It seems likely that General Motors will become a vassal of the United Auto Workers union and the federal government. Which means that GM will survive only because U.S. taxpayers pick up the tab in order to preserve the pensions of UAW members and keep them employed at above-market compensation. Similar arrangements may come to pass in other (effectively) nationalized industries — banking and health care, most notably (but not exclusively).

Nationalization of the auto, banking, and health-care industries (among others) will prove to be the straw that — when piled on Social Security and Medicare/Medicaid — breaks the back of the American economy. How so? The effective tax rate — the true cost of supporting Social Security, Medicare/Medicaid, nationalized industries, and the ever-growing panoply of government “services”  — will further (and fatally) deter work, saving, capital investment, innovation, and entrepreneurship. (See, for example, this piece by Lawrence Kudlow.)

The economy, if we are lucky, will muddle along at a rate of growth that is barely positive. And that growth will be phony because it will be attributable to the expansion of the public sector (i.e., government and its wholly controlled subsidiaries). We will then have achieved the Left’s Nirvana: Europeanism.

God help us. It’s unlikely that anyone else will.

UPDATE: Arnold Kling makes a related and equally gloomy prediction:

Cato Unbound this month deals with a core issue. Peter Thiel writes,

I no longer believe that freedom and democracy are compatible…

As one fast-forwards to 2009, the prospects for a libertarian politics appear grim indeed. Exhibit A is a financial crisis caused by too much debt and leverage, facilitated by a government that insured against all sorts of moral hazards — and we know that the response to this crisis involves way more debt and leverage, and way more government. Those who have argued for free markets have been screaming into a hurricane. The events of recent months shatter any remaining hopes of politically minded libertarians. For those of us who are libertarian in 2009, our education culminates with the knowledge that the broader education of the body politic has become a fool’s errand.

I think that perhaps the best positive approach for libertarians right now is to support institutions that compete with government. That means charities, churches, charter schools, clubs, consumer information services, and other sources of public goods. I would count the traditional family as an institution that competes with government.

You are likely to see Democrats under President Obama launch assaults against all of the institutions of civil society. Already, the Washington DC school voucher program is under attack, as is the tax deduction for charitable contributions. As libertarians, our electoral voice is worth little. Our threat to exit is probably too costly to carry out. Promoting institutions that compete with government is the best strategy I can come up with.

I tend to agree that for libertarians the “voice” option is looking bleak. I prefer exit options. But by the same token, I do not want to move to New Hampshire (see Jason Sorens) or to a seastead (see Patri Friedman).

UPDATE 2: The Supreme Court will be of no help to us, if Ed Whelan and I are right about its likely direction. I focus on the long run; Whelan, on the near future. Sadly, I must agree with his assessment:

Don’t be fooled by the false claims that we have a conservative Supreme Court. The Court has a working majority of five living-constitutionalists. Four of them—Stevens, Souter, Ginsburg, and Breyer—consistently engage in liberal judicial activism, and a fifth, Kennedy, frequently does. As a result, the Court is markedly to the left of the American public on a broad range of issues. Indeed, in coming years, Souter’s replacement may well provide the fifth vote for

• the imposition of a federal constitutional right to same-sex marriage;
• stripping “under God” out of the Pledge of Allegiance and completely secularizing the public square;
• the continued abolition of the death penalty on the installment plan;
• selectively importing into the Court’s interpretation of the American Constitution the favored policies of Europe’s leftist elites;
• further judicial micromanagement of the government’s war powers; and
• the invention of a constitutional right to human cloning.

American citizens have various policy positions on all these issues, but everyone ought to agree that they are to be addressed and decided through the processes of representative government, not by judicial usurpation.