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Government's Scary Grip on Economy Tightens: Welch

The government has taken advantage of the economic crisis to get a tighter grip on the US economy, and this does not bode well for business, Jack Welch, former GE CEO and author of "Straight from the Gut," told CNBC Friday.

"There are so many things that bother me right now. Over the last couple of weeks, things have really gone south in the government relationships," Welch told "Squawk Box."

"These guys, when they came in, said a crisis like this is impossible to waste," he added.

In business, when a crisis hits is the time to attack costs and solve problems, to restructure your company "in a nice way," Welch said.

But this was not the feeling he got from the government, who seems to think "there's a crisis and now we can get in here and do all the things that we dreamed about when we were at Harvard, when we were somewhere else," he added.

The Chrysler bankruptcy, which forced certain bondholders to give up on their expectations for payments of debts, was a heavy blow to business environment, according to Welch.

"Look at the Chrysler bankruptcy… what does that do to capital formation? You couldn't believe it could happen!"

The government now controls about 37 percent of the US economy, including healthcare, and this makes businesses uneasy, despite promises that the state's role will shrink when the economy gets better, Welch said.

"Now, these guys say they want to get out. Do you believe that? Do they want to get out?" he asked.

Another example was the recently introduced law lifting tax exemptions on profits reinvested by US companies abroad, which makes American companies less competitive overseas.

The Troubled Assets Relief Program (TARP) funds, with the conditions attached to them, are also something to be avoided by businesses, he added.

And the news that six insurers secured a green light from the Treasury Department to receive funds under the TARP is not good news. "We'll talk to these boys in a year," Welch said.

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