Sen. Thune Distorts The Impact Of The Bailout
In a blog post at RealClearPolitics titled "New Bill Ends Government-Run Companies," Sen. John Thune touts the virtues of a new bill designed to control government investment in companies. But the bill is motivated by political bias, not fact-based analysis.
Sen. Thune Misleads On Consequences Of Government Involvement
Government ownership interests in private companies create an uneven playing field. Companies aided by the government are given an unfair competitive advantage that private companies do not enjoy. Because of this influence, government entities distort the competitive process and lead to inefficient market outcomes which favor the government-owned entity. (emphasis mine)
But that's simply not the case. Take the auto industry: Chrysler and GM both took government loans, while Ford abstained. Chrysler and GM have both had to declare bankruptcy, while Ford is rapidly getting back on its feet. This is the case in part because Ford was healthy enough to narrowly avoid government funding and therefore agile enough to bounce back more rapidly. But if government really gave entities a competitive advantage, as Sen. Thune insists, rather than acting as a stabilizing force for American enterprises, as the Administration has repeatedly insisted is its role, then why has the government not stepped in given Chrysler and GM advantages over Ford?
As MSNBC reported: "Ford has taken no federal bailout money, but it's pulling ahead of its rivals because of well-timed financial planning and a focused and attractive mix of product. The automaker also is profiting from the troubles at GM and Chrysler." Given this, Sen. Thune's assessment is deeply flawed.
Sen. Thune insisted:
Unlike their privately owned counterparts, these government owned companies benefit from untold billions of U.S. taxpayer dollars, without any guarantee of repayment in the future.
As with any investment, there is of course a risk. But investing in American businesses has paid off; 10 banks have already repaid $68 billion in TARP funding, years ahead of schedule. And these loans, like all other government loans, were repaid with interest at a profit to taxpayers.
Of his own bill, Sen. Thune said:
This legislation would put an immediate end to government purchases of additional direct ownership interests of private companies. It would also prohibit government officials from making or influencing business decisions when it comes to the companies in which the government already has an ownership interest.
The direct consequence of Sen. Thune's bill, in other words, would be that the government would be unable to invest in American businesses in order to help stabilize our economy. That just doesn't make good economic sense in the midst of a crisis - and as is already clear, it's simply not necessary.
