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Shattered Dreams

I was talking with a 21-year-old libertarian-minded college student who I’ve known for quite a while, who had a dream of someday owning a Corvette. His plan was that by the time he was 25, he would have saved up enough money for the car, and by then his age would qualify him for insurance rates he could actually afford to pay. He told me that now that the federal government owned GM he no longer wanted a Corvette.

This is just an anecdote, but I wonder how many other people will shy away from buying an automobile from a government-owned corporation. Aside from ideological reasons, one has to wonder about the long-term viability of the company. There is not much chance GM will be able to buy back its stock from the government to regain its independence. For pragmatic reasons alone, if I were looking for a pickup, an F-150 would look better to me than a Silverado. Yet another reason why nationalizing GM was a bad idea.

GM got $50 billion in TARP money from the federal government. At today’s stock price of $9 a share, the entire Ford Motor Company is worth $30 billion. Clearly, the entire GM is worth less than what the federal government has put into it in the past year. That college student’s dreams are not the only ones that are shattered, but unlike the Bush and Obama administrations (using taxpayer dollars), the student doesn’t stand to lose any money in the deal. It’s easy to spend irresponsibly when you are spending someone else’s money.

Randall G. Holcombe is a Research Fellow at the Independent Institute and DeVoe Moore Professor of Economics at Florida State University. His Independent books include Housing America (edited with Benjamin Powell); and Writing Off Ideas.
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