If it wasn’t so sad it would be amusing how Paul Krugman has everything precisely backwards:
The most valuable lesson I learned from the year I spent in Washington (1982-1983, on the staff of the Council of Economic advisers — I was the senior intl economist, the senior domestic economist was a guy named Larry Summers. What ever happened to him?) was the extent to which senior government figures have absolutely no idea what they’re talking about.
So when I read something like this:
“Why should we reward Fannie Mae and Freddie Mac with $200 billion in taxpayer dollars without first reforming these housing entities that were at the heart of the economic meltdown?” House Minority Leader John A. Boehner (R-Ohio) said in a statement.
and people ask what on earth Boehner might mean when he talks about taxpayers “rewarding” institutions that are owned by taxpayers, I go for Occam’s Razor: Boehner doesn’t have some complicated notion in mind, he either doesn’t know that the government took over F&F months ago, or he just doesn’t get this “government-owned” concept.
First of all, Krugman did not even attempt to explain what exactly is supposed to be wrong about Boehner’s “stupid” statement. Whether or not he believes that the taxpayers in any way own these institutions is completely irrelevant. Let’s assume, for the sake of the argument, that they do. So what? How does this in any way invalidate Boehner’s statement. Just as a shareholder of a publicly traded private business at an annual meeting could speak out against an extension of a company’s shareholder’s equity unless the company improves its current operations, a representative of the taxpayers has the right to demand the same of a business that is held by the public trust, on behalf of the shareholders. Why in the world would anyone argue in favor of removing even this last small check on absolute power?
Now it should not surprise us that someone like Krugman gets upset about anyone asking for checks and balances when it comes to government spending. This is just another outgrowth of his small and shallow theories that favor bureaucracy and government spending anywhere and anytime. So long as we turn away from this kind of nonsense and debunk it quickly and unconditionally, no major harm is inflicted.
Regarding the issue of government ownership: The one who doesn’t get the “government-owned” concept at all is of course Paul Krugman himself. The government is a group of people that funds its operations via taxation. Taxation has always been ans will always be a form of theft. There is no way anyone can refute this simple causality.
Ownership over goods (as an economic concept) means control by one or several persons over the location of those goods in space and time. It is very different from the legal concept of ownership. Ownership over a good can come about in 4 ways: Homesteading, Exchange, Production, and Theft.
If ownership is transferred from the taxpayer to the people managing the entities in question by the means of theft, it is without a doubt a fact that the entire operation is not in the taxpayer’s interest and that the taxpayer himself won’t have any control over the allocation of the goods controlled by these entities. Thus the taxpayer doesn’t even remotely own government institutions, such as Fannie Mae and Freddie Mac. Anyone who believes that the opposite is true, should ask himself how he can have the slightest impact on what course of action these entities will pursue in future. In particular he should ask himself if he was ever asked whether or not he even wants to have any stake in them in the first place.
But all this taken aside, the most important issue with government ownership of any business is The Trouble of Bureaucracy. Any thesis promulgated by Keynesian clowns such as Krugman completely breaks down at the latest when it is confronted with the problems caused by bureaucracy.
Please note that is is more than likely that Krugman has never ever dealt with the issue of ownership in economic terms or with the theory of bureaucracy. Thus we shall exculpate him from his mistakes, but at the same time hope that others won’t blindly follow his blatant and painful nonsense.