A greener shade of crony corruption — er, capitalism — courtesy of the Obama administration.
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“It’s increasingly hard to tell the government’s green jobs subsidies apart from the Democrats’ friends and family rewards program,” cracked the Weekly Standard’s Mark Hemingway. Perhaps they might feel differently about this benevolence if Haliburton got into the green jobs act.
In February, the Washington Post reported that “$3.9 billion in federal grants and financing flowed to 21 companies backed by firms with connections to five Obama administration staffers and advisers.” This includes Sanjay Wagle, a venture capitalist who headed Clean Tech for Obama in 2008. After the election, Wagle joined the Energy Department right as the administration was planning a round of government investments in the clean technology firms.
Over the next three years, the department spent $2.4 billion in public funds on clean energy companies in which Wagle’s old firm, Vantage Point Venture Partners, had invested. The White House maintains that its venture capitalist advisers do not make these decisions, though some probes have found evidence of at least informal lobbying.
“To believe those quiet conversations don’t happen in the hallways-about a project being in a certain congressman’s district or being associated with a significant presidential donor, is naive,” David Gold, a venture capitalist critical of the administration’s energy investments who once worked at the Office of Management and Budget, told the Post. “When you’re putting this kind of pressure on an organization to make decisions on very big dollars, there’s increased likelihood that political connections will influence things.”
How could it be otherwise? Politicians have always done favors for supporters. Businesses have always spent money to try to influence the government. As the government’s role in the economy grows, so too will the nexus between private interest and public good, the K Street/Wall Street axis, even when the people involved have honorable intentions.
The dilemma of contemporary American liberalism is that its adherents decry money in politics-if you don’t believe me, Google “Citizens United“-while lionizing public investments in private energy enterprises. Liberals square the circle by maintaining steadfastly, as the Washington Examiner’s Timothy P. Carney writes, “Conservative money is bad, and linked to greed, while liberal money is self-evidently philanthropic.”
In 2008, Robert Kennedy, Jr. wrote an opinion piece for CNN.com titled, “Obama’s Energy Plan Would Create a Green Gold Rush.” Sensing the gold in them there hills, Kennedy is the one of the speculators. The environmental activist is an investor in green technologies and was a partner in Brightsource, a company that received $1.4 billion in loan guarantees to build the Ivanpah Solar Electrical System. Whatever the merits of this project, philanthropy it ain’t.
DO YOU HAVE TO BE a Kennedy to play this game? Despite the president’s confident assurances that public investment in renewable energy will create numerous high-wage jobs for Americans that can never be transferred overseas, the green jobs concept remains a matter of considerable debate. A 2009 study by Gabriel Calzada, an economics professor at Juan Carlos University in Madrid, found that for every green job created with taxpayer money in Spain since 2001, 2.2 other jobs were destroyed. Worse, only a tenth of the new green jobs ended up being permanent.
An American report titled “The Seven Myths About Green Jobs” was released the same year. Its au-thors concluded that the special interests promoting green jobs programs often employed dubious assumptions bolstered by flawed economic analyses. As one of the co-authors, Andrew Morris of the University of Illinois, told me at the time, these reports seldom include “net jobs calculations” and instead extrapolate from “very small base numbers.” Morris argued that the green studies tended to assume “very large multiplier effects” when “all the experience we have suggests that these multiplier effects are exaggerated or overstated.”
Other economists disagree, of course. But there have been many high-profile failures among these initiatives. Consider the Chevy Volt. There was a controversial Super Bowl commercial narrated by Clint Eastwood citing the recovery of Detroit’s automobile manufacturers as a national success. Depending on your perspective, the ad was either a tribute to can-do American resilience or an apologia for using TARP funds to bail out the auto makers. But if General Motors’ hybrid electric vehicle is a victory, then perhaps we owe the designers of the Edsel an apology.
According to one estimate, taxpayers will shovel $3 billion in government loans, subsidies, tax credits, rebates, and grants toward the Chevy Volt’s production. The breakdown is roughly $2.4 billion in federal funds, plus another $690 million or so from the state of Michigan. (Jennifer Granholm must be seeing that bright clean energy future again.)
“But even with spectacular deals like these, GM has so far only managed to sell about 8,000 of their vaunted Obamacars,” writes Larry Bell in Forbes (Ford sold roughly 84,000 Edsels). “And despite another big gift we gave them in the form of a huge TARP bailout, the prognosis doesn’t look good at all.” As we went to press, GM announced a five-week suspension in Volt production due to low sales. MIT’s Technology Review characterizes it as “good news” when Fisker Automotive, the troubled electric car manufacturer, produces 1,500 cars and claims to have sold “hundreds.”
General Electric’s Shepherds Flat initiative in northern Oregon is another example of U.S. tax dollars blowing in the wind. The Manhattan Institute’s Robert Bryce has called it “America’s worst wind-energy project.” Bryce notes that the Department of Energy has given GE and its partners a $1.06 billion loan guarantee for the project, with the Wall Street Journal reporting that the Treasury Department will kick in a $490 million cash grant once things get going.
Given that the project is only supposed to create about 35 green jobs, the cash grant alone would come out to $16.3 million per job created. Forbes’ Bell quips that taxpayers may find that price tag “just a little steep.” But Shepherds Flat has critics even within the Obama administration. An October 2010 memo attributed to energy policy czar Carol Browner and economic adviser Larry Summers, among others, complained that the project’s backers had too “little skin in the game.” Their investment was relatively small, the subsidy large, and the likely environmental benefit insufficient to justify the cost.
CRONY CAPITALISM has become an epithet on both the left and the right. Both Ralph Nader and Sarah Palin have condemned the practice. It is a concept that is as unpopular at Tea Party rallies as it is in the makeshift campgrounds of Occupy Wall Street, one of the few points of agreement between the powdered wig and the Birkenstock sets. “The American people do not like Friendly Fascism,” TAS editor-in-chief R. Emmett Tyrrell, Jr. writes in a forthcoming book. “They do not even like corporate cronyism.” Yet it is less clear what this stance means for most people in practice.
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