Venture Socialism: the Logical Endpoint of Obamanomics
And thus, corporatism comes full circle. Under the old definition of corporatism, the government simply got in bed with a seemingly private corporation once it became sufficiently large and/or unions made it sufficiently hidebound and sclerotic, as GE, GM, Chrysler, public utilities, defense contractors, etc. Or it took over a corporation that failed, such as 1971's Amtrak, formed by Congress to run the nation's passenger trains, which had been rendered outdated by jet air travel, and Conrail in 1976 to absorb Penn Central and other bankrupt northeast railroads (which eventually went private under the Reagan administration).
The Obama administration now jump starts the process by shoveling ginormous amounts of start-up money (courtesy of you and I) at future businesses they wish to control, such as Solyndra. As Stephen L. Carter, a Yale law professor, writes at Bloomberg.com:
That relatively high expected failure rate, together with the fact that the Energy Department’s portfolio of green-loan guarantees stands near $30 billion, has led some observers to argue that the program should be considered as analogous to a venture capital shop. The department, after all, is putting money into lots of startups, knowing that some will fail, but betting that a few will hit it big.
Government Making Bets
True, the program deals with loans rather than making investments -- but we are speaking here of an analogy, not an identity.
Like the Energy Department program, the venture capitalist makes bets, many of them very high risk, on many companies that otherwise would have trouble raising capital, except perhaps at prohibitive cost.
Yet the analogy fails because the venture capitalist is disciplined in his lending by two forces that government does not face. First, if the venture capitalist makes too many bad bets, he will lose his investors. Government loan guarantee programs, on the other hand, can be refunded by Congress as often as politically convenient, and have been known to grow larger after making bad bets.
"No wonder many Democratic strategists predicted their party’s 2008 landslide win would usher in a generation of political dominance," James Pethokoukis discussed earlier this month in a column titled, “Solyndra, the logical endpoint of Obamanomics:”
Obamanomics, essentially, would divert taxpayer dollars to the Green Lobby – and then into the campaign coffers of the Democratic Party. This is what crony capitalism is really all about: politicians enriching favored businesses, who then return the favor. Or maybe it’s the other way around, Who cares, really. It’s an endless, profitable loop for both.
And Obama almost pulled it off. The Great Recession conveniently allowed the president to start the spendathon under the guise of economic stimulus. (“You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things you think you could not do before.” – White House Chief of Staff Rahm Emanuel, 2009). As it turns out, the $38.6 billion loan program for clean energy firms that Solyndra benefited from has created just 3,545 permanent new jobs after parceling out half its dough. That works out to around $5 million a job.
Unfortunately for the Obamacrats, the financial meltdown also undercut political support for cap-and-trade on Capitol Hill. Voters worried the scheme would slow growth and cost jobs. But without permanently and continually raising the price of carbon-based fuels, many green businesses can’t make the numbers work.
The piece we quoted above from Stephen L. Carter at Bloomberg is titled, "Energy Department Is No Venture Capitalist." Republican Sen. Jim DeMint concurs -- he calls it a case of "Venture Socialism." Writing in the Washington Times, DeMint notes that "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 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.
Read the whole thing.
Related: "Obama’s Acting Commerce Secretary: U.S. 'Can’t Afford' Not To Spend Taxpayer Dollars Subsidizing Green Tech," the Weasel Zippers write. "Leave it to someone in this administration to say we can’t afford not to spend money."
What a Krugmaniac.