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Romney’s claims of misspent stimulus money

at 11:00 AM ET, 07/26/2012

“Where did all the Obama stimulus money go? Friends, donors, campaign supporters, special interest groups. Where did the Obama stimulus money go? Solyndra: 500 million taxpayer dollars, bankrupt. So where did all the Obama stimulus money go? Windmills from China, electric cars from Finland.”

-- Narration from Romney campaign ad

“Seventy-nine percent of the $2.1 billion in stimulus grants awarded through it went to overseas companies -- $2.1 billion.”

-- 2010 remarks from Sen. Charles Schumer (D-NY), featured in Romney campaign ad

We’ve covered most of these claims in the past, with each one receiving Pinocchios to one degree or another. But GOP presidential hopeful Mitt Romney and his campaign must have missed all that, because they repeated and combined the assertions in this ad, even adding in a comment from a Democrat to bolster their case.

Let’s review how President Obama’s administration handled the American Recovery and Reinvestment Act --better known as the stimulus--to determine whether this ad bears a closer resemblance to the straight truth.

The Facts

Crony capitalism

Romney claims the Obama administration funneled stimulus money to friends, donors and campaign supporters. In large part, this assertion starts with a federal loan that went to Solyndra, the now-defunct solar-panel maker that received $535 million as part of the stimulus program’s clean-energy initiative.

Billionaire businessman George Kaiser, who collected between $50,000 and $100,000 for the president’s 2008 campaign, had ties to Solyndra. The Kaiser Family Foundation owned more than one-third of the company’s stock, but Kaiser himself didn’t serve on the foundation’s board or own shares of the solar-panel manufacturer.

Nonetheless, Kaiser seems to have played an advisory role with his family’s foundation. A December Washington Post report revealed that a manager for the group’s investment fund once sought his “authority” to make a major move.

A Washington Post report from November showed that the Obama administration remained steadfast in supporting Solyndra when the company showed signs of deep trouble. The Department of Energy, which administered the clean-energy program, restructured Solyndra’s loan when the company was foundering, attracting $75 billion in new investments by promising to protect the private investors ahead of taxpayers if the manufacturer went broke.

This move supports Romney’s claims of crony capitalism to an extent, since it represents bureaucratic interference with the free market.

Obama’s critics have suggested that the president was doing favors for Kaiser, who visited the White House 16 times but claims he never discussed the Solyndra loan.

Beyond Solyndra, a February report from the Post revealed that the Department of Energy had awarded $3.9 billion in federal loans and financing to companies backed by firms with which Obama administration staffers and advisers had previously worked. None of the White House insiders had direct control over the federal funds, but e-mails show that they informally advocated for some of the businesses that received taxpayer money.

In a previous column, we determined that these facts “represent a strong case for Romney’s claims of crony capitalism, but they don’t provide conclusive evidence.” As such, we awarded the GOP candidate just one Pinocchio, noting that he would be better off saying there is “evidence” of the president doing favors for supporters.

We should note that the independent Center for Public Integrity reported in April that Silicon Valley clean-tech venture capitalist Steve Westly, who raised $500,000 for Obama, had a stake in at least five companies that received support from the Energy Department. Still, this does not constitute conclusive evidence -- such as an incriminating e-mail -- that proves the administration granted favors in exchange for past fundraising.

We awarded one Pinocchio to the Republican National Committee for an ad that used the Westly case as an example of the Obama administration providing federal grants, loans and advisory positions to the president’s top donors.

As usual in these cases, the circumstantial evidence is compelling. But it’s hard to prove for certain that campaign financing directly influenced decision making. More often than not, politicians will argue that decisions are based on merit, and that any connection between contributors and awards are mere coincidence.

As for special interest groups, we suspect the ad is referring to the federal bailout, structured bankruptcy, and eventual restructuring of two Detroit automakers, which resulted in a UAW trust fund claiming ownership of about 42 percent of Chrysler and 10 percent of General Motors.

In this case, the car companies didn’t have enough cash to pay for their share of retiree benefits, so they offered stock to the union trust instead. A typical Chapter 11 allows corporations to default on pension obligations, so the union workers probably wouldn’t have made out so well without the federal government’s involvement in restructuring.

Windmills from China

Most of the ongoing chatter about this issue stems from reports in 2009 and 2010 by American University’s Investigative Reporting Workshop, which determined that about 65 percent of the turbines erected through the stimulus program--at the time-- were built by foreign manufacturers, including some from China. But that doesn’t mean all the work and money to create wind power went abroad.

That same report from the Investigative Reporting Workshop said: “There were no farms that we could find that used turbines entirely built in China, so we can’t say for sure how much of this stimulus money went to create jobs in China. Some money definitely did, but it is safe to say more money went to creating jobs in the U.S. and Europe.”

How could this happen when 65 percent of the turbines were built by foreign companies? It’s all about the global economy. Many of the foreign firms have U.S. facilities and U.S. subsidiaries that assembled the turbines with foreign-made parts, as we noted in a previous column.

Russ Choma, the author of the reports that form the basis of this Romney claim, told us earlier this month: “In many cases, manufacturers told us that domestically manufactured turbines were not available. When we last reported on the issue, we found that more and more domestic companies were getting involved, but I can't say what the situation is today.”

Moreover, the Lawrence Berkeley National Laboratory concluded in a report that the U.S. couldn’t have possibly handled all the wind-turbine demand that sprung up during the stimulus days. It said, “a 100% domestic content requirement could yield significant near-term domestic job losses relative to the current program design.”

That’s not to say the wind farms were an optimal investment in terms of economic stimulus, nor that U.S. taxpayers didn’t pay for Chinese jobs. But the turbine funding provided a boost for domestic employment, which is something the ad ignores.

Electric cars from Finland

This claim relates to two federal loans that went to Anaheim-based Fisker Automotive. The first disbursement, for $169 million, paid for the electric-car maker to work with “primarily U.S. suppliers to complete the company’s first vehicle, the Fisker Karma,” according to an announcement from the Energy Department.

Fisker generated controversy by announcing plans to build a luxury model in Finland, which is how the Romney campaign came up with its claim. But the company said all federal money went toward design and engineering activities in the U.S.

The automaker plans to use the second (currently suspended) loan, for $359 million, to eventually build a plug-in hybrid in Delaware.

We covered most of this in a column last week in which we awarded Romney four Pinocchios for a statement that, in part, suggested taxpayer money went toward manufacturing Fisker cars in Finland rather than creating work in the U.S.

Sen. Charles Schumer’s remarks

The Romney campaign borrowed this snippet from a 2010 news conference in which Schumer joined forces with Sen. Bob Casey (D-Pa.) and Sen. Sherrod Brown (D-Ohio) to push for “buy America provisions” within the Recovery Act’s clean-energy program. The news conference was held in response to Choma’s reporting, which as we have noted is no longer up-to-date.

Schumer’s quote is no more incriminating than the claim about Chinese windmills. It fails to recognize the global nature of the wind-turbine industry and the lack of U.S. preparedness to handle a sudden surge in demand back when the stimulus funds were being awarded.

The bottom line here is this: Just because 79 percent of the stimulus funding for clean energy went to foreign companies doesn’t mean that the money went only toward foreign jobs.

The Pinocchio Test

Thre may be a circumstantial case that the president has provided favors to friends, donors and special interests, whether it’s in the form of appointments, federal investments or beneficial restructuring deals. But no one to date has provided conclusive evidence that proves a direct connection between support and rewards--and as we have noted in the controvery over the exact date of Romney’s departure from Bain Capital, the burden of proof remains on the campaign or organization making such accusations.

As for the stimulus money that went toward Chinese-manufactured windmills, those same funds helped create American jobs when the domestic economy was in tatters -- especially with foreign parts being assembled in the U.S., and vice versa. This same idea applies to Schumer’s remarks from the 2010 press conference with Casey and Brown.

In terms of providing money for electric cars from Finland, all the U.S. taxpayer money appears to have gone toward domestic activities, even if the initial vehicles were built across the Atlantic.

On balance, the Romney campaign ad earns two Pinocchios.

Two Pinocchios

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    About the Blogger

    Glenn Kessler has covered foreign policy, economic policy, the White House, Congress, politics, airline safety and Wall Street.

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