President Obama accuses Republicans of clinging to the failed policies of the past. But the Obama administration has revived the practice of picking winners and losers in the marketplace. That policy didn’t work in the 1930s and isn’t working today.
Policy wonks believe that businesses are congenitally short-sighted — that businesses must be prodded to invest in infrastructure and tomorrow’s technologies. But it’s not true. The mobile phone industry continues to spend tens of billions of dollars acquiring spectrum rights, building nationwide networks, and developing next-generation technologies. Businesses wisely make long-term investments when there are good prospects of success.
The Obama administration clings to ideas that even FDR’s treasury secretary, Henry Morgenthau, said didn’t work. Every available means is being used to undermine natural market forces: loans are being made that will never be repaid, regulations and taxes are being enacted to punish select industries, corporate bondholders are being expropriated, waivers are being granted to individual companies, and private businesses are being squeezed out of markets.
No wonder the U.S. is experiencing the worst economic recovery since the 1930s. Who wants to invest in businesses when the federal government is running around trying to make winners out of losers and losers out of winners?
Let’s look at the energy sector. The Obama administration loaned Solyndra $527 million and Abound Solar Manufacturing $400 million. Solyndra filed for bankruptcy less than two years later. Abound laid off nearly half of its workforce.
Solar and wind power are called “renewable” but they would more accurately be called “intermittent.” Germany bragged that its solar power infrastructure produced half of the country’s electricity for a few hours per day over a recent weekend. However, that same infrastructure supplies less than 5% of Germany’s annual electric power consumption. Unless governments find a way to eliminate nighttime and clouds, solar energy will never be anything more than a part-time producer.
Meanwhile, President Obama threatens to bankrupt anyone who dares to build a coal power plant. But coal is one of the most abundant sources of energy and coal power costs about one-third of what wind power costs.
Now let’s look at the auto industry. General Motors’ sales had been declining for years because the company was no longer competitive. The Obama administration decided that GM was too big to fail. The bailout preserved the United Auto Workers’ benefits at the expense of GM’s bondholders and U.S. taxpayers. True, GM rebounded after receiving $50 billion from the government and while Japanese competitors recovered from a devastating tsunami. However, the bailout did nothing to improve GM’s long-term competitiveness. Some industry watchers say that GM is headed towards another bankruptcy.