The Wisconsin Policy Research Institute

America’s New Economic Model: All the Style and Power of a Yugo

By George Lightbourn

I recall as a young boy anxiously awaiting the time every autumn when America’s car companies unveiled their new models. That was an era when style ruled the automotive world; a bold new design could literally make or break a car company.

Now Washington has unveiled a new model for America, an economic model. This new model, a bold departure from our old economic model, is not getting rave reviews. Let’s examine why that is.

The new economic model tramples the line dividing public and private enterprise. The new model has politicians running “private” businesses and has CEOs roaming the halls of government. In our new economic model, eye-popping sums of money regularly move from government to business. Few Americans understand where all that money comes from and nearly all are skeptical that it will produce anything of value.

There is no better example of our new economic model than Wisconsin’s Hail Mary attempt to reopen the Janesville GM plant. Janesville is that hard working community where hundreds of families are in shock at the sight of the closed auto plant and the prospect of massive, permanent job losses. Now, at the last minute, the new General Motors has given a slender ray of hope to those families by promising to reopen one of three obsolete plants. Predictably, that ignited a bidding war among the competing states with Governors from Wisconsin, Michigan and Tennessee each committing tens of millions of dollars to the new GM.

While all of Wisconsin is pulling for the Janesville plant be the chosen one (I’m assuming that phrase has yet to be copyrighted), we cannot disguise our befuddlement over the whole transaction. We are still adjusting to the $50 billion the federal government “invested” to save General Motors. We-the-people now own a 60.8% share of the new GM. And we have been led to believe that this injection of cash, coupled with some tough-minded business decisions, might some day yield a profitable company. However, we are increasingly doubtful that profitability will ever be the result since we cannot see how the new GM will be better able to compete with Toyota or Honda.

And just where is Governor Doyle coming up with the money Wisconsin is pledging to give to the new GM? That’s easy - under the new economic model, all salvation comes from Washington. You see, Governor Doyle wouldn’t have two nickels to rub together, much less have any way to promise any money to GM, were it not for the $650 million of federal stimulus money built into the state budget. Therefore, under our confusing new economic model Wisconsin is pledging armloads of federal money to entice a federally-owned auto company to reopen the Janesville plant. Amazing!

To complete the picture, the new economic model has Americans using government subsidies to buy cars produced by government-owned companies. Under the new economic model federal money is taken out of the left pocket and moved to the right pocket attempting to replicate market-like transactions. Of course this not the stuff that drives any real economy since it is all paid from money that the government really does not have.

In the end, our new economic model seems to be little more than a modern-age Ponzi scheme. And as is true of every such scam, someone is being bilked. Sadly, under our new economic model it is our children and grandchildren that are being played for suckers.

-June 25, 2009

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