Features
Barack Obama/Photo by Mandel Ngan/AFP/Getty Images

Capitols and capital

Politics | Should politicians pick business winners and losers? The Solyndra debacle is a black eye for those who say yes, but the practice is bipartisan and widespread not only in Washington, but in Mississippi, Texas, and other states

SAT question: How do you explain the Obama administration's $528 million loan to solar panel manufacturer Solyndra, now bankrupt?

A. Corruption. Major Obama donor/Solyndra investor George Kaiser-through his George Kaiser Family Foundation-made four visits to the White House on March 12 and 13, 2009. He says he did not discuss the Solyndra loan there.

B. Patriotic wisdom. President Barack Obama said on Oct. 3, "Not every single business is going to succeed in clean energy, but if we want to compete with China ... we've got to make sure our guys here in the United States of America at least have a shot."

We see you’ve been enjoying the content on our exclusive member website. Ready to get unlimited access to all of WORLD’s member content?
Get your risk-free, 30-Day FREE Trial Membership right now.
(Don’t worry. It only takes a sec—and you don’t have to give us payment information right now.)

Get your risk-free, 30-Day FREE Trial Membership right now.

C. "Mistakes were made." Some people goofed-but avoid personal responsibility by phrasing this in the passive voice.

D. Governmental arrogance. Bureaucrats are bad at picking winners and losers, particularly when it comes to start-up companies.

Answer key:

A. May be correct, since the Department of Energy reportedly fast-tracked the Solyndra loan, over objections that the company was too risky, and announced it two weeks after Kaiser's visits.

B. The Obama administration is sticking to this free-spending position. The U.S. Department of Energy just rushed through $4.7 billion more in loans for solar energy companies to beat a midnight deadline Sept. 30, when the fiscal year ended.

C. Plenty of evidence for this. Regarding Solyndra, it's not only that "hindsight is always 20-20," as President Obama said: "People felt like this was a good bet." Staffers at the Office of Management and Budget had early concerns. Forbes on Sept. 17 headlined one story, "Yes, It Was Possible to See This Failure Coming," and explained how Solyndra right from the beginning was non-competitive in pricing against not only other kinds of energy providers, but even against other solar panel manufacturers.

D. Probably the best answer, as even Obama administration members and associates sometimes admit privately. In December 2009, Solyndra investor Brad Jones sent a worried email to President Obama's top economic adviser at the time, Larry Summers. Jones wrote about the Obama administration's first year of dispensing largesse: "The allocation of spending to clean energy is haphazard; the government is just not well equipped to decide which companies should get the money and how much." Summers responded, "I relate well to your concern that gov is a crappy vc [venture capitalist] and if u were closer to it you'd feel more strongly."

One problem facing the United States, though, is that "crony capitalism" and governmental picking of winners and losers are roiling not only the White House: Many state governors and their associates are trying to do on a smaller scale what Team Obama has done big-time. They generally fare as poorly. U.S. solar manufacturers SpectraWatt (which received New York taxpayer funds) and Evergreen Solar (Massachusetts taxpayer funds) declared bankruptcy weeks prior to Solyndra's collapse.

Since it's easy for Republicans to blast Obama and for newspapers to cover Washington misdeeds, WORLD decided to look beyond the Beltway at two governors who have tried to pick winners and losers. We examined the record of one Republican governor with stellar corporate connections, Mississippi's Haley Barbour, who has not been dogged by a full-court press. We then reviewed the pickings of Texas governor Rick Perry that are now being examined in the light of his presidential candidacy.

Barbour, former chairman of the Republican National Committee, is well-connected: For years before becoming governor in 2004 he was a Washington lobbyist for major corporations ranging from Philip Morris to Microsoft. During the past year and a half he has brought six green energy manufacturers to Mississippi with taxpayer-backed loans totaling $400 million. The loans will be funded with bonds in a state where the total fiscal year 2011 budget is $4.5 billion.

The six companies receiving loans-Twin Creeks Technologies, Soladigm, Stion, KiOR, Calisolar, and HCL Cleantech-do not appear to have direct ties to the Barbour administration, though Calisolar's chairman, John Correnti, is a friend of Barbour's. The loans seem strange in that The Wall Street Journal in March quoted Barbour's disapproval of the Obama's administration's green energy funding: "The federal government too often is picking winners and losers. I don't think we should be saying we are willing to fund this kind of energy but not that kind of energy."

Despite that rhetoric, Barbour has placed his own bets on manufacturers of monocrystalline and thin-film solar panels, renewable crude, energy-efficient glass, solar silicon, and bio-fuels and bio-products. State legislators, thinking of the 4,550 green jobs these companies collectively promise, have supported him. Although all six companies are venture capital-backed, and most had no previous commercial-scale manufacturing experience, legislators asked few questions.

Comments

You must be a WORLD member to post comments.

    Keep Reading

     

    From cool to cold

    A long-term study finds middle-school popularity often doesn’t end well