Wealth Creation Under Attack

From Commentary.com

That some should be rich shows that others may become rich,” said Abraham Lincoln, “and hence, is just encouragement to industry and enterprise.” Barack Obama has made it quite clear he wants to be seen as Lincoln’s heir. But in this instance, he is an heir in open rebellion. He is promising a range of policy initiatives that will have the effect of closing off new pathways to wealth, to the detriment not only of our economy but of our national life as well.

The United States is organized on the principle of the consent of the governed. Power and legitimacy do not flow from the state to the people, but the other way around. In this respect, what individuals do is entirely their own business, just so long as they do not violate the law or the sovereignty of other citizens. Generating wealth is therefore no different from any other private human activity; it is and should remain private, outside the reach of government, until the point at which it impinges on others.

This is a philosophical understanding of American society with which Obama and his policymakers are not in immediate sympathy. They are not opposed to wealth generation; nothing they say indicates any such thing. But they do not see it as a private activity. Rather, they see it as a human endeavor that can and should be harnessed to aid in producing the social changes they believe are most beneficial for the greatest number of people. In the view of the Obamaites, private wealth is not a bad thing, but neither is it a good thing; it is only good if it can be used in furtherance of large-scale public goals.

in the wake of the financial meltdown and the disasters that have flowed from it, the administration and certain members of Congress have seen fit to intervene directly in the affairs of individual corporations in ways that recall some of the worst abuses of power in our history. The recent actions in respect of Chrysler, the stricken automaker, are quite revealing. The administration’s management of the Chrysler bankruptcy has led to an astonishingly reckless abrogation of contract law that will introduce a new level of uncertainty into business transactions at all levels, and make wealth generation more difficult going forward.

In a typical case, a bankruptcy judge or trustee will gain the power to force a company’s creditors to accept less than full value for their claims, and otherwise manage the situation to produce an outcome that is as fair as possible, complies with the law, and allows the company to continue as a viable concern.

In particular, the position of secured creditors (those who have lent money at a lower interest rate in return for a direct claim on the company’s assets in case of liquidation) is generally held to be senior to that of unsecured creditors and trade claimants. That is, at any rate, what the contracts between the secured creditors and the debtor companies say.

In the case of Chrysler, the President of the United States egregiously went out of his way to take sides in the negotiation. As the holder of a $4-billion note (soon to be more, as the government infuses more taxpayer money into Chrysler), the President is, in effect, an unsecured creditor. But Obama gave a nationally broadcast speech on April 29 in which he singled out Chrysler’s secured creditors (including a group of hedge funds that had purchased Chrysler bonds) as bad actors seeking to profit unduly from a bad situation.

They were no such thing. Read the whole piece here.

Commentary is one of the few publications to which I actually subscribe.  It’s an invaluable source of inciteful information.  I also like it’s blog Contentions. They really have a group of first class intellects as contributors.


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