Thune Divestiture Bill: Ideology over Pragmatism

...which is how the GOP lost in 2008...

Senator John Thune's federal corporate ownership exit strategy continues to be heaped with continuing laudatory praise... or at least that's the impression you'd get from reading his campaign blog or its paid subsidiary, Dakota War College, which has taken to slavish repetition and amplification of every dribble posted by the "Friends of John Thune." (Thune does have a track record of paying bloggers.)

So let me join Powers in flogging the issue his advertisers are paying him for (something Doug Wiken says the FTC is going to start monitoring). I would like to buy into Senator Thune's Government Ownership Exit Plan Act (S. 1242). It sets a deadline of July 1, 2010, for the federal government to sell off its ownership interest in all of the businesses that have gotten bailouts. I am worried that this arbitrary deadline might lead to a fire-sale divestiture: it wouldn't take a financial whiz to figure out that the remnants of GM or AIG could be had for a song by simply waiting until next June 30 and submitting a lowball bid to a federal government bound by law to sell. Thune's bill does include a provision for extensions: it looks like the Secretary of the Treasury can request a six-month extension and one renewal if we taxpayers stand to get screwed by low bidders.

So if I'm reading this right, all the bailout companies that we taxpayers currently own would get two years max to turn themselves back into lean mean money-making machines so we can sell them off at a decent price and pay down the federal debt (sorry, no dividend checks: Thune's bill sends any divestiture proceeds straight to paying down the public debt... which is as good a place for the money as anywhere else). I assume Thune's subpremise to his business friends is, "Look, if you need more than two years of government ownership to get your act together, you don't deserve to survive."

S. 1242 also bans members of the Executive Branch from influencing any "significant management decisions" of federal bailout money. Here our corporate welfare queens seem to be getting a break that regular welfare recipients and publicly held corporations never do. The government gets to impose all sorts of influence on the "significant management decisions" of indivudals receiving government support. The federal government has used its welfare dollars to require recipients to take jobs and get training and even to influence them to get married. Stockholders get to communicate and vote at stockholder meetings to influence the corporations they own all the time. When our President reviews the books at GM and Chrysler and makes recommendations for fixing their broken business practices, is that really undue influence that should be criminalized, or is that simply our President acting as a good steward of our public investment?

The final question we should ask about this legislation is whether we even need it. Heaven knows Republicans hate to clutter up the books with unnecessary laws. On the GM bailout, President Obama has described us as "reluctant shareholders" who intend "to get out quickly." And as for that influence Thune seeks to ban, Obama sounds like he's already on the same page, at least 90% of the way:

"GM will be run by a private board of directors and management team," Obama said. "They — and not the government — will call the shots and make the decisions about how to turn this company around. The federal government will refrain from exercising its rights as a shareholder in all but the most fundamental corporate decisions" [Tom Raum, "Obama: Nationalization of GM to Be Short-Term," AP via Yahoo News, 2009.06.01].

If you buy the propaganda that Obama and the rest of us Dems are socialists, then sure, Thune's law sounds like a vital protection of the free market. Actually, if you're a real free-marketeer, Thune's law doesn't go far enough: you should demand an amendment requiring the immediate divestiture of all government holdings in private businesses, with no extensions allowed at all.

But if you turn off Rush and look at what's actually going on, you see a government (under Bush and Obama alike) that executed these bailouts not as a re-enactment of Marxist revolution but as a last-resort alternative to economic free-fall.

Thune's bill may be a honest defense of capitalist ideals... but that may be its fatal flaw. The Government Ownership Exit Plan appears to be motivated entirely by ideology and not by any cogent analysis of actual economic conditions. It's a lot easier to just shout "Socialism!" than it is to come up with actual plans to solve problems. If Senator Thune and the GOP continue to pursue the easy route, they will find themselves increasingly irrelevant to the vast center of the elctorate that wants solutions, not slogans.