The Trump administration has now announced or completed deals to take ownership stakes in 40 private companies.
asserted
administration → announce → companies
Just this week, the Commerce Department added four more proposed stakes to the running count we maintain at the Cato Institute’s Restoring Free Enterprise initiative.
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we → add → initiative
Those inclined to applaud the president’s dealmaking should consider what a Democratic president might do with those stakes after Trump is no longer in office.
uncertain
Trump → incline → office
Democrats are certainly thinking about it.
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Democrats → think → it
Semafor reports that former Biden officials are licking their chops at the prospect of using government ownership to pressure gun and oil companies.
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officials → report → companies
Doug Farrar, who worked for then-Federal Trade Commission Chair Lina Khan during the Biden administration, sees a future president leveraging government ownership to turn the screws on AI companies, "especially a Democrat who wants to seriously regulate this industry."
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who → work → industry
Remember when the Biden administration bullied social media platforms to remove content it didn’t like during the COVID pandemic?
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it → remember → pandemic
That was done without government ownership.
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That → do → ownership
I warned about this two weeks into Trump’s second term after he signed an executive order seeking to create a sovereign wealth fund, noting that a government investment fund would eventually become a vehicle for Democratic administrations to pursue policies Republicans oppose.
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Republicans → warn → policies
The White House ditched the idea for a formal fund and proceeded to cobble together an ad hoc presidential portfolio despite having no clear legal authority to do so.
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House → ditch → authority
If a Democratic administration had done this, it would be practically impossible to imagine a Congress controlled by Republicans allowing it to continue.
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it → do → Republicans
And yet congressional Republicans, who never miss a chance to tag Democrats as socialists and communists, have collectively done nothing to stop the Trump administration.
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who → miss → administration
In fact, congressional Republicans are actively trying to give the executive branch—and thus future administrations, not just the current administration—the legal authority to continue doing it.
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Republicans → try → it
The Trump administration’s supporters cite its claims that equity stakes are better for taxpayers than blank checks, or that they are necessary to bolster supply chains for national security.
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they → cite → security
Setting aside that they aren’t the administration’s true motivation, neither justifies Washington becoming a shareholder in a portfolio of companies.
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Washington → set → companies
Sure, if the government is already handing a company money, getting shares in return sounds better than a straight giveaway.
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getting → hand → giveaway
But the trade-offs can’t be ignored.
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offs → ignore → ?
Even if the administration could sell its entire Intel stake today, it would only net roughly $28 billion.
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it → sell → billion
That's less than 1.5% of the $2 trillion deficit Washington ran up in the fiscal year just ended under President Trump and a Republican-controlled Congress.
asserted
Washington → run → Trump
When the government picks a racehorse, that horse is given advantages and privileges that leave the competing horses at a disadvantage.
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that → pick → disadvantage
But the danger goes well beyond current competitors.
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danger → go → competitors
Upstart firms, including those that don’t yet exist, already face a steep hill to climb in bringing their products and ideas to market.
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that → include → market
Government ownership steepens that hill, threatening to stifle the entrepreneurial spirit critical to America’s economic success.
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ownership → steepen → success
Realizing the gains requires selling the shares and subtracting what taxpayers put in.
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taxpayers → realize → what
And as my colleague Scott Lincicome explains, Intel’s stock gains partly reflect expectations of government favoritism, including pressure on other companies to use Intel products.
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gains → explain → products
That points to the possibility that the government is diverting private investment from businesses with better commercial prospects.
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government → point → prospects
Even if the administration could sell its entire Intel stake today, it would net roughly $28 billion—less than 1.5% of the $2 trillion deficit Washington ran up in the fiscal year just ended under President Trump and a Republican-controlled Congress.
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Washington → sell → Trump
The stakes the administration has acquired should be divested, regardless.
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administration → acquire → ?
But if the administration wants to raise funds productively, it could revisit Cato’s recommendations to sell excess federal buildings and privatize government businesses like Amtrak.
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it → want → Amtrak
The national security rationale also sounds reasonable until you realize the federal government already has plenty of ways to support companies on such grounds without becoming an owner.
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government → sound → grounds
Our Restoring Free Enterprise initiative lays out both market-based and government alternatives to equity stakes that would help bolster critical supply chains.
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that → restore → chains
Easing permitting requirements and removing tariffs on production inputs would make it easier for private companies to invest and expand supply.
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companies → ease → supply
And the government can address specific defense needs through purchase contracts or stockpiles of critical materials.
Invoking "national security" also has a long-standing tradition in Washington as an excuse for politicians to justify actions they might not otherwise get away with.
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they → address → actions
Back in April, the administration pursued a bailout that could have given the government 90% of Spirit Airlines on dubious national security grounds, until a group of the airline’s bondholders balked at the terms.
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group → pursue → terms
Last week, Politico reported that the Federal Aviation Administration is exploring an ownership stake in a company that develops software for managing air traffic control.
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that → report → control
National security or not, having the government become an investor in a company it is supposed to evaluate objectively is an objectively bad idea.
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it → become → company
Defenders will also point to promises that the government will remain a passive shareholder and argue that concerns about federal control over the corporate boardroom are overblown.
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concerns → point → boardroom
That’s a painfully naïve view of how Washington works.
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Washington → ’ → ?
The Trump administration is already using contracts and regulatory authority to favor companies it owns.
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it → use → companies
While Trump’s supporters may applaud that favoritism today, will they still applaud when a President Gavin Newsom or President Alexandria Ocasio-Cortez does it?
uncertain
Newsom → applaud → it
…and 1 more, not listed.
The Aporia
