It’s hard to predict right now which we will hear more about this year: Solyndra as a symbol for Obama’s failed environmental policies or Romney’s low personal tax rate as a emblem for all that is wrong with Republican economic policies. Unfortunately, only one of these is really fair. Let’s see which one.
Make no mistake, supporting Solyndra to the tune of $528 million was a horrendous mistake. Solyndra was failing and it needed all the support it could get but it shouldn’t have come from US tax payers. But this isn’t the sort of policy that the US renewable energy industry has lobbied for. What it has consistently asked for is a level playing field. That’s what a carbon tax is supposed to do. Solyndra was a case of misuse of government funds during a time of crisis, not a failed environmental policy.
Direct government support for individual companies is almost always a bad idea. But perhaps it was inevitable. With the economy in a free fall back in 2009 the Obama Administration was looking to do what it could to buttress the economy, save the US auto industry, and promote green jobs. The auto bailout was hotly debated, but it was arguably defensible to support specific firms because they made up much of the industry and supported a good part of the manufacturing sector in the United States. GM and Ford are now back on their feet. So the auto bailout has been an unqualified success.
The US renewable energy industry is much different though. For the most part, it’s made up firms that are hoping to develop the next big thing. Most of the industry is not profitable and supported by venture capital and private equity financing. In the early part of the 20th Century there were over 1,800 car companies in the United States. This is more or less the composition of the US renewable energy industry today – no real champion, but lots of players competing to come out on top. For the government to give direct assistance to any individual companies is pure folly and the worst kind of industrial policy. It’s one thing to support a mature industry that only has a few players; it’s another to pick champions in a sector that has no clear winners and losers. That’s best left to the VCs, who incidentally have been plowing money into the clean tech space.
Romney on the other hand is the perfect example of everything Republicans might hope for. His low tax rate has encouraged him to work over the years and there has been a wonderful trickle down effect to all of the communities his companies have stopped doing business in over the years. I am sure his personal bankers at Goldman Sachs also appreciate the opportunity to manage his money. I can’t imagine a better example of why tax rates are too low for the rich. If Romney gets the Republican nomination for president it will be interesting to see if he can campaign for lower taxes with a straight face.