THE NATIONAL MEDIA has missed the real lesson taught by the $530,000,000 in loans the Obama Administration's Department of Energy gave Solyndra, the now bankrupt solar-power panel manufacturer from Fremont, Calif. The real lesson is not just one of cronyism and abuse, it is one about the inherent folly of government planning, the inability of bureaucrats to decide for consumers which market players will be "winners."
In May of 2010, Pres. Barack Obama stood before workers at the ill-fated Solyndra plant, landing them for their green energy production and proclaiming them stewards of his vision of the U.S.'s future, one replete with "the promise of clean energy." The President not only decided that about Solyndra, but that his Administration would help make the company a success.
In March 2010, PricewaterhouseCoopers LLP determined that Solyndra was suffering from severe financial difficulties, raising "substantial doubt" as to "its ability to continue as a going concern." By contrast with that fair economic assessment, the Department of Energy maintained--following its purported "rigorous financial, legal, and technical review"--that Solyndra not only was an appropriate candidate for receipt of taxpayer financed loans from the Federal government, but tightly deserving of the whopping sum of $530,000,000 in those loans. For most medium-sized businesses in the U.S., that enormous sum would be sufficient to finance operations for decades, even without the generation of revenue, but not so for Solyndra.
On Aug. 31, 2011, Solyndra dismissed 1,100 employees, a huge army it had employed as part of an extravagant expansion project financed with Federal dollars. That same day, the company announced that it would file for Chapter 11 bankruptcy, seeking reorganization of its business.
To those of us familiar with how Washington works, it comes as no surprise that tax dollars were blown on a boondoggle. Regardless of how the agencies try to sugarcoat it, ultimate decisionmaking by the Federal government (whether it comes in the form of an approval of a new drug or of a federally backed low-interest loan) is made by political appointees whose judgment depends heavily on subjective political considerations, rather than objective practical ones. When political will dashes with objective reality, political will prevails in almost every case, inviting catastrophic consequences like the Solyndra debacle.
The DOE loan guarantee program was created by Congress in 2005. The former Republican majority is equally guilty with the Obama Administration for promoting government planning over market processes, because it was a Republican Congress and Bush White House that created the initiative. Loan guarantees were one fat pork option irresistible to members. Those guarantees would line the pockets of those who could form a ready, enthusiastic political constituency, one that would repay politicians who backed the program with campaign contributions and support. …