Here in this country, Republican opposition to public ownership remains implacable, at least in theory. Conservatives have long argued that government-owned enterprises such as Amtrak and the U.S. Postal Service are inherently inefficient, and have criticized even modest public initiatives as dangerous flirtations with socialism. Ironically, however, this is a Republican president Donald Trumpwhich is busy expanding the boundaries of the state by forcing government agencies to acquire significant stakes in private companies.
In August, chipmaker Intel announced that the Trump administration would acquire 433.3 million of its shares for $8.9 billion, an ownership stake of just under ten percent. It was one of a series of deals that allowed the federal government to acquire either direct ownership interests or options to purchase future ownership interests in five rare earth companies, as well as a so-called golden share in USA steelwhich he received when the Trump White House approved its sale to Japanese company Nippon Steel. While this unusual arrangement did not give the government any ownership rights to future profits that US Steel would generate, it did give the president the right to veto certain company actions, including decisions to close plants or move operations overseas.
Of course, this is not the first time the US government has acquired stakes in large companies, and the basic principle of rewarding taxpayers for providing funding to private businesses is sound. (Bernie Sanders, hardly a fan of Trump, has expressed qualified support for the Intel deal.) During the great financial crisis of 2008-2009, the federal government provided emergency funding to automaker General Motors and insurance company AIG, taking ownership stakes of approximately sixty percent and eighty percent, respectively, which were subsequently sold. He also seized control of mortgage giants Fannie Mae and Freddie Mac, gaining an 80 percent ownership stake that he still owns today.
All of these government rescue measures were crisis measures. Trump's stakes, which some observers call “state capitalism,” are more arbitrary and opaque, subject to his whims. Obviously he's not a socialist, but if a Democratic president intervened in the business sector the way he does, many Republicans would be screaming about creeping socialism.
The Intel deal comes out of unfinished business from the Biden administration, which through CHIPS and the Science Act of 2022 agreed to provide the struggling chipmaker about $8 billion in federal grants and eleven billion in loans to build new factories in the U.S. that will help the company catch up with overseas competitors. When Trump returned to the White House, Intel had received only about a quarter of the promised money, and it was unclear what would happen to the rest. Obviously, the Trump administration demanded a share of the shares in exchange for the transfer of part of the money, and Intel could hardly refuse. The federal government is now its largest shareholder.
The administration has already exercised the power granted by its gold share in US Steel. In September, according to Wall Street JournalMinister of Commerce, Howard Lutnicklearned the company was planning to close a plant in Illinois and told its CEO that Trump would exercise his right to block the move. US Steel changed course. This kind of interventionism is anathema to free-market conservatives, and it is far from clear how it will end. Lutnick said the administration is even considering purchasing stakes in major defense contractors such as Boeing and Lockheed Martin, presumably as payment for renewing their lucrative federal contracts.
There has also been some speculation that the Trump administration could end up doing some kind of equity financing deal with a major artificial intelligence company like OpenAI, which is making huge investments in data centers that he needs to train and run his models. According to Sam Altmanthe company's CEO, has committed to spending $1.4 trillion over the next eight years. Its revenues are growing rapidly: Altman said they will reach twenty billion dollars a year by the end of this year. But the company still spends far more than it takes in and needs to raise significant outside funding. Last week, Sarah Friar, OpenAI's chief financial officer, said the company was looking at “an ecosystem of banks, private equity, maybe even government,” and raised the possibility of a federal funding guarantee that would lower the firm's borrowing costs and shift at least some of the risk to the government if OpenAI fails to repay its loans. Essentially, if a company performs poorly, the taxpayer may be given the opportunity to pay a portion of its bills.
