugen.
Blake
June 15th, 2009 at 7:21 am
What Can we common Poeple do about the Bailout? Nothing.. we just have to wait and see if the company comes up and develops new cars and prototypes to please the americal consumer
June 15th, 2009 at 11:17 am
Yea! And when, G.M gets out of federal custody, maybe all those other crooked car companies will understand, that surrender is the better part of valor. Lol
June 16th, 2009 at 10:27 am
Abby, I think “we common people” can do plenty. If you don’t like a certain policy, vote with your money. That’s what makes the most effect.
I pledge to do my best to not do business with any companies receiving bailout money. GM, Citibank, and the rest of them. Maybe that means my purchasing choices will be very limited, but saving my income would be a far better choice anyway…