The stimulus bill of February 2009 included a ton of money to press high speed rail and green energy more so than to create jobs. Why waste a crisis?
On the solar energy side, the government awarded $1.56 billion in loan guarantees to companies making solar panels. You may be aware that western panel makers are going out of business everywhere. The cause for failures is lack of demand in a down economy coupled with a flood of far cheaper panels made in China with equipment manufactured in the west.
The largest investment of taxpayer money made by the U.S. Department of energy was $535 million to Solyndra in March of 2009 – that was more than half of the $1 billion in total capital the company was able to raise from investors anywhere. Bloomberg News says that the company was in serious trouble before the original investment. Today, people are asking what the rush was and finding emails that suggest the DOE had its doubts about the company. Solyndra was owned by a Democrat and major Party campaign contributor.
A year after the taxpayer investment, the company had built a new plant and hired 1,100 workers. President Obama visited the plant saying, “The promise of clean energy isn’t just an article of faith.” Two months before Obama’s visit PricewaterhouseCoopers warned that Solyndra had troubles deep enough to “raise substantial doubt about its ability to continue as a going concern.”
In January of 2010 – less than a year after the investment – the Energy Department accepted a new investment of $75 million but as senior debt, ahead of all but $150 million of the taxpayer’s money. On Aug. 31 Solyndra announced it would file for bankruptcy reorganization in a week. All the jobs are gone. The FBI, likely at the insistence of House Republicans, has raided the place and is investigating for fraud.
The main issue for me is neither fraud nor cronyism; if those exist, the truth will out. The key issue for me is Keynesian government policy and “stimulus” in general:
· Government cannot do anything well – we ignore this at our peril.
· Guaranteeing loans to businesses is absolutely “picking winners” and something the American government should very rarely do.
· When Congress decides to support a major project with loan guarantees, engineers and scientists should select the best plans and technologies. The Treasury should evaluate the financials and set the terms.
· “Stimulus” should be about creating and preserving jobs immediately not someplace in the distant future but equally important is the cost of each job created.
· The Solyndra investment was a good idea because it was truly “shovel ready” and created 1,100 new jobs in a year.
· But the Solyndra investment was a very bad idea because the DOE is no judge of financial risk and $484,000 per job is too much even if those jobs lasted more than a year.
· “Infrastructure” spending is seductive but mostly a mirage. Such projects cannot be shovel ready and should be part of growth activities not stimulus. If there is a big project underway but about to shut down for lack of funds, keeping that going would be stimulus.
· Government investment in a project such as high speed rail – a bad idea at anytime – is not stimulus; it’s not shovel ready, the costs are unknowable and the project carries an after completion, ongoing taxpayer obligation of unknowable dimensions. As with dams and nuclear power plants, get the lawyers, regulations and tree huggers out of the way; let the market decide whether the investment is sound. But either way, these projects are not stimulus.
· “Stimulus” is cutting taxes to little people, extending payments to the unemployed and handing out money to states if they will keep government employees a little longer.
· The WPA et al is not stimulus; that is communitarian interference with the free market which will absolutely slow economic growth.
We need a lot more common sense in government.
Solyndra Bankruptcy Was Disaster Waiting To Happen
By: Martin LaMonica
September 6, 2011
Taxpayers Rank behind Solyndra Investors under Obama’s Refinancing Deal
By William McQuillen - Sep 3, 2011
Obama Team Backed Solyndra Aid As Auditors Were Wary
September 12, 2011 by Bloomberg
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