What Exactly Does the Government Own? An Accounting

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Pajamas Media:


What Exactly Does the Government Own? An Accounting
The decline in private-sector wages is just the tip of the iceberg.


May 31, 2010 - by Tom Blumer

Last Tuesday, Dennis Cauchon at USA Today had an insightful take on an economic release from the government’s Bureau of Economic Analysis (BEA). Using BEA’s March 2010 Personal Income and Outlays report, he calculated that wages paid by private companies “shrank to their smallest share of personal income in U.S. history during the first quarter of this year.”

Cauchon then unfortunately went to the prevailing media template, the one requiring that the Bush 43 era be dragged into everything, regardless of relevance:

A record-low 41.9% of the nation’s personal income came from private wages and salaries in the first quarter, down from 44.6% when the recession began in December 2007.

Cauchon’s convenient timing ignores the fact that as late as the fourth quarter of 2008, the same calculation using numbers in the same BEA report he cited came in at 44.0%. In other words, over three-quarters of the decline (2.1 percentage points divided by 2.7 points is actually 78%) occurred after everyone knew that Obama would be in charge.

As important as what Cauchon cited is (after the reality-based context yours truly has provided), the shrinkage in private pay only partially unmasks the much more broadly important story of rapidly advancing statism. Federal intrusion into the private sector and federal confiscation from it are accelerating. A tipping point may be near.

For items one could put hard numbers to with sufficient research, let’s start with entities still classified as “private” which Uncle Sam actually or substantively controls.

First, there are the two vehicle-producing wards of the state known as General Motors and Chrysler. These companies emerged from bankruptcy in their current forms largely as a result of extralegal maneuvers that shortchanged disfavored creditors during their respective bankruptcies, followed by excessive infusions of post-bankruptcy cash to ensure their multiyear survival even if they are run poorly or rejected by a nationalization-averse car-buying public.

Though majority-owned by the government, GM characterizes itself as a “private company” in its financial and other reports. While the government only has a minority interest in Chrysler, no one can honestly believe that it isn’t overseeing operational moves there. BEA includes the payroll of both companies in its “private industries” figure. You can knock off at least $5 billion in wages from BEA’s figures for GM and Chrysler alone.

Then there are Fannie Mae and Freddie Mac, the two entities that brought us the housing and mortgage-lending fiascos after 15 years of deliberately misrepresenting the quality of mortgages they controlled and securitized. Fan and Fred are also considered private firms, even though they have thus far siphoned off $145 billion in taxpayer bailout money. With $8.1 trillion in combined outstanding debt and trillions in “assets” that are of questionable value, there is no end in sight.

The Federal Deposit Insurance Corporation has taken over and is obviously dictating what goes on at more than 70 failed banks just this year, on top of over 130 takeovers in 2009.