When tycoons and politicians do business, taxpayers lose
If your blood hasn’t boiled in awhile, you must have missed the AJC story earlier this week about Range Fuels — a multimillion-dollar lesson in why taxpayers usually lose when billionaires with hare-brained schemes sidle up to politicians.
It’s been about a year since Range Fuels shut down its facility in Soperton, the South Georgia town where it had promised to turn our state into a world leader in turning wood into ethanol. There was just one problem: Range didn’t actually know how to turn wood into ethanol. The resulting failure cost taxpayers $64 million in federal loan guarantees and another $6 million in state funds.
This past week, the AJC’s Dan Chapman reported the sale of Range for a mere $5.1 million. The lucky bargain shopper? A New Zealand firm bankrolled by Vinod Khosla — the former tech executive who just happens to have been one of the main backers of Range.
Too bad Georgia didn’t invest in one of Khosla’s other ethanol endeavors: In its 2011 ranking of the richest Americans, Forbes described Khosla as “the rare Silicon Valley venture capitalist able to generate profits from a clean tech portfolio.” I’m sure his portfolio’s profitability has nothing to do with the fact that taxpayers shoulder losses by the million on dogs like Range Fuels.
To the degree the public is upset about inequality, the anger seems to stem less from the existence of inequality — which we’ve always had, and always will — and more from the belief that the inequal gains were ill-gotten. The belief that the system is being rigged.
The Occupy movement blames this chiefly on bankers and big business generally, the tea partyers on big government. They are both right when they notice the overlap between their respective targets.
Both parties are guilty of enabling this overlap. Range Fuels was handed money by a GOP governor, Sonny Perdue, and the Republican Bush administration; solar-panel flop Solyndra by the Democratic Obama administration. Both George W. Bush and Barack Obama oversaw bailouts of financial firms and auto makers. Need I go on?
And while failures make headlines, the relative successes line private pockets with public largesse, too.
The timing of this lesson couldn’t have come at a better time. As Georgia’s leaders mull ways to spur the economy during the 2012 legislative session, Range Fuels should be an indelible reminder of the folly of using taxpayer dollars and tax-code loopholes to enrich private firms and individuals.
That goes for the CAPCO scheme, which hands money over to private companies to invest without retaining a stake for the state.
That goes for any other effort that calls for the state to invest directly in private firms — an enticing opportunity for corruption now and years into the future.
That even goes for using hotel/motel tax revenues, once they are freed up from paying off the Georgia Dome, to build an outdoor stadium that will accomplish little besides cannibalizing the Dome’s business and making a lot more money for the Falcons.
The hidden danger of economic downturns is that they invite all manner of bad decisions made with scarcer-than-ever public monies, all in the name of “jobs.”
Yes, Georgia needs jobs. And, yes, there are things Georgia’s leaders can do to encourage their creation. But we don’t need more “friends” like Vinod Khosla, or more misadventures like Range Fuels.
– By Kyle Wingfield
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232 comments Add your comment
I Report (-: You Whine )-: mmm, mmmm, mmmmm! Just sayin...
January 8th, 2012
2:35 pm
Considering that common decency eludes the typical liberal and they think of things only vermin and other assorted wild animals would contemplate, why do they now call themselves “progressives?”
The REAL GodHatesTrash, Superstar
January 8th, 2012
3:37 pm
Curly @2:17
blah, blah, blah – the usual overemotional drivel…trying conduct a decent debate?
_______
Curly, you’re hilarious.
Michael H. Smith
January 8th, 2012
3:49 pm
Lil’ Barry Bailout (Revised Downward)
January 8th, 2012
12:19 pm
I disagree with you and the conclusion drawn by your statement. The problem is these corporate heads never face the kind of scrutiny or the accountability you suggest they do or as they should by stock holders and I consider your kind of thinking to the contrary very dangerous for market integrity and liberty. Regulations have a proper place in the economy despite what “Liberal”-tarians beliefs. A market without proper regulations, the kind you appear to want, gives the corporate fascist warm and fuzzy feelings of empowerment of what is often called Corporatism which is a governance worse than Communism.
Thanks for your returned comments but somehow I’m really not surprise, just disappointed that you, considering your depth of knowledge, are so far too trusting of something as absolute and extreme as a laissez-faire market.
Michael H. Smith
January 8th, 2012
4:03 pm
The Stephanopoulos attempt to trap Romney with and unexpected obscure question was so far over the top, even the average person listening to his question thought George had lost his damn mind; and after his relentless persistence in asking it, he confirmed to just about everyone listening that he had at the very least lost all his honest objectivity.
I Report (-: You Whine )-: mmm, mmmm, mmmmm! Just sayin...
January 8th, 2012
4:21 pm
I would say something fowl about the recently deceased Dirty Birds, to rub salt in Atlanta liberals wounds, but the only sports they like are tiddledeewinks, cricket and other such gay endeavors.
Still, the Birds should be ashamed.
Linda
January 8th, 2012
6:20 pm
carlosgvv@8:27 AM, Your statement deserves a prize. I just can’t figure out what would be appropriate.
The federal income tax rates for 2011 are 10%, 15%, 25%, 28%, 33% & 35%. That means that earners work 1.2, 1.8, 3, 3.36, 3.96 & 4.2 months for the federal government. In addition to federal income taxes, there are also state, county & municipal taxes. What is the maximum number of months that you think anyone should work for the government before they keep any money for themselves to, you know, pay for their own food, clothing & shelter?
The 33% tax bracket is for singles making over $174,400 & couples making over $212,300.
The 35% tax bracket is for singles & couples making over $379,150.
Obama’s Soak The Rich scheme has nothing to do with millionaires & billionaires, nor the rich. It’s a Soak the “Thousandaires” scheme. He want to raise the 33% bracket to 36% & the 35% bracket to 39.6%. These taxpayers would be working for the fed. govt. 4.32 & 4.752 mts. If they pay state income taxes of 10%, they will be working for the govt. up to 6 mts. of the year.
In addition to raising the brackets, he wants to cap their itemized deductions at 28%. That means for every $1000 they contribute to charity, they may only deduct $280. Every charity & non-profit organization in America will be hurt as well as the unfortunate people they stand for, i.e. every church, hospital, college & university, the Salvation Army, the arts & all emergency relief organizations. He has wanted to take away charitable deductions from day one, so that only the fed. govt. can decide who is worthy, what they need & how much.
Who decides what is fair? Regardless of income, is it fair for one person to work a little over a month for the fed. govt. & someone else to work almost 5 mts. for the fed. govt.? Only corporations file corporate tax returns. These tax brackets include our small businesses. Is it even wise to threaten to raise their taxes during poor economic times? Obama said that is would not be good for the economy but that he wanted to do it anyway for “fairness.”
Linda
January 8th, 2012
6:42 pm
carlosgvv, The second part of your statement was ludicrous. The next plan for the progressives is to take over our financial industry via the Consumer Financial Protection Agency. The only swindle going on is by the progressives.
The Republicans are NOT “doing everything possible to torpedo the CP Bureau.” All they did was block Obama’s appointees to this agency & to the NLRB by long-standing procedures. By Obama appointing them anyway during a duly open pro forma session of congress, he violated the constitution. This was the most brazen, arrogant violation of his oath of office thus far & might be the number one reason he will not be re-elected.
Batterycap
January 8th, 2012
7:23 pm
Kyle – great article. Tell me why we actually pay movie companies to come here and make movies. Yes, the State of Georgia foregoes hundreds of millions of tax revenue so that movies will be made here. Isn’t throwing money at industries favored by politicians supposed to be primarily an Illinois thing?
Mary Elizabeth
January 8th, 2012
7:42 pm
Kyle,
Thank you very much for writing this outstanding article for today’s (Sunday’s) paper and for posting this information on your blog. It exposes the injustice to taxpayers when “billionaires with hare-brained schemes saddle up to politicians.”
As a public school teacher of 35 years, and as the daughter of a City Manager who believed in, and who practiced, honest government which served his community and the “common good,” I have little patience for those politicians, or for private sector businessmen and women, who would make a buck for themselves on the taxpayers’ dime, and especially without feeling any tinge of conscience that what they are doing is wrong. If a politician is going to be a public servant, then he or she should serve the public’s interest, and not primarily serve the interest of his/her own pocketbook, at the public’s expense. One has to wonder why there are so many members of the U.S. Congress who are wealthy. Some have come into their wealth by honest and ethical means, but many others have used their political power, primarily, to serve their own monetary advancement. I fear that the pitiful truth is that many in Congress, today, as well as many politicians in Georgia, have chosen to run for office simply to advance their own wealth. Thomas Jefferson, in contrast, lost money while serving the public’s interest, as did many of our founders, including George Washington. But these outstanding men believed in personal honor, as well as in service to their countrymen and women, rather than using their government service to advance their personal wealth.
I have a couple of qualifications to express regarding this article. First, I believe that President Obama should have bailed out the auto industry with government money, as he did, because the U.S. was quickly moving toward a Depression, at that time, and the auto industry needed to be rescued from total collapse, even with governmental funds. Much of that “loaned” money to the auto industry has been returned to the government. As a result of many steps taken during that dire time, our nation did not succumb to a Depression, and we have now had more than 22 weeks of private sector job growth.
Second, I question any venture capitalists – such as Vinod Khosla – using state workers’ pension money for their risky ventures when venture capitalists will not be the ones to suffer as much, in the long run, if these risky ventures fail, as will state workers. In other words, there could develop a mindset of “easy come; easy go” with retirees’ pension money with some venture capitalists. That would never be the mindset of state workers, toward their own pension money, since state workers have directly contributed to their pension funds for decades. State workers would have more to lose with venture capital losses than the venture capitalists.
Government is not the problem in our nation, nor is business the problem. The problem is corrupt government and corrupt business. Good government has an important role to play in building and maintaining our society, as does good business practice. As citizens, we would be wise not to demonize either our government or business, but to insist that both play their separate parts, in harmony and in balance with one another, and that they do so for the benefit of America’s citizens, as did our Founding Fathers.
Thank you, again, Kyle, for this outstanding article.
Linda
January 8th, 2012
9:05 pm
Mary Elizabeth@7:42, I have read your prior & present commentaries.
You are a progressive & are so smooooooooth.
You are a liar, by omission, as are all Democrats, especially progressives. The unemployment rate is the net number of jobs. That is, the number of jobs created by the number of jobs lost, or vice versa. Quoting merely the number of private sector jobs created is dishonest.
State workers have contributed to their pension funds for decades? In what states? Are you kidding?
Your statement that “govt. is not the problem in our nation” is the opposite of what Ronald Reagan stated. Govt. IS THE PROBLEM.
What
January 8th, 2012
9:20 pm
Your statement that “govt. is not the problem in our nation” is the opposite of what Ronald Reagan stated. Govt. IS THE PROBLEM.
Reagan said a lot of things, doesn’t make this correct.
Linda
January 8th, 2012
9:37 pm
What@9:20, The fed. govt. is borrowing at least 40 cents (more like 42 cents) of every dollar it is spending, borrowing it from China or, even worse, printing it at the Fed. Reserve, out of thin air. Have you noticed that your grocery prices are outrageous? Inflation, anyone?
Have you noticed that your gas prices are also outrageous? Thanks to the fed. govt. & Obama.
Where are your light bulbs, chap? If light bulbs were the cause of global warming, we would be home free by now!
“Reagan said a lot of things” & you, my friend, need to compare what he said & what worked to what is being said today & what is not working.
bluecoat
January 8th, 2012
9:57 pm
She stated corrupt business,corrupt government.And she is right.
bluecoat
January 8th, 2012
10:07 pm
Please tell me how Obama or any president controls price of oil.
sheepdawg
January 9th, 2012
7:27 am
first time i’ve agreed with mr wingfield, maybe he’s starting to remove the gop blinders and looking at the growing wealth disparity caused by these heartless and brainless psychopaths as the real problem with our “democracy”
GT
January 9th, 2012
8:48 am
Mary Elizabeth we agree. The problem we have in this economy is too many clever people who do not want to put in the work but want to get in the way of hard working Americans and claim some of their money. I am not talking about government I am talking about Wall Street and finance people who take money from one private pocket and put it into another pocket and their own. They are then paid whether the deal works or not. This is stealing to me. I do blame the investor who blindly invest without doing his or her homework, though many pension funds are set up to make it very difficult to know what is going on so this is easier to pull off, the politician who is desperate to bring jobs to his home town so he can be reelected. The real criminal is the person who loses this money for these people while making his money for himself. Without a thought or conscience of his or her ill fated deeds, taking a bonus and is off doing it again like a serial killer. These people think they are entitled because of some Ivy League education or birthright to be fed when their actions have caused a holocaust in the American economy. This nonproductive in-between man needs to be held responsible for his or her indiscretions. I as a business man am responsible for the product I sell. If I cause harm to a customer, I am responsible for what I have done. How have these people been let off the hook while doctors who earnestly try to help society are held to a higher grade as are most professionals.
The government is our fault, it is us, though like bad children many of us don’t claim it. The government didn’t directly cause the pain we are going though right now, dumb as they are they trusted the information of a greedy bunch of entitlement babies who sold them a bill of goods to get a commission and bonuses. As the people of south Georgia were trying to figure where their next meal was coming this weekend these big shots were riding their jets and parading around with the “let em eat cake” attitude that is about to destroy this nation. I am not against wealth if it is producing and I am not against a community trying to better itself through its government. I am against a winner never feeling the pain of his or her actions, making the losers what they are then ridiculing them for trying to survive.
Melissa
January 9th, 2012
11:07 am
I support the philosophy that willingness to fail is a key ingredient in success, however, no one should assume that risk for me. Government has no right to risk my money without my permission.
UGA 1999
January 9th, 2012
11:37 am
Kyle, normally I agree with you, However this time may be the exception. IF the “tycoon” is the job creator, he/she may have to work with local politicians for tax incentives or grants.
Lil' Barry Bailout (Revised Downward)
January 9th, 2012
12:21 pm
Govt. IS THE PROBLEM.
Reagan said a lot of things, doesn’t make this correct.
————
Wrong. Our President Reagan was correct. Government is the problem. Bad schools, disappearing jobs, expensive healthcare, expensive higher education…all are caused by government and the party of government.
Thanks, Democrats.
Mary Elizabeth
January 9th, 2012
12:22 pm
Melissa@11:07 a.m.
“I support the philosophy that willingness to fail is a key ingredient in success, however, no one should assume that risk for me. Government has no right to risk my money without my permission.”
—————————————————————
Melissa, as a retired teacher, and as a state government retiree, I want to use your remarks at 11:07 a.m. – and alter them somewhat – in order to show some irony, as well as to advance further my reason for rejecting the current trend of allowing business entrepreneurs to use state workers’ pension funds for their own purposes. See below:
—————————————————–
I support the philosophy that willingness to fail is a key ingredient in success; however, no one should assume that risk for me. Venture Capitalists have no right to risk my pension money without my permission.
Lil' Barry Bailout (Revised Downward)
January 9th, 2012
1:00 pm
Venture capitalists don’t control where teacher pensions are invested.
End of story.
Mary Elizabeth
January 9th, 2012
1:31 pm
Lil’ Barry Bailout@ 1:00
“Venture capitalists don’t control where teacher pensions are invested. End of story.”
——————————————————————-
Barry, you are misinformed. This has been a trend in many states. Georgia is considering it.
To be more informed, read this paragraph from Kyle Wingfield’s post of January 5, 2012:
“As I’ve written before, however, there are other ways to pursue this good goal the wrong way. The best way is to put a small portion of funds that are going to be invested anyway — say, 1 percent of the state pension fund’s portfolio — into a top-shelf VC or private equity fund, with the stipulation that the fund open an office in Georgia. Let the fund’s managers choose its investments, whether they’re here or elsewhere, but give our companies a better chance at attracting the attention of those managers.”
———————————————————-
Here is the link for Kyle Wingfield’s full article on Jan. 5, 2012, which will link to his Nov. 28, 2011 article, which also addresses this topic:
http://blogs.ajc.com/kyle-wingfield/2012/01/05/dear-gov-deal-go-broad-with-plan-to-spur-georgia-economy/
UGA 1999
January 9th, 2012
2:30 pm
Obama’s Cheif of Staff is stepping down….hmmmm I wonder why. Get out before the ship sinks.
Lil' Barry Bailout (Revised Downward)
January 9th, 2012
5:44 pm
Mary Elizabeth: Barry, you are misinformed. This has been a trend in many states. Georgia is considering it.
————————–
Who’s considering it? Georgia? Would that be the government of Georgia?
As I said earlier, the government controls where teacher retirement money is invested.
Glad to see you agree.
Mary Elizabeth
January 9th, 2012
6:57 pm
Lil’ Barry Bailout@5:44 p.m.
Specifically, the Teacher Retirement System of Georgia determines where teachers’ retirement pension money is invested.
If you had read the links I had provided for you, you would have realized that some of Georgia’s legislators have considered presenting legislative bills which would allow a certain percentage of retired state employees’ pension funds to be utilized by Venture Capitalists for startup businesses. I believe those legislative proposals would be contested.
Lil' Barry Bailout (Revised Downward)
January 9th, 2012
7:33 pm
Why read the links when you’ve so neatly summarized my point–it is the government, not eeeeeevil capitalists, that controls teacher retirement funds.
Mary Elizabeth
January 9th, 2012
9:06 pm
Lil’ Barry Bailout@7:33 p.m.
The “government” is made up of many agencies – some of which have jurisdiction over others.
If risky Venture Capital endeavors fail, having used a percentage of state employees’ retirement pension funds, those retirement funds will be depleted, by that percentage. That is the heart of the issue.
Please do not put words into my writing which I have not used. “Evil” is not a word I have used, or would use, to describe capitalists.
Good evening.
Lil' Barry Bailout (Revised Downward)
January 9th, 2012
10:12 pm
That’s correct–government controls teacher retirement funds and government determines how those funds are invested. And you are also correct that any risks taken with those funds are at the direction of government. If someone doesn’t like how funds are invested, their argument is with government, not with an investment firm providing services at the direction of the government.
Mary Elizabeth
January 9th, 2012
11:34 pm
Lil’ Barry Bailout@10:12
You have correctly stated that retired teachers and retired state employees may have an argument with government relative to the investing of their pension funds. However, you do not appear to perceive of the connection that some “government” politicians may have with big business interests, which may adversely effect state workers’ interests.
And, you appear to have an inordinate prejudice against government, in general, which makes you erroneously perceive of government as one monolithic entity. I believe you should fine-tune your thinking relative to the positive role that government can play within our society. Below is a repeat of a paragraph that I posted on this thread, that places government, and its proper interaction with business, in a balanced perspective:
“Government is not the problem in our nation, nor is business the problem. The problem is corrupt government and corrupt business. Good government has an important role to play in building and maintaining our society, as does good business practice. As citizens, we would be wise not to demonize either our government or business, but to insist that both play their separate parts, in harmony and in balance with one another, and that they do so for the benefit of America’s citizens, as did our Founding Fathers.”
Lil' Barry Bailout (Revised Downward)
January 10th, 2012
7:42 am
I agree–if government makes poor decisions with your retirement money, government is the problem. Investing in new, risky ventures is what venture capitalists do. Let’s not blame them for government taking on known risks. You seem to have a prejudice against business, so I understand your need to put the blame on them rather than where it belongs.
Mary Elizabeth
January 10th, 2012
9:18 am
You are wrong. I do not have prejudice against business. I have an invested concern about risky Capital Venture types of business endeavors and the percentage of success that these start-up businesses will have with hard-earned pension retirement money of state workers. Most start-up businesses do not suceed.
It is not a matter of “blaming” anyone. It is a matter of looking boldly at the rate of successs of start- up businesses which have no record of success behind them – and trying to prevent from happening the use of state workers’ pension money for these start-up endeavors.
Also, I trust the business minds within the Teacher Retirement System whose purpose is to determine the sound investment choices of my pension money, and who have my best interests in mind when they do so, more than I trust certain politicians, who are not business specialists, but who may give themselves the right to determine the investment of my pension money in risky business start-up endeavors, when I know that some of these politicians have politicial connections to big business moguls, who have an ideological agenda against state workers. It is a matter of looking at what is going on straight on. Both the TRS and Georgia’s politicians are “government.” One must differentiate within “government.”
I believe that my “government” contributions to the state of Georgia, for over 35 years, are to be valued as much as business endeavors have done for the state of Georgia. My rate of success in educating young people was not only documented, but also praised by parents, students, and administrators. My contributions to Georgia through educating her students have contributed to Georgia’s long-ranged success. Thomas Jefferson was a strong proponent of public education in his writings. Jefferson was so dedicated to education that he started the University of Virginia, of which he was so proud that he had that achievement placed on his tombstone. He did not have the fact that he had been the President of the United States placed on his tombstone. Through that deliberate choice, Jefferson wanted future Americans to know that his priority for our nation was education. Alexander Hamilton believe in the importance of business outreach to America. Both of these outstanding founders’ ideas about what is important for American should be valued. Neither “government” nor “business” should be demonized and citizens must keep both government and business from becoming corrupted, as I previously had stated, and especially if “government” and “business” become questionable bedfellows through political contributions of big business moguls to governmental politicians.
Mary
January 10th, 2012
12:41 pm
This kind of taxpayer was could be reported daily – actually could fill the entire newspaper daily if based on the nation. Government waste is happening at all levels in this country and continues to happen. Anyone read about the fines imposed on the oil industry today for NOT using a product that this NOT available? The EPA also must stop in it’s investments in sustainable fuels that don’t exist and cannot be produced. Their excuse? If we mandate it, the technology will follow. In the mean time we’ll all pay for this mis-guided agency and local governments greedy for jobs at any cost.