Streams

Opinion: If You Thought Solyndra Was a Money Pit...

Tuesday, July 24, 2012 - 12:00 PM

President Barack Obama on a tour of the Solyndra solar panel company May 26, 2010 in Fremont, California. (Getty)

Here’s the popular conservative mythology about Solyndra:

President Obama guarantees an enormous federal loan to a company that’s pushing a technology which works about as well as a tissue paper gasoline can. To make matters worse, a major investor in this company is a “bundler” for the Obama re-election campaign, so this is obviously a pay-to-play, envelopes-full-of-cash sort of deal, right?

Plus if you consider that the project involves “renewable energy,” which somehow strikes a lot of Republicans as being vaguely leftist rather than simply being practical, this whole thing hits all the pleasure centers of people who would very much like it if Obama would stop being the president. It features political favoritism, enormous amounts of money, and government bailouts. In terms of a scandal, it’s pure gold.

Except it isn’t. Solyndra-like events happen constantly in DC. The government offers money to private companies all the time, either as a guaranteed loan, subsidies, or as straight-out funding for research and development. If something goes wrong or doesn’t pan out, the government either has to eat the cost of the loan or gets nothing in return for its research and development expenditures. Either way, money goes bye-bye.

Business as usual

The government guarantees loans quite often, particularly if they think that whoever or whatever needs the money is important. For instance, since there simply aren’t that many conveyor belts and assembly lines left in America for people to stand in front of, it became national policy to make it easier for students to pay for a college education. They did this by way of providing banks with subsidies to lend out as student loans.

The downside of that policy was that if the student defaulted on the loan, it was guaranteed by the government anyway. All the banks had to do was keep collecting the subsidies and divvy them out (with a hefty operations fee, of course) with no risk to their bottom lines whatsoever.

So when your space case second cousin dropped out midway through his sophomore year to sell scrap metal figurines at Burning Man and defaulted on his loan, me, you and everybody else who pays taxes were on the hook for that. President Obama eliminated the middleman in 2010, and was promptly crucified for “meddling in the free market.”

A lot is being made of George Kaiser’s involvement in Solyndra, and the thinking is that the loan got guaranteed because Mr. Kaiser delivers big buckets of money to the Obama campaign. That might have something to do with it, but it isn’t exactly a secret that the Obama administration considers green energy and energy independence a priority; Solyndra had some green technology to offer.

As I mentioned, the government tends to guarantee loans on things that it thinks are important. Despite what you might think, green, renewable energy is important. T. Boone Pickens seems to think so, and if you think he’s a bed-wetting liberal you should contact John Kerry for his thoughts on the matter.

Remember Halliburton?

Is this “pay to play,” or is it “Hey, good idea?” I mean, did the Koch brothers win the contract to replenish the Strategic Petroleum Reserve in 2002 because they dump money onto conservative causes, or because they happened to have 8 million barrels of crude oil lying around? Did Halliburton get the biggest no-bid logistics contract in history because they were the only American corporation capable of supplying the troops during the Iraq War, or was it because Dick Cheney used to run the show over there?

Either way, the SPR got topped off and the troops got fed, albeit at a rate of about $45 bucks for a case of soda, with an extra charge if Private Jenkins wanted it served to him in a glass.

The only difference with Solyndra in terms of finished product was that they went bankrupt before they could start putting out solar panels—but they didn’t go bankrupt because the technology didn’t work. It was the market price of the materials they used to make those solar panels that did Solyndra in. It’s the same ebb-and-flow of the market that causes the Chamber of Commerce to genuflect and the rest of us to fall asleep in Econ 101.

Solyndra and 'Star Wars'

So did we just toss $535 million in the garbage? Well, here’s a parallel for you to consider: The Missile Defense Agency is a branch of the DOD that does exactly what its name implies. It’s their job to come up with ways to figure out how to keep ballistic missiles from striking the United States. When they say “ballistic missiles,” they mean “nukes,” although they never actually say that on the website.

We’ve been working on this sort of thing for quite some time now. Under Reagan it was called the Strategic Defense Initiative (otherwise known as “Star Wars”). The project was almost killed by President Clinton in 1993, but it survived and got a new name out of the deal (the Ballistic Missile Defense Organization). In 2002, President George W. Bush gave it yet another name change (this time to the Missile Defense Agency), as well as a cubic boatload of new funding.

Four of the major defense contractors working on the MDA are, of course, THE four major defense contractors in the country. Over the past decade, Boeing has received $19.45 billion, Lockheed got $5.75 billion, Raytheon got $4.94 billion, and Northrop Grumman got $3.69 billion. This doesn’t count the billions and billions that these folks have been given, not loaned, since the whole Strategic Defense Initiative got started back in 1983.

While we’re on the subject of accusing people of “pay to play politics” and “crony capitalism,” do you want to take a guess as to which members of the House Defense Appropriations Subcommittee got campaign donations from Boeing? Here’s a hint: It’s all of them. Chairman Bill Young (R-FL) got a little under $20,000. Ranking Member Norm Dicks (D-WA) got $25,000 from Boeing and $11,000 from Lockheed Martin.

Are all these representatives “on the take,” or would they very much like it if we wouldn’t get blown up? I guess the answer depends on whichever side of the political fence you happen to dwell.

After thirty years of research and billions and billions and billions of dollars, does our missile defense system work? Well, sort of.

According to the MDA, they have been successful in 54 out of 68 “hit-to-kill” intercepts since they started serious testing in 2001. That’s not a bad percentage, I guess, but close only counts in horseshoes and hand grenades, not thermonuclear ICBM’s with multiple-kiloton warheads. Provided that whoever fires a nuke at us only does so one at a time, we have a little less than 80% chance of not getting incinerated. Woo-hoo?

An open wallet and a big smile

It should be noted that nobody on Capitol Hill is demanding that Boeing, Lockheed, Raytheon and Northrup Grumman return all the money that we gave them for all the times that their missile defense products failed to work. The United States Government at least “loaned” Solyndra money in the hopes that they would get it back. The defense contractors just got an open wallet and a big smile.

The $535 million dollar loan to Solyndra seems like small potatoes compared to the amount of money that Boeing got for missile defense, the Koch brothers got to give us our back-up gas, and Halliburton got to make sure that our guys who were getting shot at and blown up at least had something decent to eat. We didn’t “invest” in missile defense as much as we just decided to dream the whole project up from scratch, while Solyndra had a product that was very close to being ready to go. Those cylindrical panels of theirs actually worked. The whims of the market did them in rather than failed technology.

If I were a guy with over $500 million to invest and I was given the choice between a technology that worked and one that would take 30 years to get not-quite-right, I know where I’d put my money. In fact, I have every confidence that within ten years solar power will be a working and crucial part of our energy infrastructure. But if in ten years I turn on the news and hear that a full-fledged nuclear attack is on the way, you will find me sitting on a lawn chair with a bottle of 18-year-old Scotch in the middle of the National Mall, complete with a sign advising all passersby to kiss their posteriors goodbye.

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Comments [9]

Adam Dawson from Washington, DC

Uh, hey man, I hate to tell you this, but that Canadian oil is going to China anyway, Keystone Pipeline or not. That pipeline wasn't stopping at refineries just over the border. It was going all the way down to the Gulf of Mexico. Was the plan to take the oil on a nice, relaxing sea cruise before we brought it back and sold it here?

Oh my heavens, you mean to tell me that a politician running for office in America had a fundraiser? Good. God. I'm sure Obama's motorcade caused a traffic jam. It causes them all the time here. But then again, so does a drunk driver being made to blow into a breathalyzer on the side of the highway, so it's kind of hard for me to get worked up over that. And if you think an Obama traffic jam causes adverse environmental impact and an incredible expenditure of taxpayer dollars, you should see what an oil spill does.

This is fun and all, but tell me, seriously, what is so ultimately wrong and crazy about research and development on renewable, home grown energy sources? Is that a "liberal" thing, or a "practical" thing? And doesn't it very much relate to national security? If we can come up with ways to keep the lights on, the cars moving (and yes, the jets flying and the aircraft carriers afloat) in a way that minimizes both environmental damage and our need to kiss the posteriors of people who secretly believe that we are all going to hell, wouldn't that be a good thing?

Jul. 25 2012 07:03 PM
listener

Wouldn't be fun to make deals with our largest trading partner which is Canada and build a land based pipeline between our two nations which creates jobs and cheaper fuel instead of Canada shipping tons of oil across the ocean to China?
BTW...Obama just created a mass traffic jam in Seattle so he could enjoy his third fundraiser in that city this year with no regard for the cost to tax payers or the environmental impact.
It's good to be the king.

Jul. 25 2012 05:51 PM
Adam Dawson from Washington, DC

Ok, I see your point on the $59/per gallon organic jet fuel, but wouldn't it make sense to do more research and development on that sort of thing now as opposed to later when supplies get even lower? Why not spend the R and D dollars so we can actually come up with biofuel that works as well as petroleum and is cheaper? Wouldn't it be fun to tell the Saudis and Venezuela that their services are no longer required? Wouldn't it be fun to be able to power our grid without strip mining West Virginia, or power our cars without the risk of enormous spills? I just don't understand the revulsion when it comes to trying to develop sources of fuel and power that won't run out or are subject to the whims of buggy ding dong dictators, particularly when the R and D costs for that sort of thing are significantly lower than the R and D costs for defense projects. I'm not saying all defense spending is bad or that all green energy spending is good, but wouldn't total energy independence be a significant improvement to our national security?

Jul. 25 2012 01:23 PM
listener

"..you also agree that r and d for renewable energy is just as important in terms of national security"

Um, no.
Especially $59 a gallon for biofuel in Air Force jets.
Ridiculous, expensive and dangerous policies like this careen directly into darkly absurdist Dr. Strangelove territory.

Jul. 25 2012 11:00 AM
dan from San Diego

Point is, don't trust government with our money ?

Jul. 25 2012 10:19 AM
Adam Dawson

Ha! Sorry Glen.

Jul. 25 2012 10:04 AM
Glen

I know this is just a hypothetical example *but* buying and selling isn't allowed at Burning Man, except for ice and coffee from the organizers.

Jul. 25 2012 06:57 AM
Adam Dawson from Washington, DC

Hey, my old man worked at the pentagon. You don't have to tell me about the dod. The cold war paid for my braces when I was growing up.

Since you are rising in full throated defense of sdi research and development, would you also agree that r and d for renewable energy is just as important in terms of national security?

Jul. 24 2012 05:56 PM
listener

From "Hope and Change" to "Hey, Everybody Does It So Why Not Us".
Not as catchy is it?

SDI helped change the course of the Cold War in the last century and with a nuclear Iran and North Korea it may do the same in the 21st Century. Let's see if this century has a happy ending as well before we start with the stylish sneering.

PS...thanks to the Department of Defense and warmongering defense contractors and huge corporations who helped Al Gore invent the internet and allowed us to read insightful political columns that deride them.

Jul. 24 2012 05:03 PM

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