Fred LaSor: Separate government and business
December 13, 2018
Six years ago, then-President Barack Obama stood in front of a General Motors audience and journalists in Detroit and announced an $11 billion bailout of that company. He went on to say how impressed he was with the Chevy Volt, and how he hoped to own and drive one when he was no longer president in four years.
Obama is no longer president (a fact that will shock some readers, no doubt), but he still rides around in a large SUV. And if he wanted to own a Chevy Volt now, he'd have to buy a pre-owned one, as GM has closed that line completely in a restructuring effort that will see the closure of five auto assembly plants in the U.S. and Canada, the layoff of 15 percent of its workforce, and a redirection to production of SUVs and trucks.
When Obama bailed out GM, taxpayers who footed the bill were told it was necessary to prevent an avalanche of job losses well beyond GM, including suppliers of various parts that went into the passenger cars they were producing, and services to all those employees.
The $11 billion we pumped into GM delayed, but didn't prevent recognition of the fact GM wasn't producing passenger vehicles the American public wanted to buy. Not their small cars, which lost market share to Japanese and Korean vehicles, many produced in the U.S., nor their large luxury sedans, whose market was taken by Mercedes and Audi. GM was just not competitive in the passenger car market, and a government bailout didn't change that reality. What it did do was satisfy the UAW union, which was good for large political donations to Democrats running for office that year.
When government picks winners and losers in the national economy, it distorts the role of the marketplace and invites what economists call rent-seeking. We used to call that bribery before academics decided to change its name to protect its reputation. But the effects are the same. Remember the solar power giant Solyndra? That company received nearly half a billion dollars in government subsidies the same month it closed its doors, and a sizeable portion of that money found its way back to politicians. In a rational world (which of course excludes politics), no government money would be allowed to find its way back to politicians who voted in favor of its distribution in the first place.
Returning to the Chevy Volt our former president never bought, I am friends with two people who own them. They love them, but admit their decision to purchase the Volt was significantly influenced by government subsidies they received upon purchase. These same subsidies are available to purchasers of Teslas and rooftop solar panels, and are additional examples of government intervention in the market place — intervention that ultimately drives consumer decisions in economically irrational ways. The special lanes for electric vehicles on California freeways also fall into this category, although I understand these are being phased out.
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Next time you hear of a government subsidy or bailout being offered to an American business, try to imagine (without the din of TV opinion makers) just who's benefiting from the government action. It's most assuredly not the owner of the burrito buggy who sells lunch to workers in the industrial area down the street, nor the woman with the local millinery shop. It's far more likely to be someone who hires a Washington lobbyist who can smoke cigars and sip brandy with your senator. Then ask yourself if this crony capitalism is really good for you or your economy. I believe it's not.
Fred LaSor retired to Minden after a long career in the U.S. Foreign Service.
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