The recent government takeover of General Motors and various financial institutions is distasteful to the business community and political conservatives. However, the nature of our national demographic means that this type of government intervention is more likely. Politicians will come under increasing pressure to meddle in the private sector to protect the financial well-being of the baby boomers as they reach their “golden years.”
If the speech given by Senator Lindsey Graham at the South Carolina Republican convention is any indication, then we will see more politicians willing to compromise principle to get reelected. Senator Graham vehemently challenged the delegates that “if you want to win, you’d better decide to moderate on issues to get something done.” Senator Graham went on to mention that because President Obama is such a likable guy that conservatives will have a tough time defeating his agenda.
So we already see the death of fiscal responsibility as there is no strident opposition to the Obama administration and influential members of Congress like Senator Graham have adopted the go-along-to-get-along mentality. If there isn’t the political will today to try to stop the taxpayer funded bailouts (with no union concessions) then how will there be any political will to ask for stewardship on any other issue that affects the boomer retirement hopes. Who will argue the other side for the future generations who have to pay for the government bailout of the pensions of the current retirement generation? The silence on government takeovers will allow the “likable” liberals to enact an agenda that erodes any hope of a resilient American economy in the future. Conservatives need to get the guts to answer the question, “What hill are we willing to die on,” and then stick to the principles of our founders.
Sunday, May 31, 2009
The Rule of Law and Liberal Hypocrisy
This past week, President Obama cut a deal to save General Motors that cast aside the existing contracts between the company and the companies bondholding creditors. Normally these moves could only take place in a rightly constituted bankruptcy court. However, in the current economic environment, we have obviously suspended the rule of law in an effort to return political favors to labor unions while hiding behind the stalking horse of saving the economy.
While unions were given concessions for their investment stake in the company at a dollar-to-dollar basis, including preferred stock paying a 9% dividend, bondholders were told to accept equity stakes at ten-cents-on-the-dollar or get nothing. This level of government intervention into capital market contracts is growing almost by the day as the current administration, with no business experience, plays with taxpayer money to make politically driven decisions about whom to save in the recessionary economy.
As The Wall Street Journal reported today,
Even after nine months of extraordinary government intervention, the scope and complexity of the General Motors Corp. rescue present a thicket of conflicts unlike any seen before in Washington.
The federal government is likely within weeks to emerge as the principal owner of a storied U.S. corporation whose factories and products touch the lives of tens of millions of Americans. It will simultaneously serve as the company's regulator, tax collector, customer, pension backstop and lender.
The Obama administration is making up the rules as they go. The only hope to keep the federal government from continuing to become increasingly entrenched in the affairs of private enterprise is for state pension funds and other large institutional creditors to stand up and say enough of the Obama administration running roughshod over creditors’ rights.
At this point we have put significant taxpayer funds into dying business models. Why should the taxpayer expect anything different when we continue to see the Washington attitude of “it’s our money to use as we see fit, and we’ll do what it takes to maintain power.” The Obama administration seems to have added the sentiment, “So whatcha gonna do about it; we’re in charge now.”
While unions were given concessions for their investment stake in the company at a dollar-to-dollar basis, including preferred stock paying a 9% dividend, bondholders were told to accept equity stakes at ten-cents-on-the-dollar or get nothing. This level of government intervention into capital market contracts is growing almost by the day as the current administration, with no business experience, plays with taxpayer money to make politically driven decisions about whom to save in the recessionary economy.
As The Wall Street Journal reported today,
Even after nine months of extraordinary government intervention, the scope and complexity of the General Motors Corp. rescue present a thicket of conflicts unlike any seen before in Washington.
The federal government is likely within weeks to emerge as the principal owner of a storied U.S. corporation whose factories and products touch the lives of tens of millions of Americans. It will simultaneously serve as the company's regulator, tax collector, customer, pension backstop and lender.
The Obama administration is making up the rules as they go. The only hope to keep the federal government from continuing to become increasingly entrenched in the affairs of private enterprise is for state pension funds and other large institutional creditors to stand up and say enough of the Obama administration running roughshod over creditors’ rights.
At this point we have put significant taxpayer funds into dying business models. Why should the taxpayer expect anything different when we continue to see the Washington attitude of “it’s our money to use as we see fit, and we’ll do what it takes to maintain power.” The Obama administration seems to have added the sentiment, “So whatcha gonna do about it; we’re in charge now.”
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