One of the industries hardest hit by the spike in fuel prices caused by the Iran War is airlines. Jet fuel prices have doubled since the start of the war. Airlines have reacted to the fuel price increase by raising fares and baggage fees, as well as by cutting routes.
Raising prices is not a good option for “budget” airlines since their main appeal to consumers is their low prices. Increasing prices could cause these carriers to lose business.
The financial strain from the increased fuel costs led discount airline Spirit to ask the Trump administration for a bailout. President Trump said a bailout would be conditioned on Spirit giving the government an ownership stake in the company. Spirit was unable to reach a deal with the government, so Spirit went out of business on Saturday. However, several other budget airlines are seeking a government bailout.
Spirit has been struggling for years. In 2022, the airline sought to get on better financial footing by merging with fellow discount airline JetBlue. The merger may have allowed for more effective competition with the dominant carriers. However, the Justice Department successfully opposed the merger in court on the grounds it would lead to more concentration in the discount airlines market. This is one of many examples of how an aggressive approach to antitrust enforcement can harm businesses and consumers.
Spirit is not the first business President Trump has considered having the government “invest” in. For example, in exchange for government approval of Nippon Steel’s acquisition of US Steel, the government was given a “golden share” allowing the government to overrule decisions made by the company that the government determines are against US “national security.” Among the other companies the government has obtained an ownership interest in are several minerals mining companies and computer chip manufacturer Intel. If discount airlines receive bailouts in exchange for granting government ownership stakes in their businesses, other companies impacted by the spike in fuel prices may line up for the same deal.
Having government own part of what is a nominally private company interferes with the efficient allocation of capital. It also means business decisions will be made to please government officials and bureaucrats instead of to meet the needs and wants of consumers. Government officials will also act based on what will boost returns in the government’s investments.
Government ownership of all or part of private businesses is the epitome of economic fascism. Yet, there have not been protests from the so-called “anti-fascist” progressives over President Trump arranging US government ownership stakes in private companies. This is probably because they are looking forward to a Democrat president expanding government’s investment in, and control of, private businesses.
There has been little criticism of President Trump’s acquisition of ownership interests in private companies from Republican politicians or conservative writers and activists. Many of them, though, would have opposed President Obama or President Biden tooth and nail if either had the US government take an ownership interest in private companies.
Contrary to what many seem to think, full or partial government ownership of private companies does not magically become less of a threat to liberty and prosperity when done by a Republican. Congress should pass a law forbidding any part of the federal government — including the Federal Reserve — from taking an ownership interest in any private business.
