How did things get this crazy? You turn on the news and the headline is something like "President fires CEO," and a blogger points out that's about as expected as "Pope fires missile."
Presidents aren't supposed to be deciding who runs our major corporations, but here we are. President Obama reached out and touched Rick Wagoner of General Motors, and he was gone.
The other day Bloomberg News toted up all the commitments, loans and bailouts handed out since last year's credit blowup. It came to more than $12 trillion, almost as much as the Gross Domestic Product – the value of everything we produce in a year.
A good bit of this was necessary, as galling as that seems. In September, credit froze up and we came within a whisker of complete financial collapse. Something had to be done, and quickly.
Since then, the Federal Reserve has opened up the floodgates. It's printing money like crazy to fend off deflation. But when that money starts circulating, it will generate the opposite problem – inflation – and we'll get to find out whether the Fed can move fast enough to remove all that the liquidity without tanking the economy again. That should be interesting.
A lot of the bailout money will be paid back (we hope). But when you think about all that's happened it still leaves you with a tight feeling in the pit of your stomach.
Will it ever be possible to roll back all of these spectacularly unprecedented initiatives and return to some semblance of normal? I doubt it. There's a queasy sense that we have crossed a line, that the role of government in the economy has undergone a profound and permanent change.
Last week, the White House essentially began running two of our major auto companies. It not only fired a CEO, it appointed his successor. The president said his team would be "working closely" with General Motors, to make sure the company's reorganized business plan includes a lot more environmentally correct cars.
Soon, perhaps, the government may not only decide what kind of vehicles GM and Chrysler should make, but which plants should continue and which should be closed, and the problem here is that these are deeply political decisions, given that many of these plants are in swing states that Obama won. These are matters that should be decided by a bankruptcy court, not by politicians. But government has waded in with both feet, and that will create its own set of problems.
For example: The leader of a major union recently called on Obama to fire a prominent bank president, Ken Lewis of Bank of America. Andy Stern of the Service Employees International Union demanded to know why the government was letting banks off the hook and punishing car companies.
So now we're going to have political campaigns over which CEOs should be canned? Wonderful.
There are lot of definitions of socialism. Here's one: a system in which an increasing number of private–sector issues somehow leak into the political arena. It's a system in which the zone of private decision–making steadily shrinks.
Last week, Obama threatened the car companies with bankruptcy if they didn't reorganize more thoroughly. He gave GM two months to come up with a viable plan. Chrysler, judged too weak to go it alone, got a month to cement its alliance with Fiat.
Chrysler and GM warranties will be backed by the government. A $5 billion lifeline has been created to support parts suppliers, to keep them alive in case the car makers must head for bankruptcy court. The administration has laid the groundwork for bankruptcy, but will it pull the trigger?
My guess is no; the key decisions will remain in the political arena. Bankruptcy would put the union agreements at risk, and that would undermine a core Democratic constituency.
Obama says the nation "cannot make the survival of our auto industry dependent on an unending flow of tax dollars." In a few weeks, we'll see if he really means it – and whether we have a ghost of a chance of ever returning to some semblance of normal.