Arnold Kling  

The Energy Loan Scandal as a Non-story

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Mark A. Thiessen writes,


as Hoover Institution scholar Peter Schweizer reported in his book, "Throw Them All Out," fully 71 percent of the Obama Energy Department's grants and loans went to "individuals who were bundlers, members of Obama's National Finance Committee, or large donors to the Democratic Party." Collectively, these Obama cronies raised $457,834 for his campaign, and they were in turn approved for grants or loans of nearly $11.35 billion.

If our political digestive system were functioning properly, it would vomit out the energy loan program and the people responsible. There would be daily front-page headlines in the newspapers. Congressional hearings would feature harsh attacks by Democrats as well as Republicans and be carried live by all major news channels. Steven Chu would be as generally reviled as Bernie Madoff. There would be a special prosecutor operating and talk of impeachment.

Instead, this has produced among left-of-center politicians and pundits little concern, much less outrage. My fear is that what will emerge is a pattern in which Republican scandals are ignored by the right and Democratic scandals are ignored by the left. The result will be a spiral of ever-worsening corruption.


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COMMENTS (20 to date)
Speedmaster writes:

>> "My fear is that what will emerge is a pattern in which Republican scandals are ignored by the right and Democratic scandals are ignored by the left."

I'm in complete agreement. For the last few presidents, each time, we've seen the opposite party wring its hands incessantly about what was being done to the Constitution. But once they get their guy back in, they just make it worse.

ChacoKevy writes:

I agree with your worrying about ceaseless scandal, but I don't think this one is a scandal. Are you suggesting that Obama wasn't going to give out this cash if not for the contributions? To further the point, for such a huge amount of cash lent/granted, the small quantity his campaign received from these parties makes this look close to legit.
Unless the president is a seriously cheap date.

dha writes:

I'm not intimately familiar with the US system so I may be comparing to the wrong thing, but according to wiki Obama's campaign raised $650m, making this a 0.08% contribution.

Is it not more likely that Obama believed ideologically in energy subsidies than that he thought he would lose the election with only 99.92% of the money he in fact raised?

JLV writes:

Not to be too contrarian, but wouldn't you expect clean energy entrepreneurs to be disproportionately Democratic donors?


Like, say you're a clean energy entrepreneur. Who do you donate to? The guy from a party that is pretty much dominated by climate change deniers?

Philo writes:

Why so alarmist? So long as each party publicizes the other's scandals there will be enough public awareness of the corruption to hold it somewhat in check.

JLV writes:

Also, it seems like "large donors to the Democratic Party" is doing all of the heavy lifting in the quote.

The Sheep Nazi writes:

Like, let's say you're a clean energy entrepreneur

There's your scandal, right there.

JLV writes:

I guess its one of those "support capitalism, piss off liberals; choose one" sort of deals.

Greg G writes:

Let's see:

Those who support green energy are more likely to support Democrats than Republicans.

Those who seek government money are more likely to be bundlers of political contributions than those who don't.

Is this really the evidence of a corrupt conspiracy or is it what you should expect when you decide that money is speech and corporations are people?

Dan Weber writes:

What's the counter-factual?

That is, what would the number be instead of "71 percent" if Obama were completely and absolutely without any scandal at all? 0%? 50%?

Trespassers W writes:
So long as each party publicizes the other's scandals there will be enough public awareness of the corruption to hold it somewhat in check.

How's that approach working out for you?

Neil S writes:
JLV writes: Not to be too contrarian, but wouldn't you expect clean energy rent seekers to be disproportionately Democratic donors?

ftfy

Gerald writes:

I don't doubt that both Democrats and Republicans favor their donors/constituencies when handing out goodies. President Obama may be a bit more blatant than some, but both parties have a certain hubris as to their ability to make good "investments" and contempt for the opinions of the taxpayers that are on the hook for their failures.

Perhaps a better question is why should the President or Cabinet members be entrusted with the ability to make discretionary "investments" in anything other that basic R&D or military research at all? Certainly Presidents of neither party in the past decades on my adulthood have demonstrated the vision, foresight or economic analysis ability to be entrusted with investments as compared to the standards required by any competent corporation.

The best alternative is don't give them the money or allow "investment" commitments to be made without public scrutiny in advance of said commitments.

Chris Koresko writes:

Arnold Kling: My fear is that what will emerge is a pattern in which Republican scandals are ignored by the right and Democratic scandals are ignored by the left.

Philo: Why so alarmist? So long as each party publicizes the other's scandals there will be enough public awareness of the corruption to hold it somewhat in check.

The Big Media are pretty much on the left. Their counterpart on the right consists mostly of a bunch of radio talk shows and the National Review, which (I think) are collectively less influential than the Big Media.

Based on that asymmetry, and Philo's assumption that publication of corruption will tend to control it, one would predict that there will be more corruption on the left than on the right. This is especially true if the left also favors more big government investment and the opportunities it creates for corruption.

Collin writes:

My question would how does the government fund no products and innovation. Other it seems oliogopolies (pharma) start exiting in internal innovation and try to buy out small innovators. And the well is drying up the last 5 - 7 years on new drugs. (OK que FDA rants...) Let us remember the computer, internet and chips were an innovation by the military and space program which under today environment looks like a lot of waste on military way back when. Otherwise I do think less for US solar is probably the right strategy so the Chinese can take over the market or combine with US companies.

CR

Johnson85 writes:
Let's see:

Those who support green energy are more likely to support Democrats than Republicans.

Those who seek government money are more likely to be bundlers of political contributions than those who don't.

Is this really the evidence of a corrupt conspiracy or is it what you should expect when you decide that money is speech and corporations are people?

It has nothing to do with speech and corporations. As long as you allow politicians to give out goodies to fund raisers, you're going to have tons of money being "invested" in politics. Look at the returns these people got for their investment. Hard to beat that investment in a way that doesn't involve the threat of force.

At this point, I'd rather presidents just be given $5B to hand out in cash to their political allies. That's be half the potential cost of Obama's energy program and it wouldn't require that people destroy a lot of wealth pretending that they're "clean energy entrepreneurs."

Karl Smith writes:

Is there any evidence that this is corruption?

For example, I would expect nearly 100% of Oil and Gas tax credit recipients to be bundlers or major donors to the Republican Party, but I would not suspect that there was any corruption at play.

Simply, Republicans are ideologically pro-Oil and Gas and hence Oil and Gas folks are pragmatically Republican.

disapointed writes:

Very disappointed in the quality of the post. At the risk of rehashing what others have said, my complaints are listed below. Please note I personally am no fan of the solar/wind subsidies and loan guarantees.
1. What basis is there for asserting causation over mere correlation?
2. Confirmation bias?
3. If someone runs a campaign stating they want subsidies for so-called "green" energy, is it a scandal if they do what they said they would do once elected (while breaking no laws)?
4. I don't find it very credible that Steven Chu spends his whole life studying physics (and extremely successful at it) so one day he could reward some political cronies of his boss. Comparing Chu to Madoff, really?

Shayne Cook writes:

I suspect the major reason these "investment" failures haven't received more press - and public outrage - is that the plausible counter-argument is that they were "stimulus" for an ailing U.S. economy. All very Keynesian - allegedly.

Only these weren't Keynesian nor were they investments. A loan guarantee is NOT an investment. There is no up-side to a loan guarantee, only potential (or in these cases, realized) down-side. Real investors (I am one) DO NOT do loan guarantees. Loan guarantees, as well as the vast majority of the other Federal "stimulus" spending over the past 5 years, has been re-distribution, pure and simple. Not investment, and very little in the way of "stimulus".

See BEA GDP data (Table 1.1.5). You'll see that U.S. Government spending over the past 5 years, as a percentage of GDP, has not been remarkably over the trend of the previous 25 years - and less than many of those years. Pretty remarkable given the $1.5 Trillion annual deficits of the past 4 years. The explanation is that GDP data counts Government spending for New Goods and Services only, not re-distribution spending.

@ disapointed:
To your point 4 ... Steven Chu may very well be a well studied and even accomplished physicist. But he's not an investor. I certainly wouldn't hire Bernie Madoff to be my investment advisor or financial director, but I wouldn't hire any physicist for that function either.

aaron writes:

It's like straight out of Goodfellas:

"Paulie could do anything. Especially run up bills on the joint's credit. And why not? Nobody's gonna pay for it anyway. And as soon as the deliveries are made in the front door, you move the stuff out the back and sell it at a discount. You take a two hundred dollar case of booze and you sell it for a hundred. It doesn't matter. It's all profit. And then finally, when there's nothing left, when you can't borrow another buck from the bank or buy another case of booze, you bust the joint out. You light a match.” And the restaurant is set on fire by Paulie’s hoodlums and burns down."

The main differences are: the insurance company is in on it and afterward nothing is burned, it's bought back on the cheap.

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