Solyndra Casts Shadow on Obama Stimulus
Rumors of a scandal swirl as the bankrupt corporation owes taxpayers $535 million
Four months ago, there was President Obama, intrepid stimulator of the economy, sage creator of jobs, fount of hope and change, summoner of transcendence and transparency in governance, on a visit to the Solyndra plant in Fremont, CA, inspecting solar panels on the factory floor, shaking the hands of construction workers–in hard hats and reflective vests!–and addressing the beneficiaries of his stimulus and the innovators leading the world in the green energy technology revolution. He closed his speech at Solyndra, the recipient of a $535 million dollar loan from the U.S. taxpayer, with a ringing endorsement of the company and its work:
Every day that you build this expanded facility, as you fill orders for solar panels to ship around the world, you’re demonstrating that the promise of clean energy isn’t just an article of faith–not anymore. It’s not some abstract possibility for science fiction movies or a distant future–10 years down the road or 20 years down the road. It’s happening right now. The future is here. We’re poised to transform the ways we power our homes and our cars and our businesses. And we are poised to lead our competitors in the development of new technologies and products and businesses. And we are poised to generate countless new jobs, good-paying middle-class jobs, right here in the United States of America.
Unfortunately, things didn’t quite work out that way. And when I say not quite, I mean not at all. By August, only three months after the President’s speech, Solyndra had suspended operations and filed for Chapter 11 bankruptcy. The corporation was dragged under mainly from competition in China–so much for leading our global competitors. Furthermore it was forced to shed over 1,000 jobs–so much for the 4,000 green jobs the administration claimed the government’s investment in Solyndra would generate. Oh yea, and there’s the tiny fact that taxpayers are now on the hook for $535 million, money that came from Obama’s first stimulus (remember that bill that was supposed to save our economy and keep unemployment under 8%?). Revelations that one of Solyndra’s primary investors was also a major fundraiser for Obama’s 2008 campaign, that Solyndra’s loan process was fast tracked, skipping essential oversight steps, and that the public was made to take a back seat to private investors when it comes to paying back the loans have added an unsavory taste to what would otherwise just be a regrettable failure to stimulate the economy and set rumours swirling in the capital over the last few weeks.
An ongoing investigation by the Department of Energy’s Office of the Inspector General, and a recent raid by the FBI, should soon provide more details on what role, if any, corruption and political cronyism have to play in the situation. If it’s found that awarding Solyndra the money was improperly motivated, then it’s pretty much just your garden variety rewarding-campaign-contributors sort of scandal, except with a $535 million price tag in public funds. Part of me almost hopes it was motivated by cronyism, because the other option is more damning, especially since it comes at the same time that President Obama is standing in the Rose Garden waving around a giant bill entitled the American Jobs Act.
If it turns out that Solyndra was not the product of corruption, then it’s one hell of a line on the President’s economy resume. In my opinion, such a gross economic failure is even scarier than a pretty standard act of Chicago politics. Two months before the President delivered that address at the Solyndra plant, the accounting firm PricewaterhouseCoopers, in a Securities and Exchange Commission filing on March 16, gave a pretty frank assessment of the corporation’s dim prospects. The report noted that Solyndra had accumulated a deficit of $557.7 million, and then PricewaterhouseCoopers went on to say, “The company has suffered recurring losses from operations, negative cash flows since inception and has a net stockholders’ deficit that, among other factors, raise substantial doubt about its ability to continue as a growing concern.” (Here’s a link to the SEC filing, including the PricewaterhouseCoopers report, for all of you who want to crunch the numbers yourselves) That this information did not stop the loan from going through, or give the President pause as he set to deliver his glowing speech, is a little troubling.
It is quite possible that the whole Solyndra scandal will turn out to be nothing more than a tempest in a teapot, a regrettable incident of good intentions gone wrong (for as Vice President Biden has so astutely noted, “”If we do everything right, if we do it with absolute certainty, there’s still a 30% chance we’re going to get it wrong.”) But regardless, it throws light on the Obama administration’s approach to fixing the economy. It calls into question the other companies applying for loans through this program as well as the whole premise of government trying to get involved in stimulating the economy with expenditures. Clearly, the government is not cut out to play venture capitalist. The market can identify potential innovators – profitable ones – far more efficiently than a Washington bureaucracy generally lacking in private sector experience. Furthermore the government has essentially wasted over $500 million at the cost of over 1000 jobs. Would it not have been a far better stimulus for the economy to keep that money in people’s hands and allow the market to apply it toward profitable and efficient growth? And as the President seeks to trim almost $4 trillion from the federal deficit, wouldn’t cutting these sorts of programs be an ideal source of savings? With the nation debating the President’s new jobs bill, which is essentially a second stimulus, these sorts of questions are bound to go far beyond Solyndra.