The collapse of Solyndra, a California-based solar-panel company, has cost taxpayers $535 million in federally guaranteed loans and exposed the Obama administration to legitimate criticism of how it handled the project.
In a nutshell, the White House seems to have been so enthralled by the prospect of clean-energy jobs, as well as by a desire for a politically useful success story, that it ignored warnings that Solyndra might be a bad investment. In addition, FBI and congressional investigators are looking into more serious allegations, including claims that Solyndra executives lied to federal officials about the company’s prospects and that political favoritism may have played a role.
The Solyndra case has also re-energized a broader debate about government subsidies to private industry. As Paul Ryan, the Republican chair of the House Budget Committee, put it Sunday on Fox News, Solyndra represents “industrial policy and crony capitalism at its worst. It’s Exhibit A for how this kind of economic policy doesn’t work.”
Personally, I have some sympathy for that position. In fact, if Solyndra is Exhibit A in the philosophical indictment against government intervention, it’s easy to come up with exhibits B, C and D right here in Georgia.
1.) On Jan. 19, 2009, just as the Bush administration was leaving office, the Energy Department approved $80 million in loan guarantees for a new plant in central Georgia that was supposed to convert wood scraps to fuel. (In 2007, the company had been approved for another $75 million in outright federal grants.)
U.S. Sen. Saxby Chambliss lauded the Range Fuels deal “as a great boost for economic growth and job creation in our state.” “This is exactly the kind of project this country needs to move us toward energy independence,” U.S. Sen. Johnny Isakson said. But when the plant closed its doors in February, having failed to produce any fuel whatsoever because its technology didn’t work, the federal investment was lost.
2.) The same Energy Department office that approved the Solyndra and Range Fuels loans has also approved $8.3 billion in loan guarantees to finance two new nuclear reactors at Plant Vogtle outside Augusta. As with solar panels and biofuel, the loans are necessary because nuclear power is considered too risky by private investors. So if you take the principled position that government should not intervene, you eliminate nuclear power as an energy source.
3.) One of the most controversial government interventions occurred in 2009, when the Obama administration used government loans to save General Motors and Chrysler. Again, on grounds of principle I can understand why people might oppose that program. But it strikes me as odd that you rarely hear such criticism about the $410 million package of subsidies offered by the state of Georgia to lure a single Kia auto plant to the state. Why is that?
Vinod Khosla, a venture capitalist who invested and lost a significant sum in Range Fuels, argues that government intervention can be justified because what’s at stake is more important than private calculations of profit or loss.
For example, given that we’ve spent trillions of tax dollars ensuring access to oil from the Middle East, Khosla wrote in the Wall Street Journal, “it seems reasonable to spend a tiny fraction of that on technologies that help end our oil addiction.” And while there are no guarantees of success, “we must take risks: That means course corrections and even failures, and we have to be tolerant of that.”