This month, as President Obama pressed Congress to pass another misguided “stimulus” proposal, the consequences of the administration’s first $800 billion stimulus law are becoming painfully clear. High unemployment and anemic growth are serving as constant reminders of the president’s broken promises on the economy.
Consider Solyndra, the now-bankrupt California solar panel company, which was once the poster child of the administration’s “green jobs” initiative. Solyndra is proving to be Exhibit A in the case for why the president’s economic policies have failed.
There’s still much to be learned about Solyndra’s interactions with the administration. The House Committee on Oversight and Government Reform has launched a probe into the process by which Solyndra secured a $535 million stimulus-funded loan guarantee from the Department of Energy.
And tomorrow, Solyndra’s executives are scheduled to appear before the House Energy and Commerce Committee. Despite earlier pledges to testify, these executives have recently announced that they will exercise their right to remain silent at Friday's hearing.
But regardless of the potential legal impropriety, there is no question that the fundamental laws of economics have been violated. The company’s rise and fall illustrates the folly of empowering government to pick winners and losers in our economy.
The president’s stimulus was premised on the faulty idea that “Washington knows best,” and that bureaucracies can make better decisions than taxpayers, entrepreneurs, and businesses can. With respect to energy, this translated into tens of billions in new government subsidies for politically favored interests: $6 billion in loan guarantees for renewable energy investments, $2 billion for energy efficient battery manufacturing, and $17 billion for the Department of Energy’s energy efficiency programs.
Solyndra was the very first recipient of the Department of Energy’s stimulus-backed loan-guarantee program, and it has become a fitting public symbol of the administration’s new green-energy agenda.
When the loan guarantee was announced, Energy Secretary Stephen Chu and Vice President Joe Biden participated in the public ceremony, and president himself highlighted Solyndra as an example of America’s energy future.
Even against the advice of government financial experts at the Office of Management and Budget, the loan guarantees were pushed out the door with great haste, and the company was given a decided leg up on their competitors that lacked the political capital Solyndra enjoyed.
This troubling behavior does not end with Solyndra – it extends to other well-connected firms in industries favored by the administration.
Since the passage of the stimulus bill in 2009, the Department of Energy has issued $40 billion in new loan guarantees for renewable energy projects that might not otherwise have been commercially viable. In addition to Solyndra, Beacon Power and First Wind Holdings offer examples of other instances in which the federal government backed risky and financially unstable firms, using taxpayer money to fund an ideologically driven pursuit of unproven energy sources.
The federal government’s job is not to play favorites among firms – it is to make and enforce clear rules of the road, so that markets are fair, transparent, and competitive. In other words, government’s job is to foster an environment that is conducive to private-sector job creation.
By picking winners and losers in the energy sector, the government-as-investor model distorts markets, weakens the rule of law, and fails to spur sustainable job creation. Instead of helping the economy, the story ends with taxpayers losing billions of dollars, successful companies losing their competitive advantage, and workers losing their jobs – in Solyndra’s case, 1,100 of them.
This is the ugly end of government’s adventures in crony capitalism.
Rather than helping politically connected-firms at the expense of others, Congress should be advancing comprehensive policies that benefit all job creators and entrepreneurs.
House Republicans have passed a budget, "The Path to Prosperity," that would roll back federal interventions and end expensive corporate welfare programs created to benefit the president’s allied industries. Instead, it would promote policies aimed at reliable energy, lower energy prices, and market-based solutions that advance the nation toward the goal of sustainable energy.
We cannot afford an economy full of Solyndras, where firms exist and prosper only because they have attained preferred status among the politically powerful. Crony capitalism flies in the face of our most deeply held principles, such as equal rights before the law, and it hurts our economy by weakening the connection between effort and reward.
With President Obama calling on Congress to pass his latest round of stimulus spending “not today, not tomorrow, but right now,” Solyndra reminds us what happened the last time this administration was given hundreds of billions of taxpayer dollars to spend without any due diligence or foresight.
In 2009, the President Obama highlighted Solyndra as the crown jewel of his economic agenda. Today, this bankrupt firm still serves as a fitting monument to his failed policies.
Rep. Paul Ryan is chairman of the House Budget Committee and represents Wisconsin's 1st district.