Would a Constitutional amendment like this be workable?

Great Debates
1

I was thinking today about the state of the economy, and it occured to me that one thing that tea partiers and 99-percenters both seem to agree on is that “bailouts” have gone too far and become too common. There’s an argument to be made that the government shouldn’t be protecting mega-corporations from the consequences of their own mistakes at taxpayer expense, but there’s also an argument to be made that it’s better for the economy at large for the government to prop up certain industries than to let them collapse. I spent some time thinking of a way to allow the government to protect industry without putting undue burden on the taxpayer, and the idea popped into my head of a Constitutional amendment looking something like this;

“Congress shall lend, grant, or gift no money to any profitable enterprise, domestic or foreign, but as purchase by the United States of an equivalent share of ownership. Any dividend or revenue accrued by the United States, by virtue of ownership, shall be applied to any tax on income levied by Congress.”

In other words, suppose XYZ Corp. asks for and receives a $1 billion bailout from the government, and XYZ’s stock is collectively worth $5 billion. In order to receive the bailout, the government acquires 20% of XYZ’s stock. The government would be free to re-sell this stock, thus hopefully making back the cost of the bailout, or to maintain it and use its clout as a shareholder to ensure that XYZ turns itself around and doesn’t blow the money on CEO bonuses or conventions in Vegas. If the government brings in dividends, or the government eventually makes a profit when it sells off the stock, the profit is divvied up and applied as a tax credit when everyone pays their taxes at the end of the year. (This would admittedly probably only be a few bucks per taxpayer, but it’s got a nice feel-good aspect to it.)

The pros I can see here is that “too big to fail” corporations are made less likely to behave recklessly in the belief that Uncle Sam will cover them if they screw up, that the government is acting as an investor rather than simply doling out welfare, and that the government has the power to ensure that the money is spent wisely and the company is put back on track for financial solvency.

I can admittedly see a few potential downsides as well - mainly that, if the company goes bankrupt in spite of the bailout, the government is left holding a bunch of worthless stock.

Assume that this could be passed by Congress and ratified, would it be a workable policy? Would you personally support it? Is there a major flaw i’m not seeing, and could it be patched without scrapping the entire idea?

2

First thing: Just because a company has issued $5B in stock doesn’t mean it has $1B in stock in its treasury. Infact, I would be shocked if a large corporation held on to 20% of its own stock.

3

This divvied up tax credit: How is it divvied? Same amount to every person, same percentage of each person’s taxes, what?

4

The business of government is governing. The business of business is business. The govt. should stay out of business, with the exception of taxing it fairly, and decreasing regulation within reason. Let business’ get along amongst each other. The economy will get along just fine if business is just * left alone! *

5

Recent events provide a stark counterexample to this claim.

6

The people who are concerned about the favoritism of the government loaning companies money would be even more concerned about favoritism shown to companies in which the government had an ownership share.

7

I think that frex utilities companies need to put more into infrastructure improvements and less into profits to the investors. Lets work on getting our infrastructure put underground. I think that CEOs/officers/management should not be making obscene incomes and perks - why should some jackass get 20 million for sitting in an office basically jacking off? You can’t tell me running CL&P is so damned difficult, it isn’t like producing and routing electricity is cut throat competition - it doesn’t change much from year to year. I think there is an amazing lack of oversight of pretty much every business.

We also need to think about the low level employees - companies are eliminating employees to save money which in turn overworks the remaining employees. mrAru regularly puts in 20 or more hours of OT a week. I personally would like to see him home a bit more:(

8

Rather than OP’s proposed amendment (or in addition to…), what we seem to need is a law (passed by Congress, if Congress ever gets back into the business of passing laws, or maybe an amendment if that’s what it will take) to re-define the Corporation to not be a “person” any more.

9

You are clearly fine then, with a law that would prohibit businesses from doing any sort of donating or co-ordinating of donations for political candidates, or lobbying for laws.

After all, the business of business is business, and not governing.

10

As mentioned up thread, I think the biggest issue would be getting that stock. Since few companies have that kind of stock lying around. You can’t just taking it from the stock owners. If you force them to sell it back, the company is now more in debt and will need more money to pay that back. If you magically create more stock, you destroy the value for everyone else, making it all worth less and then needing more stock to equal that amount. I really just can’t see a way to get that stock.

Moreso, depending on the owner distribution, even if the government has a significant portion like 20%, if someone has 51% by himself or between a few people, the government might as well not have any because they can’t control anything.

And what happens if they loan them that money and the company still goes belly up or the government otherwise loses a signficant amount of money? How do you cover that shortfall? Does it just become more random money on the deficit? How do we decide what investments are worth taking or not? Congressmen are now playing stockbroker too?

In the past, I think the whole idea of “too big to fail” would have been anathema to the people and the government either would have made an effort to trustbust, or it would have made an effort to make it a government service because then it’s not going to fail unless the government pulls its funding. Either way, this hybrid we have today seems like the worst of both worlds.

11

How about instead of the government owning it, congress creates a private “People’s Stock Trust,” that would be the owner and pay the people dividends?

On the other hand, I think we need to quit allowing corporations to grow so huge that they are “too big to fail,” if we have to have the concept “too big to fail” anyway. I kinda agree with the premise that too big to fail needs some trustbusting done, or reforms in the definition of a trust, or something to prevent this from continuing to happen.

12

There must be a mechanism, given that the government took an 80% stake in AIG when it bailed them out.