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Ron Nehring

The Solyndra Green Jobs Fiasco

Solyndra is the kind of company certain politicians love because it provides a concrete example that can be used to justify a particular philosophy.  It turns an abstract idea real.

In this case, the philosophy is one which liberals have developed to rationalize all types of regulations and subsidies of the kind America has otherwise spent fifty years moving away from.  “Green jobs,” the story line goes, will be our future.

It sounds great.  And politically, it’s even better: it’s suddenly acceptable to crush all kinds of businesses with regulations and taxes because the jobs that are destroyed will be replaced will all kinds of new “green jobs.”  Everything will be fine.  In his 2010 campaign for Governor, Democrat Jerry Brown citied such idealistic, clean, high-tech jobs almost daily.

Yet, “green jobs” is an abstract concept, and one which has proven to be largely a failure in the real economy.  At best they occupy a niche, and no credible economic analysis can demonstrate a roadmap by which such jobs become anything more than a tiny sector of our giant economy.

The “green jobs” concept is an important one to keep the liberal base happy, however, and it provides a quick sound bite rebuttal to Republican complaints about taxes and regulations.  Solyndra provided an example that liberals could seize upon to demonstrate that, in fact, “green jobs” are real.

The now-bankrupt company is based in Fremont, California and its core business was the manufacture of thin-film solar panels.  The residential market for solar panels has been artificially pumped up through a variety of state and federal tax benefits for those who purchase them.  In other words, government plays favorites by giving tax breaks to people who buy favored products, while others who are less enlightened (or less capable) are left with the bill.   Public utility demand for solar panels and other politically correct energy-producing equipment is artificially stimulated through regulations requiring power companies to produce or purchase a specified amount of electricity from such “renewable” sources, regardless of the impact it has on ratepayers.

Solyndra and other companies dependent upon the government to create (or mandate) demand for their products are called “rent seekers.”  Their business model is dependent upon government favoritism, which in turn means corporate executives become highly dependent upon the good will of politicians.

Such cross-dependencies are ripe for abuse, as Solyndra demonstrates.

Company executives visited the White House 20 times while Solyndra’s application for a $535 million loan guarantee was pending at the U.S. Department of Energy.  Why would a company need to go to a federal agency for a loan instead of the credit markets?  Precisely because those markets know a lot more about managing risk than the government appears to.  The 2005 Energy Policy Act (sadly, a product of a Republican Congress) created the loan program at the heart of this fiasco, and the 2009 American Recovery and Reinvestment Act, also known as the Obama stimulus bill, increased the amount of funds available through the program and added a requirement that such funds be spent by 2011.

The problem for President Obama and his defenders in Congress comes in the form of apparent pressure from the White House to push through the loan despite misgivings from other federal offices, most notably the Office of Management and Budget.  Emails among top Administration officials shows a keen sensitivity to the “potential announcement value” in approving the loan, which would be “an example where the Recovery Act is helping create new high tech jobs.”

The loan was eventually approved in September 2009.  Vice President Biden participated in a video conference in conjunction with the groundbreaking of Solyndra’s new plant, and President Obama paid a visit in May 2010 together with Governor Arnold Schwarzenegger.  You can imagine all of the politicians patting each other on the back for their wisdom in providing taxpayer money to such a job-creating endeavor.

The problem with Solyndra was that politicians liked their product more than consumers did, and government was willing to take big risks with taxpayer money despite warnings about the company’s business model.  Solyndra’s fancy thin-film solar panels cost about $4 per watt to manufacture, compared to 75 cents per watt it cost Chinese and other manufacturers to build traditional panels.  It was only a matter of time before Solyndra’s flawed business model intersected with reality.

Solyndra is now bankrupt, leaving taxpayers at risk of a multi-hundred million dollar loss because it appears political pressure and concern about “announcement values” and justifying the failed 2009 stimulus bill placed political expediency and philosophical rationalizations ahead of protecting taxpayers.