The American Spectator

In September 2010, Michigan Gov. Jennifer Granholm celebrated a brave new chapter in “America’s clean energy future.” A123 Systems had built a 291,000-square-foot electric car battery manufacturing facility in Livonia and the second-term Democrat was on hand for the grand opening. Granholm called it “a powerful demonstration of the job-creating potential of clean energy” and a “success story” of the $787 billion federal stimulus package.

“You can see the pride in the faces of A123’s workers and hear it in their voices,” Granholm enthused in the Huffington Post. “They know they’re helping shape our nation’s clean energy future, and leading Michigan’s economic recovery. Half of the new hires at A123’s Livonia facility were previously unemployed.”

A report by the Mackinac Center for Public Policy paints a less rosy picture. “[T]he company has laid off 125 employees and had a net loss of $172 million through the first three quarters of 2011,” states a report on the free-market think tank’s website. “Yet, this month A123’s Compensation Committee approved a $30,000 raise for [Chief Financial Officer David] Prystash just days after Fisker Automotive announced the U.S. Energy Department had cut off what was left of its $528.7 million loan it had previously received.”

Despite A123’s financial woes, other executives also reaped the rewards of America’s clean energy future. Mackinac reported, “Robert Johnson, vice president of the energy solutions group, got a 20.7 percent pay increase going from $331,250 to $400,000, while Jason Forcier, vice president of the automotive solutions group, saw his pay increase from $331,250 to $350,000.”

The federal government gave A123 $249.1 million in grant money through the Department of Energy, while the state of Michigan supplied another $141 million in tax credits and other subsidies. All told, that is $390 million in taxpayer dollars for a company that is losing money, shedding workers, and giving its bigwigs big paydays. Fisker Automotive, the hybrid electric car manufacturer, buys lithium ion batteries from A123. Fisker had received $193 million from the feds before the Department of Energy decided the company wasn’t even doing well enough for government work and terminated the rest of its $528.7 million loan guarantee.

Another day, another Solyndra. Solyndra, of course, is the solar energy company that first attracted national attention to the green jobs fad’s darker hues. Solyndra received a $573 million loan guarantee from the federal government. It was considered the first major “public investment” of its type in alternative energy by the Obama administration. The White House originally estimated that government support would help Solyndra create 4,000 new jobs. Instead by September 2011, the company had largely ceased operations, filed for Chapter 11 bankruptcy protection, and laid off nearly all its employees. The U.S. taxpayer is on the hook to pay back the loan.

WHEN GOVERNMENTS TRY to pick winners and losers in emerging industries, they often swing and miss. Politicians and bureaucrats just don’t have the same batting average as the free market. But there is another problem inherent in such government interventions: the public largesse inevitably accrues to the politically connected. Solyndra’s case was no different. Roughly 35 percent of the company was owned by George Kaiser, an Oklahoma billionaire who just happened to be a bundler for Barack Obama’s 2008 presidential campaign. Each Obama bundler raised at least $100,000. The more than $500 million loan guarantee wasn’t just a random mistake and Solyndra’s fate was no unpredictable fluke.

“The economic reality is that Solyndra loses money on every solar panel it sells,” the Hoover Institution’s Peter Schweizer wrote in his book Throw Them All Out. “The company has never been profitable. The plan was simple, and has become a pattern with other companies: secure government money, go public, and get out.” A Solyndra investor memorably told the Wall Street Journal: “There was a perceived halo around the loan. If we get the loan, then we can definitely go public and cash out.”

And cash out they did. Kaiser and other Solyndra investors will be paid back before the taxpayer. But the recipients of these loan guarantees and subsidies don’t just get access to government money. Government backing serves almost like a Good Housekeeping seal of approval for other investors, helping businesses partially on the public dole raise more private capital as well.

“Crony capitalism” is the name given to corporate welfare for politically connected enterprises. But it has come to signify a broader departure from the free market in which profit remains private while losses are socialized. Incentives to self-regulate disappear. There is always Uncle Sam waiting in the wings to assume responsibility. This ugly distortion of capitalism predates the Obama administration: it undergirded the $700 billion Troubled Asset Relief Program (TARP) bailout and the 2005 energy bill, which gave Solyndra-style boondoggles their start, both of which were signed into law by President George W. Bush.

But by making green jobs and government investment in alternative energy such a large part of its economic stimulus strategy, the Obama administration is institutionalizing crony capitalism. There is no shortage of cronies. To cite just one example, Schweizer found that $16.4 billion out of $20.5 billion in loan guarantees under an Energy Department program went to companies run or primarily owned by Obama financial backers. “Their political largesse is probably the best investment they ever made in alternative energy,” Schweizer wrote. “It brought them returns many times over.”

In some cases, the people running the loan programs are also financial supporters of Obama. Bundler Steve Spinner raised about $500,000 for Obama in 2008 and, according to a Politico report, has brought in roughly the same amount for the president’s reelection effort. He was dubbed the campaign’s “liaison to Silicon Valley.” Spinner went from the Obama national finance committee to overseeing strategic operations for the Department of Energy’s loan program. When he later left the administration for the Center for American Progress, Spinner’s bio on the group’s website said he “helped oversee the more than $100 billion of loan guarantee and direct lending authority for the Title XVII Loan Guarantee Program and the Advanced Technology Vehicles Manufacturing loan program.” (Spinner left the Center for American Progress in October 2011.)

Spinner became something of a household name when he was ensnared in the Solyndra debacle. The government released emails showing that Spinner was, as the Huffington Post put it, “more actively involved in a loan for Solyndra LLC than administration officials have acknowledged.” According to the emails, Spinner pushed to have the Solyndra loan finalized before Vice President Joe Biden’s planned trip to the company’s Fremont, California groundbreaking ceremony. “How — hard is this? What is he waiting for?” Spinner complained. “I have the OVP [Office of the Vice President] and WH [the White House] breathing down my neck on this. They are getting itchy to get involved.”

The administration’s line has always been that the White House didn’t know the Solyndra investors’ names and Spinner wasn’t involved in the approval process for the loans. These emails, released to the House Energy and Commerce Committee as well as the media, aren’t exactly a smoking gun to the contrary. But they don’t give off an air of dispassion or neutrality either.

LAST YEAR, the Department of Energy gave a $737 million loan guarantee to a company called SolarReserve. SolarReserve is partnered with Pacific Global Group, which in turn employs Nancy Pelosi’s brother-in-law Ronald as a high-ranking executive. The St. Louis-based wind energy firm Wind Capital received a $107 million tax break. Wind Capital’s current chairman, former president and CEO, is Tom Carnahan-son of the late Missouri Gov. Mel Carnahan and former U.S. Sen. Jean Carnahan, brother of Congressman Russ Carnahan and Missouri secretary of state Robin Carnahan, and for good measure Obama’s chief fundraiser in the Show Me State.