The Solyndra disaster is the perfect example of what happens when the federal government decides to play venture capitalist with taxpayer’s money.
Private venture capitalists invest with the sole intention of creating successful companies. Whether a company comprises two MIT geeks with little to recommend them but a groundbreaking search algorithm, or has a labor-intensive manufacturing operation that requires tens of thousands of workers, the focus is on turning a profit. The number of people employed is not the primary issue.
In contradistinction, when the Department of Energy decided to play venture capitalist with its loan guarantee program, it focused less on building successful companies, and more on finding which companies it could fill with the most warm bodies. And then it carelessly threw money at them in pursuit of improving the employment statistics. Here is an instructive excerpt from the DOE website, highlighting how the department regarded its investment in Solyndra:
The Department of Energy finalized a $535 million loan guarantee for Solyndra, Inc. to finance construction of the first phase of the company’s new solar manufacturing facility in Fremont, California. The project, eligible under Section 1703 and Section 1705 of Title XVII of the Energy Policy Act of 2005, will create 3,000 construction jobs.
The Department of Energy undoubtedly hoped Solyndra would become a successful company, but their interest was clearly primarily in employment for the sake of employment.
Solyndra is the poster example of this mindset and a story whose plot we can expect to see repeated. It goes like this: A bunch of extremely rich people invested in the company in the hope of both making a fortune and changing the world in the process. When reality hit, and investors decided they didn’t want to put more money into the company, the endeavor looked as if would come to a sticky end. But then, Obama was elected, the heavens opened, the light came down, and the celestial choirs started to sing. The stimulus was passed and, all of a sudden, a company that was about to go under — for the oh-so-old-fashioned reason that it wasn’t viable — gets a lifeline from the DOE. Fast forward a couple of years: Solyndra ran out of money again and, since none of the investors would put additional capital into the company, it had to shut down. It happens every day, except this time the ship went down with $535m of your dollars in the hold.
This is not a partisan issue. Solyndra was taking advantage of a Bush-era program, but Team Obama picked up the ball and ran with it, and under this administration the project has become the stimulus-enhanced monstrosity it is today. Take a cursory look at the DOE website and note how it highlights, right there in the middle of the page, how much has been loaned and how many jobs those loans have created. The numbers show that in return for $38.7 billion invested, 65,578 jobs have been created.
That’s comes to a staggering $590,000 per job.
Come Thursday September 8, when the president outlines his big, bold job bill, just remember how well his last one did.