Managing Lemon Socialism
Byline: The Register-Guard
If the U.S. government is headed down the road toward socialism, as President Obama's most excitable critics claim, it's socialism of a sour variety: lemon socialism. The public has taken control only of losing enterprises, leaving all profitable ones in private hands.
Yet socialism of any type brings the risk that businesses will be run for political purposes. With some of the country's biggest automotive and financial companies at least temporarily under government control, Congress should take steps to guard against that risk.
The first steps toward all three of the biggest recent government takeovers were taken during the waning days of the Bush administration. By Nov. 10, the federal government had pledged a total of $150 billion to shore up insurance giant AIG. On Nov. 23, the government gave Citigroup aid and guarantees amounting to $306 billion. General Motors got a $17.4 billion lifeline under the Troubled Asset Relief Program on Dec. 19, the first of several installments to follow. These infusions came at the panicky peak of the credit crunch, when fears of a global depression were bipartisan and pan-ideological.
Those fears have subsided, in large part because the government succeeded in preventing a systemwide financial collapse in the midst of a presidential transition. The world has been given an impressive display of policy continuity between administrations. But in the aftermath, the taxpayers find themselves with a substantial or controlling stake in companies that once were, and should one day again be, entirely private.
So far, neither the White House nor Congress has taken a strong hand in the management or business decisions of these new wards of the state. The test will come when one of the companies faces a decision with political consequences - say, GM has to choose between closing a plant in a red or blue state. The government's decisions in such matters as awarding contracts or crafting tax policy also might be colored by its ownership interest. …