Tag: lobbying

Solyndra: A Case Study in Green Energy, Cronyism, and the Failure of Central Planning

Back in 2011 I wrote several times about the failure of Solyndra, the solar panel company that was well connected to the Obama administration. Then, as with so many stories, the topic passed out of the headlines and I lost touch with it. Today, the Washington Post and other papers bring news of a newly released federal investigative report:

Top leaders of a troubled solar panel company that cost taxpayers a half-billion dollars repeatedly misled federal officials and omitted information about the firm’s financial prospects as they sought to win a major government loan, according to a newly-released federal investigative report.

Solyndra’s leaders engaged in a “pattern of false and misleading assertions” that drew a rosy picture of their company enjoying robust sales while they lobbied to win the first clean energy loan the new administration awarded in 2009, a lengthy investigation uncovered. The Silicon Valley start-up’s dramatic rise and then collapse into bankruptcy two years later became a rallying cry for critics of President Obama’s signature program to create jobs by injecting billions of dollars into clean energy firms.

And why would it become such a rallying cry for critics? Well, consider the hyperlink the Post inserted at that point in the article: “[Past coverage: Solyndra: Politics infused Obama energy programs]” And what did that article report?

Why Are Environmental Policy Conflicts So Intractable?

On Earth Day the op-ed pages remind me of “Groundhog Day.”  Environmentalists argue we need stricter environmental regulation.  Business interests argue such regulations reduce economic growth and cost the economy jobs.  Each also invokes “sound science” as an adjudicator of the conflict.  Environmentalists invoke “science” in the case of CO2 emissions and effects while business interests invoke “science” in the case of traditional pollution emissions.  Each year we wake up and the same movie plays out.

The scientific validity of people’s preferences plays no role in the market’s delivery of private goods.  Markets can and do supply organic lettuce regardless of whether it is really “better” for your health.  The scientific validity of people’s preferences is irrelevant.

Air- and water-quality environmental disputes are more challenging to analyze than the supply of organic lettuce for two reasons.  First, while property rights exist for lettuce, they often do not exist for air and water.   Thus, environmental politics involves continuous struggle over implicit property rights and the wealth effects that flow from such rights.  Second, both conventional air and water quality are “local” public goods (club goods) rather than private goods, thus individual differences in consumption, the primary method of reducing conflict associated with private goods, are not possible.  Instead, everyone’s varied preferences for environmental goods can only result in one jointly consumed outcome.

One possible impediment to the implementation of market-like solutions to air and water quality is that the initial ownership of property rights to air or water emissions not only has wealth but also efficiency effects.  That is those particular property rights (the right to a pristine environment) are so valuable relative to other assets that their initial allocation alters the willingness of people to pay for them and thus affects how much pollution exists.  In such cases the initial distribution is the whole ballgame because it determines the resulting air- and water- quality levels.

The Parasite Economy and The Libertarian Mind

In The Libertarian Mind, which is officially published today, I have a chapter titled “What Big Government Is All About” that aspires to be applied Public Choice analysis. Much of it relates to what I think Jonathan Rauch first called “the parasite economy,” the part of the economy that involves getting through government what you can’t get through voluntary market processes. Reason.com has just published an excerpt from that chapter, with a few recent examples added, such as these all-too-typical stories:

Lobbying never stops. One week in December, the Kaiser Health News reported that “growth opportunities from the federal government have increasingly come not from war but from healing.” That is, “business purchases by the Department of Health and Human Services have doubled to $21 billion annually in the past decade.” And who showed up to collect some of the largesse? Well, General Dynamics was having trouble making ends meet with defense contracting, so suddenly it managed to become the largest contractor to Medicare and Medicaid. “For traditional defense contractors,” wrote Kaiser Health, “health care isn’t the new oil. It’s the new F-35 fighter.”

Of course, the old F-35, despite a decade or more of running behind schedule and over budget, is still doing pretty well. That same week Congress passed the $1.1 trillion “Cromnibus” spending bill, including $479 million for four F-35 fighters from Lockheed that even the Pentagon didn’t want. The Wall Street Journal reported that the bill “sparked a lobbying frenzy from individual companies, industries and other special interests”—pretty much the same language you could have read in earlier stories about Porkulus and Obamacare. Every provision in the bill—from the $94 billion in Pentagon contracting to $120 million for the Chicago subway to an Obamacare exemption for Blue Cross and Blue Shield—has a lobbyist or several shepherding it through the secretive process.

And I also talked about the parasite economy on John Stossel’s television show last Friday night:

For more on the parasite economy, and everything else you wanted to know about libertarianism, read The Libertarian Mind.

Lobbyists Swarm around the Winners

I’ve been talking a lot about the parasite economy this week – like in my forthcoming book The Libertarian Mind and on STOSSEL this Friday night – and two stories in the Washington Post today illustrate the problem.

John Wagner reports that campaign contributions are now flowing to surprise Maryland gubernatorial winner Larry Hogan. Why would campaign contributions come in after the campaign is over?

“A lot of people speculatively invested in the Brown campaign and now realize they made the wrong choice,” said Jennifer Bevan-Dangel, executive director of Common Cause Maryland, a group that closely monitors campaign contributions. “Donors give because it gets them in the door, regardless of who’s in power.”

The reports show that Hogan raised nearly $1.4 million in the two months after the election — roughly the amount that Martin O’Malley (D) raised after he was elected governor in 2006.

When a state government hands out some $40 billion a year, lots of people want to get friendly with the people who will influence how that money is spent. Through regulations, the government influences billions more, and lobbyists don’t want to be left out of those discussions either.

Money flowed to Hogan from utilities, banks and health-care companies that are regulated by the state and from associations that represent businesses in Annapolis. Groups representing chiropractors, nurse practitioners, nursing homes and psychologists have all given since the election….

Other donors include more than a dozen of the highest-paid lobbyists in Annapolis. 

Also in today’s Post, Mike DeBonis reports that council candidates backed by newly elected D.C. mayor Muriel Bowser are raking in cash for their upcoming special elections. People want a friend in city hall, too.

Why indeed do “chiropractors, nurse practitioners, nursing homes and psychologists” need lobbies, much less give campaign contributions? Because they want a piece of vast government expenditures on health care, they want regulatory protection from competition, or they want something else that government can deliver. 

I make no criticism here of Governor Hogan or Mayor Bowser. I have no reason to think that either of them has done anything inappropriate for a campaign contributor. This is a systemic problem.

It’s just part of the parasite economy, where you use the law to get something you couldn’t get voluntarily in the marketplace.

Lobbyists Deal — Easily — with a Changing Congress

On NPR’s “Morning Edition,” Peter Overby discusses the way lobbyists are adjusting to the new Republican Congress. Some are hiring former Republican lawmakers and congressional staff. Some are reminding clients that there are still two parties, as in this nice ad for superlobbyist Heather Podesta, former sister-in-law of White House eminence John Podesta:

OVERBY: Even in a Republican Congress, lobbyists will need to court Democrats, too. Heather Podesta is happy to point that out. She runs her own small Democratic firm.

HEATHER PODESTA: The power of the Congressional Black Caucus has really grown.

OVERBY: In fact, she says CBC members are expected to be the top-ranking Democrats on 17 House committees and subcommittees.

PODESTA: Corporate America has to have entree into those offices. And we’re very fortunate to have the former executive director of the Congressional Black Caucus as part of our team.

After every election, the lobbyists and the spending interests never rest. The challenge for the tea party and for groups such as the National Taxpayers Union is to keep taxpayers even a fraction as engaged as the tax consumers.

In the last analysis, as I’ve written many times before – and in my forthcoming book The Libertarian Mind – the only way to reduce the influence of lobbyists is to shrink the size of government. 

Attorneys General Aim at New Targets, Who Respond as Expected

The New York Times launches a series of investigative reports on corporate lobbying of state attorneys general. But you have to read fairly far down in the story to find the “nut graf” on why this is happening now. Radley Balko summed it up in a tweet: “As prosecutors get increasingly powerful, lobbyists will increasingly spend money to try to influence them.” And the article does note that: 

A robust industry of lobbyists and lawyers has blossomed as attorneys general have joined to conduct multistate investigations and pushed into areas as diverse as securities fraud and Internet crimes….

The increased focus on state attorneys general by corporate interests has a simple explanation: to guard against legal exposure, potentially in the billions of dollars, for corporations that become targets of the state investigations.

It can be traced back two decades, when more than 40 state attorneys general joined to challenge the tobacco industry, an inquiry that resulted in a historic $206 billion settlement.

Microsoft became the target of a similar multistate attack, accused of engaging in an anticompetitive scheme by bundling its Internet Explorer with the Windows operating system. Then came the pharmaceutical industry, accused of improperly marketing drugs, and, more recently, the financial services industry, in a case that resulted in a $25 billion settlementin 2012 with the nation’s five largest mortgage servicing companies.

The trend accelerated as attorneys general — particularly Democrats — began hiring outside law firms to conduct investigations and sue corporations on a contingency basis.

I wrote about this 30 years ago in the Wall Street Journal, citing Hayek’s assessment from 40 years before that:

Nobel laureate F.A. Hayek explained the process 40 years ago in his prophetic book The Road to Serfdom: “As the coercive power of the state will alone decide who is to have what, the only power worth having will be a share in the exercise of this directing power.”

As the size and power of government increase, we can expect more of society’s resources to be directed toward influencing government.

Those who work to increase the size, scope, and power of government need to recognize: This is the business you have chosen. If you want the federal government to tax (and borrow) and transfer – and reallocate through prosecution – $3.8 trillion a year, if you want it to supply Americans with housing and health care and school lunches and retirement security and local bike paths, then you have to accept that such programs come with incentive problems, politicization, corruption, and waste. And that special interests will find ways to influence such momentous decisions, no matter what lobbying restrictions and campaign finance regulations are passed.

Lobbying the Taxpayers — with Taxpayers’ Money

Some people say innovation is dead in America, but NASA is always looking for innovative ways to extract more money from the taxpayers. The Wall Street Journal reports on some of their innovations in using our tax dollars to persuade us to give them even more of those tax dollars:

In William Forstchen’s new science fiction novel, “Pillar to the Sky,” there are no evil cyborgs, alien invasions or time travel calamities. The threat to humanity is far more pedestrian: tightfisted bureaucrats who have slashed NASA’s budget.

The novel is the first in a new series of “NASA-Inspired Works of Fiction,” which grew out of a collaboration between the National Aeronautics and Space Administration and science fiction publisher Tor. The partnership pairs up novelists with NASA scientists and engineers, who help writers develop scientifically plausible story lines and spot-check manuscripts for technical errors.

The plot of Mr. Forstchen’s novel hinges on a multibillion-dollar effort to build a 23,000-mile-high space elevator—a quest threatened by budget cuts and stingy congressmen….

It isn’t the first time NASA has ventured into pop culture. NASA has commissioned art work celebrating its accomplishments from luminaries like Norman Rockwell and Andy Warhol. …

Some see NASA’s involvement in movies, music and books as an attempt to subtly shape public opinion about its programs.

“Getting a message across embedded in a narrative rather than as an overt ad or press release is a subtle way of trying to influence people’s minds,” says Charles Seife, author of “Decoding the Universe,” who has written about NASA’s efforts to rebrand itself. “It makes me worry about propaganda.”

Lobbying with taxpayers’ money isn’t new. But as Thomas Jefferson wrote in the Virginia Statute of Religious Liberty: “To compel a man to furnish contributions of money for the propagation of opinions which he disbelieves is sinful and tyrannical.” To compel him to furnish contributions of money to petition his elected officials to demand more contributions from him just adds insult to injury.

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