The demise of Solyndra, the bankrupt solar panel company showered with more than a half-billion dollars in stimulus loans, exposes the fatal flaw of President Obama’s jobs plans.
Government officials rushed $535 million to Solyndra because the Obama administration was determined to make the company the centerpiece of its green agenda regardless of the law of supply and demand. Billions more have been wasted by politicians betting on favored companies and making Washington bigger, using the brute force of government to force liberal preferences into the economy. Mr. Obama calls them “investments,” but this is really venture socialism.
The entire purpose of the $825 billion stimulus bill was to sink government money into politically advantageous projects. Once the federal coffers were opened, the venture vultures eagerly descended. Obama bundler and major Solyndra backer George Kaiser, who splits his time between Oklahoma and California, explained it this way in a July 2009 speech in Tulsa: “There has never been more money shoved out of the government’s door in world history and probably never will be again than in the last few months and the next 18 months. And our selfish, parochial goal is to get as much of it for Tulsa and Oklahoma as we possibly can.”
Mr. Kaiser was right: The government was shoveling money to various projects faster than the country had ever seen. The Department of Energy issued loans or loan guarantees or offered conditional support for loan guarantees totaling $38.6 billion for green energy projects, one of which was Solyndra. The program was supposed to “create or save” 65,000 jobs. But as taxpayers learned in recent weeks, this type of financial support carries substantial risk for the taxpayer. If the project fails, as Solyndra did, government foots the bill. And those promised jobs? They haven’t materialized. The Department of Energy (optimistically) says just 3,545 permanent jobs have been created as a result of the program. Still, the money keeps getting shoveled to high-risk startups. The Department of Energy is expected to finalize $9 billion more in green loans by the end of the month.
In addition to funding solar panels and wind farms, the Department of Energy has a heavy hand in the struggling auto industry. It is shipping billions of dollars to automakers and suppliers through a $25 billion fund established to offset the cost of building smaller cars that can meet federal fuel-efficiency mandates. In 2010, Nissan was given a $1.4 billion loan and the high-end manufacturer Tesla Motors received a $465 million loan to build an electric sedan and the battery packs to power it.
While Mr. Obama plays investor with automotive green technologies, taxpayers are still holding the bag for the auto bailouts, which were specifically structured to protect union jobs and benefit packages. The government gave General Motors $50 billion in loans through the auto bailout and now holds approximately 500 million shares, or 32 percent, of GM’s common equity. According to the Congressional Research Service, in order for the government to recoup its money, the shares would have to be sold at more than $52 a share. Today, GM shares are less than half that amount, trading around $22 per share. The taxpayer is likely to take a huge loss whenever the government does decide to sell the shares. Or, the government will simply continue to hold a more-than-one-third stake in a company that continues to struggle.
Meanwhile, government dependents Freddie Mac and Fannie Mae continue to drag down the federal portfolio. These government mortgage companies hold $5 trillion in debt, and taxpayers have been forced to feed them nearly $170 billion since the government took control in 2008. Freddie and Fannie run continual deficits, and their coffers are regularly replenished by the Treasury Department. On top of that, the Obama administration has thrown even more good money after bad trying to modify mortgages, allocating $46 billion for the Home Affordable Modification Program, which was declared a “failure” by the special inspector general. Instead of reducing its role in the housing market, high-ranking officials have floated proposals to make the government’s role even more extensive by turning government-owned foreclosures into rental properties.
The Obama economy is littered with billion-dollar busts. Yet Mr. Obama is advocating massive tax increases that would, in part, pay for more of his “investments.” If his new jobs bill were made law, it would create a new, permanent National Infrastructure Bank to fund even more green energy projects – a permanent venture socialism fund.
The investment bank is a proposal that has received bipartisan support in the past, and Republicans who oppose it are accused of not being “pro-business” enough. But the critics, a powerful cabal of labor and commerce special interests, said the same thing when conservatives opposed the housing, bank and auto bailouts, too. Republicans shouldn’t be the party of big business, and Democrats shouldn’t be the party of big labor. We should all be working together to advocate for the free market, which allows the best, most innovative businesses to succeed instead of distorting the market by subsidizing failing companies.
Thus, there is a much-needed lesson to be learned from Solyndra for Republicans and Democrats alike. Playing investor on the taxpayers’ dime won’t rebuild the economy, it will destroy it.
Sen. Jim DeMint is a South Carolina Republican.