Government Motors: Obama’s Engine of Wealth Destruction





In his latest column, Ron Paul criticizes the government’s takeover of General Motors. Instead of being propped up and managed by inefficient central planners at taxpayer expense, GM should have been allowed to fail naturally, letting the free market reallocate the company’s resources and assets to their most productive and profitable use.

GM, Amtrak and an Increasingly Fascist America

by 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 free will 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.



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8 Comments:

  1. Hey if We the People own GM and Banks too, how long before we start getting paid byt them paying some of our taxes? That cane be done by building the Electric Car we can plug into our Solar powered roofs, instead of the GUNS AND BOMBS Budget.

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  2. Ron is absolutely correct about the government's invovlement at GM. It is the role of the government to serve its constituents to the best of its ability, but interfering with private enterprise is no way to do so.

    Instead, Government Motors will 'serve' us receive by using more of our money, money that could be used to help improve our lives, to be thrown down the drain and help get this failing company back on its feet. That is just not going to happen though because government has absolutely no idea or ability as to how to run a car manufacturing and distrubution business.

    The government does know how to use taxpayer dollars and waste them and it repeatedly does a good job at this. GM will be yet another example and I hope that politicians will finally learn from this, but it is up to the people and major media outlets to hold these crooks accountable and that happening is still yet to be seen.

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  3. Ron is incorrect when he says alternative passenger trains cannot legally compete with Amtrak. It is not the law that prevents competition in passenger rail. It is the private freight railroads who will not allow competing passenger trains to operate on their privately owned tracks.

    Any passenger operator is legally allowed to negotiate for rights of access, but the track owners, who have enough to deal with in their freight operations, don't want to deal with competing passenger operators who each want their own time slots. Every freight railroad has stated in no uncertain terms they will deal with Amtrak and only Amtrak.

    Amtrak does have the legal right to access private tracks, but the law does not prohibit other operators from negotiating for access with track owners. Only the track owners themselves prohibit this.

    Until recently there WAS another operator, American Orient Express (later Grand Luxe Railways) which ran high-end luxury tourist trains all over the country. However, the freight railroads required AOE to contract with Amtrak for locomotives and crews who were familiar with each route.

    When state transportation agencies wish to start new regional services, the freight railroads often require the states to make their proposals through Amtrak. They generally will not deal with the states directly.

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  4. It should read Tim,"Govt Motors Holdings".They'll be holding GMH back and costing the tax payer a bomb.Govts here in Aust cannot run a bank properly ie, all they have to do is generate currency and collect interest.

    What chance has a high tech manufacturuing industry got,run by incompetent bureaucracy and competing against the likes if Toyota? The only way it will work is by raising tarrif barriers.The US people will have an inferior product that cannot compete on the world market.More insanity and denial of the reality.The US people need to stand up and be counted before it is too late.

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  5. i understand he is speaking of the collective U.S. I was just pointing out the fact that not only is providing GM with federal dollars fascist, but it ALSO is furthering the gap between the rich and the average American. I'm not trying to start a class-battle, although it is an interesting topic.

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  6. I agree except for one thing, not everyone is getting poorer. Around 95% of all wealth is owned by 5% of all people. An equal tax raise on all people destroys the wealth of all, but it also destroys the wealth of the bottom 95% drastically while the top 5% go on virtually unchanged. That is evidenced in the fact that the construction of $200-300K houses is virtually extinct, while homes that cost in excess of $3 Million are selling at an all time high.

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    • Lindsey Brutus

      Kevin: What does your comment have to do with the GM Bankruptcy? When Ron speaks of everyone getting poorer he is speaking of the collective U.S. and not wealthy vs non-wealthy. There is no mention of a tax raise for every one either in this statement. Class warfare is very un-American and is a practice engaged in only by true liberals. I'm sure you're not one of those!

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    • Kevin,

      Take a look at a tax return from someone whom is purchasing/living in a $3 million house and one of the "other 95%" and ask yourself what is right. Perhaps they're at a all time high because there are good bargins but I can assure you there's not many being built.

      This GM deal is for the birds, it adds another level of complexity not dictated by the free markets which makes it a unfair competitor. Imagine what Ford and others may encounter when selling cars or hiring talent, it's like asking Texas to compete with Kuwait on oil. Looks good to save the CO on the short term, politics...

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