Corporate Welfare

miles 2The more Washington does, the more corruption, inefficiency, and waste there will be  . We should insist that Washington do as little as possible.

As long as the money spigot in on, everyone in Washington will go for their piece of it — we need to turn it off. 

There is so much money being doled out in Washington that political contributions have become business investment decisions, with big paybacks available.

The best campaign finance reform might be to eliminate corporate welfare, which will help end the extortion discussed on our Regulatory Nightmares page.

 millieThe art of politics has become the art of professing a noble goal, while lining the pockets of friends and supporters.

In theory, corporate welfare can fulfill a public purpose, like jump-starting solar power or helping poor people buy homes. But, while these may be noble goals, government money is too often the tool of corruption and self-interest.

The Solyndra Scandal.

A perfect example was the government loan guarantee of $500+ million to innovative solar panel manufacturer Solyndra, whose executives took that risk-free money, built out a beautiful factory in expensive Northern California, and promptly went bankrupt when market conditions changed.

Do you think that experienced investors risking their own money might have foreseen that possibility?  Are Washington qualified to anayze business risks?

Helicopter_smallSome say that the $500+ million loan guarantee to Solyndra, was a pay-off  to Obama’s political contributors.

The GM bail out — now that was a political play to Obama’s union buddies. GM’s financial problems included burdensome labor union contracts that could be renegotiated in bankruptcy.   The bail out maintained union salaries which insured Ohio’s electoral votes in 2012, but did not do much for GM’s operations costs. Taxpayers lost $10+ billion on that deal.

Even if it was not political payback, funding Solyndra was a symbolic gesture, to appease the green crowd, and without the substantive recognition that solar power today is not economically  feasible. A more appropriate government role for solar and wind power is discussed here.

econ  5That an industry requires government help to start-up or survive means that Private Capital has determined that it is a bad investment.

 The operative fact in the Solyndra case was that the government took the risk out of the hands of private investors who then are spending other’s people’s money.  The Government should leave the risk-taking to those experienced in assessing business ideas and investing their own money.

The same applies to any kind of loan guarantee, like those to encourage home ownership, where new kinds of loans were invented, loans that no bank would ever make with their own money.  Government takes the risk, and the taxpayers pay for it.

Should Government Pick Winners and Losers?

invisiblehand_dottedIf a business offers a product at a price the public is willing to pay, it will succeed. Other entrepreneurs will flock to a successful market. When customers are not willing to pay a stated price for the service, the business goes under, and it is all at the will of the public.

Government “help” undermines the will of the people, and hides the true cost of goods and services. No one in their right mind would buy (Chinese-made) solar panels if they were not close to cost-free due to corporate welfare of tax credits.

Government “help” keeps weak businesses alive, and detracts consumer spending away from businesses that can make it on their own.  Plus, it all adds to the debt.

cb3As government does less