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As the government takes over General Motors, there's plenty of reason for us to be bothered. The President's promises to return the company to private ownership are vague, and as Milton Friedman once said, "Nothing is so permanent as a temporary government program." The erosion of trust that inevitably comes with the government takeover and bankruptcy is dangerous, too. Trust is essential to the function of a free economy; if we can't trust one another -- for instance, to pay back loans -- then the system grinds to a slow and painful halt.
We also ought to be worried about the possibility that the government will use its ownership of GM as an excuse to put up trade barriers -- the kinds of barriers that inevitably make life worse for everyone. With Senator Tom Harkin out threatening to put up trade barriers to Chinese and Russian goods as a retaliation against their blocks on US pork imports, it's not at all impossible to imagine the same kind of anti-trade mentality taking over as the government tries to "protect" GM back to health. Of course, that would hurt American consumers (who benefit from buying good imports) as much as it would hurt the people who do the exporting.
When a company goes bankrupt, is it really fair for the new company to keep all the image, marketing, and goodwill of the old while hanging the old creditors out to dry? Indiana pension funds are suing to stop the sale of Chrysler to Fiat, arguing that the bankruptcy has mis-ordered the priority of who should get paid back the money they lent to Chrysler in the first place.
All of this is happening under the umbrella of a Federal debt that just keeps growing by the second. It's now up to $11,388,997,387,553.01. That's an amazing eleven million million dollars. How can we possibly be led to believe that the government itself intends to honor the debts it's running up in our name? And how much more money, on top of the $30,000,000,000 that the government is actively pouring into GM right now, should we expect the Federal authorities to drop on keeping the automaker afloat in the future? The cost of the government's takeover of GM isn't just the $30 billion they're spending now. They're likely to throw lots more American taxpayer money after the company to try to keep it working in the future.
The government that's trying to "save" GM now is the same government that wants to label Cheerios as a drug. Maybe we should be looking for a common-sense pill.
But there's good news out there: Microsoft still "gets it", at least to some degree, as it reveals huge plans to push the boundaries of gaming systems. Microsoft is far from being dominant in the gaming sector, so it's aggressive approach to innovation in the sector is a good sign that the company is responding to market signals, and changing to meet demand.
Keywords in this show: bankruptcy • Cheerios • China • Chrysler • computers • debt • drugs • economics • FDA • Federal debt • free trade • gaming • General Motors • government • Harkin, Tom • innovation • market economics • Microsoft • pharmaceuticals • regulations • Russia • taxes • technology • trade • trade protectionism