An investigation by the Energy and Commerce Committee has revealed that, for political reasons, the White House rushed a $528 billion federal loan to solar firm Solyndra, which went bankrupt two weeks ago. Taxpayers should be outraged. Not just about Solyndra, but about the inherent corruption of government's entire push to pick winners and losers in the energy sector, and micromanage the economy in general.
In case anyone has missed it, here's a refresher on what happened with Solyndra. After the Department of Energy had tentatively approved Solyndra’s loan, White House officials unduly pressured the Office of Management and Budget to give final approval. Vice President Joe Biden was scheduled to appear at the company’s groundbreaking ceremony and the White House didn’t want to miss its photo opportunity. Even then Chief-of-Staff Rahm Emanuel wrote to ask if there was anything he could do to speed the process along. Officials worried that rushing to approve the loan meant they didn’t have enough time to assess the risk to taxpayers. But, the loan went ahead and so did Biden’s photo op.
President Obama touted the project as central to his green jobs plan, visiting the company in May 2010. Solyndra was the first solar company to receive a loan from a federal program to support green energy, a promising symbol of all those green energy jobs still to come. Then, two weeks ago, Solyndra went bankrupt. Now subject to an FBI investigation. The failed company leaves 1,100 people out of work and taxpayers liable for $528 billion in federal loans.
Solyndra was the darling of Obama’s green business plan, but a bad bet from the beginning. Blinded by its close ties to Solyndra executives and its zealotry for green jobs, the White House chose to ignore warnings from the Government Accountability Office that the firm was headed for failure. Private credit ratings agencies also warned that the project would run out of cash in September 2011. Failing to conduct due diligence with public money, the White House got caught up in “corporate favoritism, big-money politics, and Chicago-style deal making.” They cajoled the OMB into approving an enormous loan – hundreds of billions of taxpayer dollars – for political ends. Worse yet, Solyndra is not the only green energy firm propped up by taxes to go under. At least four other green energy firms that each received between $500,000 and $6 million dollars in federal loans have also gone bankrupt.
The Solyndra scandal raises the larger problem of government involvement in energy investment, and the economy in general. The problem is simple: Government’s primary motive is politics, not profit. This produces bad business decisions. Big money goes to projects which sound attractive to voters, are politically well-connected, or produce good photo opportunities, but not necessarily to the projects that produce the best results. Government ends up investing in a solar panel company that goes bankrupt, or a bio-ethanol product that does nothing to improve energy efficiency.
A savvy private investment firm would certainly never rush the approval of a half-billion dollar loan in order to take advantage of a photo opportunity. Private investment insures accountability: invest in a business that suddenly goes belly-up and you lose your investment. When its your own money on the line, you do your homework to make sure you won’t lose your shirt. The private investor wants to make a profit and therefore looks for projects with good prospects of success.
Taxpayers should keep this in mind the next time the President or another politician talks about making “investments” with taxpayer money. Do you really think that government is going to take the same care investing your money as you would?
When it comes to energy policy, the United States desperately needs clean, reliable, domestic energy sources. From this source will flow new jobs, new wealth, reduced environmental impact, and independence from Middle East oil states. But incompetent investment by politically-motivated bureaucrats is not the way to achieve this goal. If America is to have a hope of green energy and jobs, it will be through private investment in promising companies and technologies – not through government officials playing high stakes roulette with other people’s money.