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September 09, 2008
Nationalization in all but name
"Nationalization" is a word normally associated with socialist dictators and petty Third World tyrants. In this country, the government is not supposed to nationalize companies, much less entire industries. Instead, it bails them out or buys them up when they run into trouble. The end result? The government runs them just as if they had been seized with military force. I'm not an economist, but I'm having trouble seeing this as anything other than de facto nationalization. In a piece titled "Risk for thee but not for me," David Harsanyi looks at the disgraceful (IMO) bailout of Fannie Mae and Freddie Mac not as a singular event, but as part of a trend: The bailout allegedly will cost taxpayers approximately $200 billion. And, as you know, federal projections are always on target.Harsanyi does not spare Republicans: Now, not only has a Republican administration boosted an incontrovertibly unfree market, but Democrats are selling Americans on the idea that similar centralization and regulation will benefit us in the areas of health care and energy.Harsanyi goes on to make the case for privatization, and while I agree, the powers that be seem to be in near-unanimous agreement that privatization is a dirty word. That privatization is what caused the problem. Common sense would suggest it's the government guarantees; that when these large private sector entities know that the taxpayers will bail them out, they have no incentive to be responsible. Yet the only people who seem to be able to grasp this common sense notion are the ordinary middle class taxpayers who have to balance a checkbook and pay their bills -- precisely the ones whose money supplies the guarantee. In what adds insult to injury, the tax-eaters don't even seem to understand that the money they are eating comes from the tax payers. It's as if they think "the government" is another gigantic unaccountable entity with an unlimited supply of money. In the Third World countries that practice nationalization at gunpoint, they can always print more. And if that fails, they can engage in things like outright confiscation of wealth, or not allowing people to move their money. Hope we don't go that route. Not as funny as it sounds; in California there's a ballot initiative which would confiscate wealth, and impose a 55% "Exit Tax." Fortunately, California remains a state in which taxpayers still constitute a voting majority, so I doubt it will pass. But what would happen if tax eaters ever became the majority? If de facto nationalization of the private sector continues as a growth "industry" the way it has, pretty soon most people will be transformed into de facto tax eaters, because they'll be working for the government. And when we're all working for the government, who will pay the taxes? I'm glad I'm not an economist. posted by Eric on 09.09.08 at 09:32 AM
Comments
This is a loathsome state of affairs, but as a weak defense to this FNM/FRE takeover, note that those corporations were foolishly begun as some kind of a "public/private" partnership back in New Deal days, with an "implied guarantee" by the federal government. (Actually FNM was New Deal era, FRE came a little later). They never should have existed. But done is done, and I think the government has to make good its guarantee to the bondholders, although certainly not the stockholders. This emphatically should not set any precedent for how the government treats the autos and the airlines when they come begging, although I am not optimistic. Bill · September 9, 2008 11:31 AM "But what would happen if tax eaters ever became the majority?" Then it'd be high time to do some shruggin'. PhilTB · September 9, 2008 08:08 PM Post a comment
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eric, i'm right with you. both the democrats and republicans are to blame with neither placing the interests of the american people over their own selfish greed. when the banks and brokerages went to clinton and congress saying they needed to be able to cross traditional banking/brokerage lines to compete in the global economy there were many who predicted the lack of regulation would result in fraud and another taxpayer bailout.