Politico's Michael Grunwald takes a look at the federal government's $3.2 trillion in outstanding loans, up from $1.3 trillion a decade ago. "As a Washington austerity push has restrained direct spending, many credit programs have kept expanding, in part because they help politicians dole out money without looking like they're spending," he explains.
Mr. Grunwald's article touches on some of the rules governing how Washington works, some of which are known to economists as public choice theory. One of these rules is that small groups of intensely interested parties win out over large groups of only casually interested parties. Or, as he puts it, "Since fishermen in the Northwest Halibut/Sablefish and Alaska King Crab fisheries got their own $24 million loan program, it's a good bet that nobody's paid closer attention to it on Capitol Hill than their lobbyists."
Another rule is that, as he puts it, "A Washington money spigot, once opened, is almost never turned off." So, as he puts it, "The Agriculture Department...makes absurdly safe loans to rural electric cooperatives and telecoms, so safe they're sometimes described internally as 'profit centers.' Those New Deal-era credit programs made sense before rural America had electricity and phone lines, but now they're essentially boondoggles that subsidize rural ratepayers—not to mention suburbanites around Waco, Atlanta and Washington, D.C., thanks to a 'once rural, always rural' loophole." I don't necessarily agree that these programs ever made sense, but it's a reminder that a good reason to oppose new government programs is that once created they hardly ever disappear.
A third rule is what we around here call "both sides do it." So, Mr. Grunwald reports:
The riskiest programs often reek of politics, producing fiascos like the Bush-era super-ferries, which benefited a firm led by Republican ex-Navy Secretary John Lehman, or the similarly disastrous Clinton-era MarAd loan to modernize a shipyard near Boston, a pet project of the late Democratic Senator Ted Kennedy. Credit programs, especially the more obscure ones, tend to have well-positioned benefactors. South Dakota Republican John Thune, a former railroad lobbyist who is about to chair the Senate Commerce Committee, once pushed through a major expansion of a railroad loan program on behalf of his former employer, while Michigan Democrat Debbie Stabenow has protected those dicey loan guarantees for biorefineries as chair of the Senate Agriculture Committee.
Mr. Grunwald's piece, while interesting and useful in a lot of ways, isn't without what seemed to me at least to be at least one apparent internal contradiction. He writes, "The Solyndra loan, derided by Republican campaign ads in 2012 as a crazy handout that reflected Obama-era 'crony capitalism,' was nothing of the sort. The Bush administration originally selected Solyndra for the first federal clean-energy loan over 142 other applicants. It was an exciting solar startup that had raised $1 billion from savvy private investors like Richard Branson and the Walton family, and a slew of probes have failed to turn up any evidence of wrongdoing on its Energy Department loan." Then later on, he writes, "Ironically, the loan program that produced the Solyndra debacle might be as close as government gets to the sweet spot. The Energy Department recently announced that the $30 billion in loans it made during Obama's first term are on track to earn $5 billion for taxpayers. Granted, they would look less lucrative under fair-value accounting. More importantly, though, at a time when private lenders wouldn't touch alternative energy, the program financed America's largest wind and solar farms, a factory for Tesla Motors to build electric cars and a host of other innovative projects that reduced dependence on fossil fuels."
How can Solyndra have "raised $1 billion from savvy private investors like Richard Branson and the Walton family" at a time "when private lenders wouldn't touch alternative energy"? Maybe the alternative energy firms could raise equity but not debt? I still don't get why I should be taxed to lend money at subsidized rates to an investment of Richard Branson and the Walton family. Because it's good for the environment? There's got to be a better way to help the environment than to subsidize failing alternative energy companies.