Annie: Anything you can do, I can do better. I can do anything better than you.
Frank: No, you can’t.
Annie: Yes, I can.
Frank: No, you can’t.
Annie: Yes, I can.
Frank: No, you can’t.
—Annie and Frank, “Anything You Can Do,” from Annie Get Your Gun
Ronald Reagan warned us back in 1964 that “outside of its legitimate functions, government does nothing as well or as economically as the private sector of the economy.”
The fact of the matter is that the United States federal government sucks at business. Let’s leave aside for now my usual rant about the Constitution and limited government, and just consider the practical by revisiting a few examples of the “green economy” experiments the Obama administration has forced on the rest of us.
In September 2009, the Department of Energy approved a $535 million government-guaranteed loan to the California-based solar panel manufacturer, after pressure from the White House to speed up the process. Conveniently, the approval came just two days before a previously-scheduled visit by Vice President Joe Biden and Energy Secretary Steven Chu, allowing them to use the visit to trumpet the deal as a victory for the administration’s commitment to “investing” in green technology. The deal was supposed to generate at least 4,000 jobs.
What wasn’t disclosed at the time was that Solyndra’s loan application had been tabled by the Bush administration, and financial analysts within the Obama administration—i.e., business people who might actually know what they’re talking about in this area—questioned the deal and the cash flow assumptions upon which it was based, predicting that Solyndra would run out of cash in September 2011. By March 2010, auditors were questioning Solyndra’s continuing solvency, even as President Obama was visiting the company and touting it as a model of clean technology and job creation. In February 2011, the Energy Department helped Solyndra restructure its debt, moving taxpayers to the back of the line of creditor claimants, curiously behind private investors like Obama mega-contributor George Kaiser. On August 31, 2011, almost to the day financial experts within the Obama administration said it would, Solyndra filed for bankruptcy, and laid off almost its entire workforce.
So much for job creation.
Fisker Automotive and A123 Systems
In 2009, Fisker Automotive received a $529 million Department of Energy loan—sound familiar?—to produce high-performance luxury electric cars. At the same time, A123 Systems received a $249.1 million grant from DOE to develop the battery that was eventually supplied to Fisker for use in its Karma, the $102,000-a-pop car that was to come from its DOE loan (in fairness, Fisker also plans to use part of the loan money to produce a more economical “Nina,” but production of that car won’t be seen until at least 2013).
How many of you in the 99% are lining up to get one of those?
Well, a funny thing happened on the way to the showroom. First, production was delayed from 2009 to 2011 due to regulatory issues; in other words, the government’s own EPA left hand was getting in the way of its green technology right hand. Then, only 239 cars were produced, every one of which was recalled in December due to safety issues associated with the A123 battery. And even then, the EPA fuel economy ratings for the Karma (52MPGe with a range of 32 miles, 20 MPG on gasoline) ultimately fell well short of the green nirvana promised by Fisker executives (67MPGe with a range of 70 miles). But here’s the kicker:
Fisker assembles the Karma in Finland.
In. Freaking. Finland.
So what we see here is three-quarters-of-a-billion-dollars in taxpayer money wrapped up in a project that to date has produced a grand total of 239 cars retailing at more than double the median U.S. income, that aren’t nearly as “green” as promised and have been recalled due to safety issues, and that are built in Finland, not the U.S.
Is that all you get for your money?
Remember “too big to fail”?
General Motors was one of those. The U.S. Treasury spent $49.5 billion to help GM weather its 2009 bankruptcy, and the U.S. taxpayer still holds about a 25% stake in the company. At its current stock price of around $23 a share, we’re still about $24 billion in the red on this “investment.” The stock would have to more than double to around $55 for us just to break even.
Meanwhile, GM unleashed the Chevy Volt, which was to lead a new revolution in green electric cars (never mind that these cars run on batteries charged with electricity that’s still generated by fossil fuels, and no one as yet has figured out how to dispose of the dangerous lithium once those batteries die). Trouble is, with a base sticker starting above $40,000, few can afford the Volt. Even with a federal tax subsidy of $7500 to anyone who purchases a Volt, GM has only managed to sell about 8,000 units in the U.S. and Canada since 2010, again as predicted by an Obama administration task force, who advised the President in 2009 that the car “will likely be too expensive to be commercially successful.” Yet on they pressed. And now, like the Fisker Karma, it appears that GM may be moving production of the Volt abroad (such as it is)—in this case, to China.
All of this begs the question why the Left has such a hard time understanding that the government shouldn’t be in the business of being in business. For all their insistence on the importance of investing in a green future, of the need for government to stimulate growth and create American jobs, you’d expect to hear them trumpeting some success stories. Where are the concrete examples of actual substantive success in these ventures? From just the three examples above, we see some $51 billion in taxpayer money spent on projects that have resulted in one bankruptcy, two manufacturing units and the jobs they embody being shipped overseas, and the sale of fewer than 9,000 cars; cars that don’t work that well, aren’t as green as advertised, and that virtually no one can afford.
I’ve made this point before, but it bears repeating. The essence of the theory of evolution is that nature, given a large enough universe of sample events, adapts to find the most efficient means of supporting and propagating life. The same holds for capitalism: millions of people making billions of decisions driven by their own economic best interest will result in adaptations diverting capital resources to their most efficient use. Better ideas rise to dominate, and poorer ideas are cast aside. Meanwhile, the price of experimentation is very, very small; the consequences of any one of these billions upon billions of decisions being a mistake are localized and miniscule.
But when government intervenes, we give up the statistical house advantage of numbers. In place of billions of small low-risk decisions by millions of people acting in their own interest we substitute a handful of gigantic bets made by a small number of people who inherently lack the time, expertise, information, and self-interest to make them. And the consequences of any one of those bets going bad are large in scale and magnitude of their impact.
If people need a better mousetrap, profit motive will drive someone to develop it at a price people are willing to pay, and everybody wins. But if nobody wants that mousetrap, all the government accomplishes by trying to force it on the market is waste, and the only one that wins is government. That’s what happens when a handful of egomaniacal academics decide that they know better than the rest of us how to allocate our own money.
That’s why government sucks at business.