Contrary to what you may have read, the Solyndra bankruptcy is a real scandal, even if investigators never find a single violation of law. It’s always bad policy for government to anoint particular businesses and particular products. Subsidies foster political cronyism and suboptimal allocation of resources; the proper name for lending $550 million of taxpayer money to well-connected businessmen is corporate welfare, not “building a green economy.”
This view distinguishes me from those Republicans who are denouncing the Solyndra bankruptcy but have supported similar programs during the Bush administration or pursued federal energy loans and grants for their districts.
And corporate welfare is a bad idea whether it occurs on the federal or state level. In that sense, Texas Gov. Rick Perry also ranks among the GOP’s prominent offenders.
Among Perry’s signature “job creation” programs is the Texas Emerging Technology Fund, which shoveled $260 million out the statehouse door between September 2007 and September 2010. The goal of this government spending program, as expressed on the Fund’s Website, could have been plagiarized from the Obama administration’s stimulus bill: “to grow new small businesses and existing businesses to accelerate new products and services to the marketplace.”
Though some of this money supported basic research at Texas universities, an appropriate governmental function, a little over half of it -- $139 million – is “commercialization” aid to “private entrepreneurial entities . . . which, if successful, may provide significant economic benefit to the state.” Most of these state-sponsored start-ups have been medical technology firms, but millions of dollars have also gone to such Obamaesque “green” projects as solar energy, biofuels, and electric vehicles.
If I didn’t know better, I’d think Rick Perry was spending tax dollars on solutions to global warming!
And, as you might expect, the Fund has had its share of flops – albeit nothing quite on the scale of Solyndra.
One firm got $3 million in March 2007 and “ceased business operations” nine months later, “citing technical problems and the need for more money,” as the Fund’s 2011 annual report puts it. The Fund showered $250,000 on the maker of a “3-D movement based game controller” for video games, which, alas, “did not achieve the intended market acceptance.” A “social site for 2-D animation” absorbed $500,000 before going bankrupt.
A million dollars went to a scheme for converting animal feedlot waste to biofuel inputs, but the venture has “encountered difficulties with its technology.” An algae-to-animal-feed company that got $1 million reports “production facility setbacks” and lost customers.
Win some, lose some. (That’s the Obama administration’s excuse for Solyndra.) And that’s the venture capital biz — though in the private sector venture capitalists have an extra incentive to bet right because their own money, and that of the investors, is on the line. Government-run start-up funds are inherently less efficient because they’re gambling someone else’s money — yours.
The Dallas Morning News reported last year that more than $16 million had been doled out from the Texas Emerging Technologies Fund to companies affiliated with Perry’s campaign donors. It would have been surprising if the Fund didn’t give rise to at least the appearance of political favoritism, since Perry and two other elected officials vote on each cash award.
In 2008, the Fund hired a failed print-shop owner from Colorado as its executive director — apparently on the basis of his blatantly inflated resume. Perry’s aides forced him out in 2010 when they learned he was under criminal investigation for allegedly using his position to enrich himself. Travis County prosecutors eventually declined to bring charges.
The Morning News coverage led to an April 2011 state auditor’s report that characterized the Fund as far less transparent than similar programs in other states. According to the report, the Fund poured out money to grantees but had insufficient record keeping, inadequate safeguards against conflicts of interest, little public disclosure and only superficial follow-up.
Perry’s office denied the most serious charges in the report, and noted, correctly, that the auditor found no violations of law. But officials agreed to implement several of the auditor’s proposed improvements to the Fund’s monitoring of grantee performance. And even after the Morning News reports, the state legislature agreed to renew the Fund this year, as it has every two years since 2005.
When I asked a Perry campaign spokesman about the Fund, he assured me that the candidate would not advocate a Federal version of it if elected President.
That’s consistent with the purist view of states’ rights that Perry articulated in his book about the evils of Washington, “Fed Up!” But I don’t see why it’s okay to waste tax money funding selected private businesses, as long as it’s only state tax money.
Come to think of it, “fed up” is a good way to describe how some of us feel about corporate welfare and the seemingly infinite capacity of politicians to rationalize it.