None Dare Call It Socialism

by Mario Rizzo

 

The Wall Street Journal reports today that the Republican Administration may agree to a bailout package for the US auto industry that would give the government a large financial stake (“warrants”) in at least GM and Chrysler.

 

 

While it is not clear at this writing whether the warrants would be voting, nonvoting, preferred or common shares, it would be a form of ownership. The warrants would amount to about 20% of the value of the loans. The restructuring that will take place under such a deal would necessarily be open to all sorts of political manipulation and rent seeking. A “car czar” (notice how humor is used by the planners  to make things seem all friendly and nice)  will be appointed by the president to oversee the restructuring. Unlike a bankruptcy judge this appointee will be subject to the winds of political expediency. I hope this plan will die because of political wrangling and disagreement. Nevertheless, it demonstrates where we are. No one in power is counting the long-run costs. The slippery slope is in fine form.

 

 UPDATE: There is a good complementary post at CafeHayek.

11 thoughts on “None Dare Call It Socialism

  1. ‘A “car czar” … will be appointed by the president to oversee the restructuring.’

    I think Rod Blagojevich may soon be available for the job.

  2. Mario,

    Regarding your comment, “No one in power is counting the long-run costs,” I wonder what you mean by that? I think the people making these decisions are certainly making very rational, farsighted decisions. It’s just that their personal interests do not coincide with those of the average taxpayer.

    I’m not just making a pedantic quibble, I think we (i.e. free market analysts) are not only naive but also handicapping ourselves if we too easily accept the framework that the policymakers provide us for all these things. But the Illinois governor reminds us that these decisions are often about more than the commonweal. 🙂

  3. Thanks Jeremy, though I had to google “ftw.” Incidentally, I should note that I am not “lecturing” Mario Rizzo above! The Internet is often very bad at conveying tone. Mario knew about public choice before I knew about the potty. But I’m just pointing out how we (because I do it too) often give politicians too much credit when discussing their decisions.

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