Solyndra: A Case Study in Green Energy, Cronyism, and the Failure of Central Planning

Back in 2011 I wrote several times about the failure of Solyndra, the solar panel company that was well connected to the Obama administration. Then, as with so many stories, the topic passed out of the headlines and I lost touch with it. Today, the Washington Post and other papers bring news of a newly released federal investigative report:

Top leaders of a troubled solar panel company that cost taxpayers a half-billion dollars repeatedly misled federal officials and omitted information about the firm’s financial prospects as they sought to win a major government loan, according to a newly-released federal investigative report.

Solyndra’s leaders engaged in a “pattern of false and misleading assertions” that drew a rosy picture of their company enjoying robust sales while they lobbied to win the first clean energy loan the new administration awarded in 2009, a lengthy investigation uncovered. The Silicon Valley start-up’s dramatic rise and then collapse into bankruptcy two years later became a rallying cry for critics of President Obama’s signature program to create jobs by injecting billions of dollars into clean energy firms.

And why would it become such a rallying cry for critics? Well, consider the hyperlink the Post inserted at that point in the article: “[Past coverage: Solyndra: Politics infused Obama energy programs]” And what did that article report?

Meant to create jobs and cut reliance on foreign oil, Obama’s green-technology program was infused with politics at every level, The Washington Post found in an analysis of thousands of memos, company records and internal ­e-mails. Political considerations were raised repeatedly by company investors, Energy Department bureaucrats and White House officials. 

The records, some previously unreported, show that when warned that financial disaster might lie ahead, the administration remained steadfast in its support for Solyndra.

The federal investigators “didn’t try to determine if political favoritism fueled the decision to award Solyndra a loan” – that was accommodating of them – “but heard some concerns about political pressure, the report said.”

“Employees acknowledged that they felt tremendous pressure, in general, to process loan guarantee applications,” the report said. “They suggested the pressure was based on the significant interest in the program from Department leadership, the Administration, Congress, and the applicants.”

As I wrote at the time, this story has all the hallmarks of government decision making:

  • officials spending other people’s money with little incentive to spend it prudently,
  • political pressure to make decisions without proper vetting,
  • the substitution of political judgment for the judgments of millions of investors,
  • the enthusiastic embrace of fads like “green energy,”
  • political officials ignoring warnings from civil servants,
  • crony capitalism,
  • close connections between politicians and the companies that benefit from government allocation of capital,
  • the appearance—at least—of favors for political supporters,
  • and the kind of promiscuous spending that has delivered us $18 trillion in national debt.

It may end up being a case study in political economy. And if you want government to guide the economy, to pick winners, to override market investments, then this is what you want. 

Posted on August 27, 2015  Posted to Cato@Liberty

Marriage Equality’s ‘Reign of Terror’ Is in the Past–Not the Present

At the Iowa State Fair last Friday, actress Ellen Page challenged presidential candidate Ted Cruz about discrimination against gay and transgender people. Instead of directly answering her question, Cruz responded, “Well, what we’re seeing right now, we’re seeing Bible-believing Christians being persecuted for living according to their faith.”That evening at a “Rally for Religious Freedom,” he introduced several “heroes” whom he described as “victims of government persecution” who “have endured the attacks” for refusing to provide services for a gay wedding.

He’s not the only one. Religious right organizer David Lane, who has escorted numerous Republican presidential candidates—including Cruz—to meetings with pastors, wrote in March, “What does concern me is the reign of terror, now becoming old hat, that [homosexuals] impose on anyone who will not celebrate their sexual lifestyle.”

“Persecution.” “Reign of terror.” Strong language indeed.

I don’t think anyone should be forced to supply flowers, cakes, photography, or a venue for a wedding that conflicts with their religious faith. Marriage equality is right and proper in a country that intends to treat everyone equally under the law, but there’s no need to force every mom-and-pop baker into the gay wedding business—or force them out of business with crippling fines.

Terms like hatred, persecution, and reign of terror to describe this issue reveal a lot of historical amnesia.”

But terms like hatred, persecution, and reign of terror to describe this issue reveal a lot of historical amnesia. Laws making homosexual acts illegal have been on the books in America since the 1600s. In the early 20th century and again in the 1950s the laws were actually strengthened. By the middle of the century, in most states conviction for sodomy meant as many as 15 years in prison. In California, a conviction could result in life imprisonment.

Although the sodomy laws were rarely enforced directly, they justified many other forms of discrimination and oppression. As William Eskridge wrote in his book Dishonorable Passions, “Sodomy laws sanctioned police harassment of gay people and their hangouts, the discharge of homosexuals from public as well as private employment, official refusals to protect gay people when victimized by assaults and other crimes, and deprivation of custody over or even contact with their children.” In many states, it was illegal to serve alcohol to homosexuals, or for homosexuals to dance together. In 1966 New York City arrested more than 100 men a week for such crimes.

The law combined with social opprobrium to keep many gay people in the closet, living a lonely underground life. Arrest or being outed could mean the loss of a job, a family, or even a life. Many committed suicide in response to such pressures.

That was a reign of terror.

Today’s unjust but hopefully temporary wave of fines against small business owners pales in comparison.

In fact, I’m reminded of what Mark Twain wrote about the “Reign of Terror” after the French Revolution:

There were two “Reigns of Terror,” if we would but remember it and consider it; the one wrought murder in hot passion, the other in heartless cold blood; the one lasted mere months, the other had lasted a thousand years; the one inflicted death upon ten thousand persons, the other upon a hundred millions; but our shudders are all for the “horrors” of the minor Terror, the momentary Terror….All France could hardly contain the coffins filled by that older and real Terror—that unspeakably bitter and awful Terror which none of us has been taught to see in its vastness or pity as it deserves.

The solution to injustice is never to reverse the injustice. The long oppression of gay Americans does not justify reverse discrimination or forced participation in gay weddings. But conservatives should have a little humility in the language they use about injustices that are far less onerous than the hatred, persecution, and attacks that persisted for far too long in America.

Posted on August 27, 2015  Posted to Cato@Liberty

David Boaz discusses Hillary Clinton’s emails on FOX WRGT 45 News at 10

Posted on August 21, 2015  Posted to Cato@Liberty

David Boaz discusses Hillary Clinton’s emails on ABC KVII Nightside

Posted on August 21, 2015  Posted to Cato@Liberty

David Boaz discusses Hillary Clinton’s emails on NBC KRNV News 4 at Six

Posted on August 21, 2015  Posted to Cato@Liberty

David Boaz discusses Hillary Clinton’s emails on CBS WOWK News

Posted on August 21, 2015  Posted to Cato@Liberty

David Boaz discusses Hillary Clinton’s emails on CBS KMEG Siouxland News at 10

Posted on August 21, 2015  Posted to Cato@Liberty

David Boaz discusses Hillary Clinton’s emails on ABC KTVO News at 10

Posted on August 21, 2015  Posted to Cato@Liberty

David Boaz discusses Hillary Clinton’s emails on ABC WEAR Channel 3 News Extra

Posted on August 21, 2015  Posted to Cato@Liberty

Who Could Have Seen That Coming?

Several recent news stories report information that was hardly surprising to anyone who has studied economics or read Cato at Liberty. We talk a lot about unintended or unanticipated consequences around here, but in these cases the consequences were anticipated and even predicted by a lot of people.

First, consider this front-page story from the Washington Post on Monday:

The [fast-food] industry could be ready for another jolt as a ballot initiative to raise the minimum wage to $15 an hour nears in the District and as other campaigns to boost wages gain traction around the country. About 30 percent of the restaurant industry’s costs come from salaries, so burger-flipping robots — or at least super-fast ovens that expedite the process — become that much more cost-competitive if the current federal minimum wage of $7.25 an hour is doubled….

Many chains are already at work looking for ingenious ways to take humans out of the picture, threatening workers in an industry that employs 2.4 million wait staffers, nearly 3 million cooks and food preparers and many of the nation’s 3.3 million cashiers….

The labor-saving technology that has so far been rolled out most extensively — kiosk and ­tablet-based ordering — could be used to replace cashiers and the part of the wait staff’s job that involves taking orders and bringing checks. 

Who could have predicted that? Well, Cato vice president Jim Dorn in his 2014 testimony to the Maryland legislature. Or Bill Gates around the same time.

Then there’s this all-too-typical AP story out of California:

California lawmakers from both parties are calling for more stringent oversight of a clean jobs initiative after an Associated Press report found that a fraction of the promised jobs have been created. 

The report also found that the state has no comprehensive list to show much work has been done or energy saved, three years after voters approved a ballot measure to raise taxes on corporations and generate clean-energy jobs….

The AP reported that three years after voters passed Proposition 39, money is trickling in at a slower-than-anticipated rate, and more than half of the $297 million given to schools so far has gone to consultants and energy auditors. 

Well, you might have seen that coming if you’d read Cato’s 2011 book The False Promise of Green EnergyOr Thomas Hemphill and Mark Perry in 2012. Or Dan Mitchell in 2008 on government job creation. Or indeed Henry Hazlitt in 1946.

And finally this recent study from the Federal Reserve finding, as reported by Bloomberg:

The surging cost of U.S. college tuition has an unlikely culprit: the generosity of the government’s student-aid program, a report by the Federal Reserve Bank of New York said.

Increases in federal loans, meant to help students cope with rising costs, are quickly eaten up by schools in higher prices, wrote David O. Lucca, Karen Shen and Taylor Nadauld.

Private colleges raise their tuition 65 cents for every dollar increase in federal subsidized loans and 55 cents for Pell grants given to low-income students, according to the report. College tuition has outstripped U.S. inflation for decades.

Who would have guessed? Certainly not Hillary Clinton. But Gary Wolfram, author of this 2005 Cato study, understood what was going on. So did Neal McCluskey in 2009 and Jason Bedrick in 2012 and Steven Pearlstein in 2004. Clinton and other political leaders may not read the Cato website diligently. But you’d think they’d have seen Pearlstein’s article in the, um, widely read Washington Post.

Understanding basic economics can make it fairly easy to predict the results of price floors, price ceilings, subsidies, job creation schemes, and other efforts in economic discoordination. It’s too bad that the widespread availability of economic knowledge doesn’t seem to do much to improve public policy.

Posted on August 21, 2015  Posted to Cato@Liberty

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