By Jim Geraghty
Monday, July 21, 2025
Other than our Andrew Stuttaford, very few people noticed earlier this month that
the U.S. Department of Defense is using $400 million in taxpayer money to purchase a 15 percent
stake in MP Materials and became the company’s largest shareholder.
MP
Materials, based in Las Vegas, owns and operates the Mountain Pass mine,
the only operating rare earth mine and processing facility in the United
States. As the Department of Defense stated in 2024:
Rare earth permanent magnets are
not only essential components in a range of defense capabilities, including the
F-35 Lightning II aircraft, Virginia and Columbia class submarines and unmanned
aerial vehicles, but also a critical part of commercial applications in the
United States. They are also used to generate electricity for electronic
systems in aircraft and focus microwave energy in radar systems.
In addition to the F-35, Virginia
and Columbia class submarines, magnets produced from rare earth elements are
used in systems such as Tomahawk missiles, a variety of radar systems, Predator
unmanned aerial vehicles, and the Joint Direct Attack Munition series of smart
bombs. The F-35, for instance, requires more than 900 pounds of rare earth
elements. Each Arleigh Burke DDG-51 destroyer requires 5,200 pounds, and a
Virginia class submarine needs 9,200 pounds.
Mind you, this wasn’t a contract to supply rare earth
materials or pledge to purchase goods from the company in the future. MP Materials is a publicly traded company, but now the
largest portion of the shares are owned by the Pentagon.
Andrew — about as principled a capitalist, defender of
free markets, and free-trader as a human being can be — argued that the national-security interest in not being
dependent upon China for rare earth materials made direct government investment
worthwhile:
[A] step (I hope) designed to speed
up the “re-shoring” of the mining and processing of rare earths, minerals
without which the U.S. economy and, importantly, the defense sector would be in
trouble. In the short term, continuing to outsource such a critical business to
China (where production is cheaper) might make economic sense (if China risk is
mispriced), but, in the long term, it would be nuts. China is not our friend. .
. .
As a reminder, Adam Smith
recognized that economic efficiency must take second place to strategic
necessity, writing that “defense . . . is of much more importance than
opulence.”
And some might argue that defense contractors are always
going to be a little different in terms of their approach to markets; it’s not
like you or I are personally looking to buy a new fighter jet. (Although from
the ubiquitous ads in the Washington, D.C., Metro stations, designed to
influence the congressional staffers who work for the lawmakers who make
appropriations decisions, you might think it’s time to trade in your used car
for a shiny new long-range bomber. These ads are the sort of thing that drive the peaceniks
bonkers.)
Every major U.S. defense contractor is in a symbiotic
relationship with the Pentagon. About 73
percent of Lockheed Martin’s revenue in 2024 came from the U.S. government.
A company is “independent” to the degree that they’re willing to irk or
dissatisfy their largest customer.
But the move to make the Pentagon the largest shareholder
in a rare earth mining company arrived shortly after the U.S. government
negotiated itself status as a “golden shareholder” in U.S. Steel, in exchange
for approving the deal with Nippon Steel. I argued this was uncomfortably reminiscent of the Obama-era
“Government Motors” deal with GM; our Dominic Pino noted the differences:
The federal government is only
owning a token share of U.S. Steel, called a “golden share,” but in exchange
for that and for allowing the investment from Nippon Steel, the president of
the United States personally has enormous power over how the company is run —
in perpetuity. The president gets to name one of the company’s three
independent directors and gets veto power over the other two. And the president
gets veto power over a wide variety of business decisions, including relocation
or closing of facilities, sourcing of materials, moving jobs, acquisitions, and
more.
It’s very odd for the government to
have that amount of control without putting any actual financial stake into the
company. The government’s stake is essentially the promise of allowing Nippon
Steel’s $14 billion investment to happen, since Trump would have likely kept
Biden’s block in place otherwise. And there is no plan to ever return U.S.
Steel fully to private control.
Back in June, I wrote, “I hope all the Republicans
who justifiably objected, loudly and frequently, to the U.S. government
purchasing shares of General Motors — earning the company the derisive
nickname, “Government Motors” — remember to object to this arrangement.”
Have you seen any elected Republicans objecting to the
U.S. Steel deal? Nah, I didn’t think so.
Now, on the right, many people justifiably argue that
electing Zohran Mamdani the next mayor of New York City will be a disaster — in
part because he’s on board with globalizing the intifada, and in part because
he’s a communist. Not merely “socialist” — communist. As in, he’s talked about,
“the end
goal of seizing the means of production.” (That’s from the far-ago era of .
. . er, 2021, when Mamdani was 29 years old.)
The man most likely to be the next mayor of New York City
is the ghost of Hipster Stalin.
Besides echoing Karl Marx, one of the biggest examples of
Mamdani’s communism is his belief that the city of New York should set up and
run its own grocery stores. There are a bunch of problems with this idea. For starters,
he misread a chart and believed that the city currently subsidizes private
grocery stores; as Tim Carney laid out, the $140 million that “he plans to
use to pay for his proposed city-owned grocery stores is money the city doesn’t
have.”
Mamdani contends his city-run stores would keep prices
down by purchasing products in bulk; apparently he believes
privately run grocery stores pay retail prices and buy each item individually.
And, of course, his plan ignores the high cost of labor in New York City (in
fact, he wants to dramatically raise the minimum wage) and keep the sales tax
on certain foods as high as it currently is.
Oh, and Mamdani doesn’t really seem like the
law-and-order type, so it’s fair to wonder how he plans to deal with
shoplifting and other theft.
But critics of Mamdani should thank their lucky stars
that the public doesn’t pay much attention to changes in the ownership
structures of mining and steel companies.
The argument from the Trump administration is that the
government simply had to become the largest shareholder in MP Materials and the
golden shareholder in U.S. Steel because it’s a matter of security. And they
have a decent argument, probably stronger in the first case than the latter.
(Although the Department of Defense probably spends close to $500 billion
each year in publicly traded companies — Lockheed Martin, Raytheon
Technologies, General Dynamics, Boeing, Northrop Grumman, etc. When does a
company become important enough to U.S. national security interests that the
government ought to have an ownership share in it?)
At some point, Mamdani is likely to argue that the city
has a “security” interest in making sure its citizens can afford food. And New
Yorkers who are frustrated by high prices are likely to find that to be a
compelling argument.
Of course, if you really want to bring prices down, you
need to increase supply and reduce demand and maximize the competition for
customers. (And while you’re at it, cut the dang sales taxes.) You don’t bring
prices down by having the city run the stores; earlier this summer, WalletHub
compared the operating efficiency of 148 of the largest U.S. cities to
reveal which among them are managed best. New York City ranked 145th out of 148 — well behind those
urban nirvanas like Buffalo, N.Y., Gary, Ind., and Flint, Mich.
It would be easier to make the argument against greater
state involvement in private industries and companies if the federal government
under a Republican president wasn’t sporadically embracing the idea to get what
the president wants.
President Trump has no principled objection to government
control over private corporations; he just wants arrangements that he can tout
as a “terrific deal.”
Trump claims he convinced Coca-Cola to return to using “REAL Cane Sugar in
Coke.” (The company says “stay tuned.”) He demanded that Walmart “EAT THE TARIFFS.” He had no
problem telling Apple CEO Tim Cook that Apple should no longer make
iPhones in India, and threatened tariffs against Apple products specifically.
During the president’s very public, nasty, and personal
spat with Elon Musk, the administration launched a review of SpaceX’s contracts
with the federal government, looking for “potential waste.” According to the Wall Street Journal,
“Administration officials determined that they couldn’t eliminate most of those
contracts because they are critical to the Defense Department and NASA.” In
Trump’s mind, the U.S. government should make major contracting decisions based
upon whether or not he’s getting along with the CEO of the company.
And, of course, this past weekend, Trump declared that the Washington
Commanders football franchise should go back to the name “Redskins” and that
the Cleveland Guardians baseball franchise should go back to the name
“Indians.”
(Ironically, back
on October 8, 2013, Trump tweeted, “President should not be telling the
Washington Redskins to change their name-our country has far bigger problems!
FOCUS on them, not nonsense.”)
President Trump many not want state ownership of
previously private companies, but he does want private companies to obey orders
from the president of the United States. He’s just a little bit communist, but
that does make it at least little bit more difficult to counter the communist
running for mayor of New York City.
ADDENDUM: In case you missed it over the weekend . . . you can choose
to believe you live in a world where the ending of The Late Show is a
sinister plot by spineless, cowardly corporate executives who are terrified of
irking President Trump and who desperately want the Federal Communications
Commission to approve the merger of CBS’s parent company, Paramount Global,
with Skydance Media.
Or you choose to believe you live in a world where the
ending of the show is a reflection of the fact that CBS was losing $40 million
each year on the show, as the Wall Street Journal reports today, and
that “the show’s ad revenue plummeted to $70.2 million last year from $121.1
million in 2018.”
Over the weekend, some people said, “Why not both?” And
no doubt, Colbert’s willingness to go on national television and accuse
his bosses of paying “a big fat bribe” to Trump in their $16 million
settlement of a lawsuit over 60 Minutes likely made it easier for the
bosses to pull the trigger. If you bite the hand that feeds you, you should not
be surprised if you stop getting fed. It is entirely reasonable for the boss to
expect his employees to not make fun of him publicly.
But let’s imagine a world where Stephen Colbert never
made fun of Trump, was relatively apolitical, and never even thought about
making fun of his bosses on television. Sure, maybe the network executives like
Colbert more in that scenario, but they’re still losing $40 million each year
on the show and watching ad revenues decline.
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