Venture socialism hurts everyone

Rick Manning Contributor
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The other day, my wife made a growling noise as we drove by a small manufacturing plant near our house. I hadn’t heard her growl in a while; I knew it meant that something was bothering her.

After some gentle prying, she let me know that the plant was receiving government subsidies, and that it was a direct competitor of her company’s plant, which wasn’t receiving similar taxpayer help.

No wonder she had growled.

Local and state governments do things like this all the time under the guise of economic development, yet while well intentioned, the picking of economic winners through tax subsidies, loan guarantees and targeted regulatory relief means that other companies that compete with the favored entities have to work harder to succeed.

Government officials are just trying to help. Often, they do so without realizing that helping one entity means hurting another.

Because local government officials are apart of the communities they govern, it’s hard for them to favor some businesses over others without experiencing the backlash that those policies generate. Federal bureaucrats, however, don’t have to worry about upsetting their neighbors, because politics and geography insulate them from the negative consequences of their favoritism. As a result, they can play economic god without worrying about the risk of failure. The Department of Energy’s $535 million loan guarantee to Solyndra Energy, which filed for Chapter 11 protection earlier this month, is just the latest example of such a failure.

Solyndra, of course, needed the federal government to give it loan guarantees because private investors wouldn’t. But what is more incredible than the fact that the Obama administration gave Solyndra the loan guarantees is that the administration decided to tie its job-creation record to a company that had a money burn rate that was projected to put it out of business in a year.

The revelation that the loan was reworked to ensure that a major Obama contributor would be put ahead of the American taxpayer when Solyndra went belly up is the kind of thing that has caused past presidents to start working on their libraries.

However, the really important question is: What the heck is the government doing playing venture socialist with taxpayer dollars?

It’s one thing for investors to get together and decide that they are going to put their own money at risk to develop a new technology, but it’s quite another for government employees and their political leaders to play roulette with taxpayer dollars. It’s pretty easy to jump into a far-fetched idea when you are playing with other people’s money. It’s only when you have your own skin in the game that the risk becomes real.

Of course, when the government invests taxpayer money into a politically favored scheme, the risk is assumed by the taxpayer while the potential reward is reaped by the wealthy contributor who was the beneficiary of the largesse.

The loan guarantees that the federal government gave to Solyndra gave private investors the confidence to invest in the company. If those investors hadn’t wasted their money on Solyndra, presumably they would have invested that money in other ventures. We’ll never know which companies otherwise would have received capital but, because of the loan guarantees, didn’t. We’ll never know how many of Solyndra’s U.S. competitors were denied funds because the capital market assumed that Solyndra — thanks to the heavy hand of government — would drive them out of business. We’ll never know which jobs weren’t created because companies had to go lean in order to compete with a company that had an unfair advantage.

What we do know is that when government creates an advantage for one company, it does so at the expense of workers and entrepreneurs who lack the political connections necessary to access Washington’s money machine. That’s why the first step that Congress should take in its investigation of the Solyndra debacle is to defund the venture socialist divisions in the Department of Energy and all other federal bureaucracies.

Rick Manning is the communications director of Americans for Limited Government.

Rick Manning