President Trump has never been one for free enterprise. His way of being pro-business involves subsidies, handouts, and taxes (he calls them tariffs) — that is, Big Government. And his latest threat to General Motors shows why: Big Government industrial policy gives Trump more power.
“Very disappointed with General Motors and their CEO, Mary Barra, for closing plants in Ohio, Michigan and Maryland,” Trump tweeted on Tuesday. “Nothing being closed in Mexico & China. The U.S. saved General Motors, and this is the THANKS we get! We are now looking at cutting all GM subsidies, including for electric cars.”
And GM has benefited from plenty of subsidies over the years. The taxpayers bailed them out a decade ago with bridge loans. Beyond the bailout former President Barack Obama padded GM’s pockets with green subsidies, including, as Trump points out, for their electric cars.
Congress created a $7,500 tax credit for people who bought the Chevy Volt or other plug-in electrics and hybrids. (This isn’t exactly a working-class subsidy, either.) Obama gave more than $100 million — in a grant — to the GM factory that builds the batteries.
There was also the ill-considered cash-for-clunkers program which paid people to demolish their perfectly functioning cars during a recession, as long as they bought a newer, more efficient car.
Previous presidents had subsidized and protected automakers as well. General Motors surely liked the handouts, bailouts, and protective regulations at the moment, but the politicians liked them better for a simple reason that too often gets ignored: Once businesses are on the taxpayer dole, politicians have a lot more leeway to boss them around.
Obama used that clout to try push his “New Economic Patriotism” including his failed dream of putting a million electric cars on the road by 2015.
But now Trump is in charge of the federal government. He has other goals. If you take him at his word, his goal is to push GM to close any plants in Mexico and China before closing a single plant in the U.S. That sounds patriotic enough, but it’s still Gangster Government.
GM is doing something perfectly legal and clearly logical in shutting down its plants that make failed cars. Trump is threatening unrelated retaliation, akin to a parent cutting off an 8-year-old’s dessert because he didn’t clean the bathroom well enough.
One manifestation of Trump’s ego is his fondness of saying who “works for” him. Even on the occasion of Aretha Franklin’s death, he said, “She worked for me on numerous occasions,” stretching the truth.
Now that he’s president, federal subsidies and bailouts and handouts expand the list of people and entities Trump can consider to be “working for” him.
It’s not just GM. Boeing depends on defense contracts, and has in the past enjoyed many billions in export subsidies. Drugmakers depend not only temporary government-enforced monopolies, but also on billions in Obamacare and Medicare subsidies and protection from foreign competitors.
Trump has used the fact of these subsidies to threaten and jostle and cajole these businesses to do what he wants them to do — after all, since Uncle Sam is paying them, they could be said to “work for” Trump. Maybe you like what Trump is pushing them to do. Maybe you preferred what Obama was pushing them to do. In the long run, though, it’s not healthy to give politicians such ad hoc power over private enterprise.
If some activity is destructive, consider regulating it or tax it, don’t try to discourage it by turning on and off the faucet of handouts and bailouts.
Simple, uniform rules are better for business and for clean government. The lobbyists and the cash-chasing politicians love the system where rules are more flexible and subsidies and tax rates are more bespoke.
That’s why Trump never had much love for free enterprise, preferring a system of state-directed capitalism. Even when it came time to cut taxes, he eschewed “tax reform” which would have involved simplifying the code by getting rid of carveouts and loopholes. Those carve-outs and loopholes are more levers Washington can use to pull and push businesses around.
In free enterprise, businesses work for the consumer. In Big Government corporatism, businesses work for Donald Trump.
