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Give The Gov’t A Year To Exit Private Sector

July 21, 2009

IBD 22 June 09

By Sen. John Thune

Last fall’s economic downturn and liquidity crisis were very serious. However, in the course of responding to them, the government abandoned its initial plan of action to purchase toxic assets and instead took to buying ownership stakes in a large number of private companies. 

An attempt to respond to an emergency quickly changed into something unanticipated by most Americans and most members of Congress. When the dust settled, the federal government had become a major investor in more than 500 private American businesses.

I share the concerns of those who are alarmed at the federal government’s increasing role in our economy, both through spending enormous sums of borrowed money and unprecedented intervention into private businesses.

A poll released last week by Rasmussen Reports found that 80% of Americans want the federal government to sell its stakes in auto companies as soon as possible and 71% want the federal government to sell its stakes in banks as soon as possible.

The public opposition to government ownership of private businesses is well-founded.

The whole adventure undercuts the free-market principles that have guided our economy since our nation was founded.

The fundamental assumptions about how a market economy should function are contradicted by insertion of government bureaucrats into business decisions and by a market where government-favored firms compete against nonfavored, privately owned firms. 

A market economy can be compared to a sporting event, where teams play by rules enforced by a neutral referee.

In a market economy, the government serves as the referee, enforcing the laws adopted by Congress or the private contracts freely entered into by private firms.

When the government also becomes a player, it can no longer serve as an impartial referee; the government’s team will be favored. The fundamental dynamics of competition are disrupted.

Today, we are witnessing the behavior of companies for which the president of the United States is serving as a de facto CEO and Congress is serving as a 535-member board of directors. Business decisions are clouded by political calculations.

This arrangement does not inspire confidence. The American people realize that elected officials and government bureaucrats are ill-equipped to run banks, insurance companies and car manufacturers.

Last week I introduced legislation along with a dozen of my colleagues that would scale back the government’s involvement in the private sector.

My bill, the Government Ownership Exit Plan Act, would prohibit the future purchase of new or additional ownership interests in private firms through the Troubled Asset Relief Program (TARP).

Of equal importance, my bill would make the federal government end its ownership of private businesses acquired through TARP by July 1, 2010.

My bill would require the Treasury Department to sell any ownership interest such as warrants or stocks and use any revenue from the sale of those assets to reduce the national debt.

This straightforward legislation would also prohibit the federal government from making or unduly influencing management decisions, including appointing senior executives or board members.

The federal government does not have the knowledge or the resources to continue trying to run successful companies, and the American taxpayers deserve better.

Nobody understands this better than the Chamber of Commerce, the world’s largest pro-business advocacy group, which has voiced its support for my new legislation.

To reverse the alarming trend toward government ownership of private business, it’s important to move quickly.

Sadly, the Treasury secretary, who recently testified before the Senate Banking Committee, stated he has no such plan when it comes to divesting the federal government’s ownership stake in private firm. 

If we do not adopt an exit strategy, we risk government ownership becoming a permanent state of affairs. 

Increased government control of private businesses threatens the fair competition and economic freedom that Americans have enjoyed throughout our nation’s history.

A growing number of individuals are rightfully leery of the government’s ability to effectively manage the taxpayer money that has been diverted into private entities, but without congressional action the intervention will continue unchecked.

The Government Ownership Exit Plan Act is an important first step toward restoring the limited role of government in the economy.

In the weeks ahead I will work to see that this matter is considered by the full Senate.

Thune is the junior senator from South Dakota.

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