Commentary

It's Not Easy Subsidizing Green

The bankruptcy of “green jobs” darling Solyndra is in the news because it could potentially cost U.S. taxpayers $535 million due to a federal “stimulus” program loan guarantee. The Silicon Valley solar-panel maker’s failure comes on the heels of another “green” corporate welfare beneficiary also going under, Evergreen Solar (with a factory located in Midland, Mich.). These deals were big losers for Americans.

Both businesses repudiated claims that company management or the current market for “green” energy products were the cause of their failure. Instead, company officials cited intense competition from lower-cost Chinese manufacturers: “The solar power market is intensely competitive and rapidly evolving,” wrote Evergreen Solar’s chief executive officer, Michael El-Hillow. “In particular, solar manufacturers in China continue to receive considerable government and financial support and, together with China’s low manufacturing costs, have become price leaders within the industry.”

“Prices of silicon came down as the Chinese volume increased; they were able to get to very low costs and become competitive,” said former Solyndra CEO Brian Harrison.

U.S. Department of Energy Department officials are promoting the same party line, saying that “less expensive solar panels made by government-subsidized companies in China undercut Solyndra’s products.”

"Chinese companies have flooded the market with inexpensive panels, and Europe — currently the largest customer base for solar panels — has suffered from an economic crisis that has significantly reduced demand and forced cuts in subsidies for solar deployment that were important to Solyndra's business model," Jonathan Silver, who heads the Department of Energy's loan-guarantee program, is expected to tell the House Energy and Commerce Committee, according to The Wall Street Journal.

Proponents of costly government “green jobs” subsidies, without which these firms would probably never have existed on such a scale, claim that select “clean” energy (wind, hydro and solar but not nuclear or natural gas) is the wave of the future, and worth risking taxpayer dollars to support.

If so, why wouldn’t they welcome lower-cost Chinese versions of these products, which presumably would bring about our economy’s transition from “evil” fossil fuels even more rapidly? Or at the very least, let the Chinese government instead of American taxpayers take the hits for allocating capital through politics rather than market realities.

Those favoring these energy subsidies may disagree, believing that sending taxpayer money to politically connected select companies is actually a “jobs creator.” Disregarding the mountains of evidence that government is notoriously bad at picking economic winners, just looking at these two solar companies should show that this is a bad argument: The companies combined to employ about 1,500 people at the time of their bankruptcies (a few hundred for Evergreen Solar and 1,100 for Solyndra). On top of the federal funds, Evergreen Solar received $58.6 million from the state of Massachusetts and millions more from Michigan sources, while Solyndra got $535 million in federal aid and more from California. This is, in the words of my colleague Michael LaFaive, an expensive game creating the illusion of jobs.

State and federal governments should stop using selective economics and get out of this game altogether.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.

News Story

Recall Battlefield Report: Michigan Chamber Taking on 'Greedy Teachers Union'

Ground zero for Michigan's political wars this year is the recall election of House Education Committee Chair Paul Scott, R-Grand Blanc. That's where all the rhetoric, recriminations and ballyhoo in the wake of Gov. Rick Snyder's reforms are beginning to collide. Rep. Scott is the only lawmaker the Michigan Education Association has managed to get onto the recall ballot. All indications are that an election to decide whether or not Rep. Scott keeps his seat will be held in the 51st House District on Nov. 8.

There have been two off-election-year Legislative recall elections in Michigan history, both in 1983, and both resulted in defeats for the lawmakers. Many believe that's so because such elections tend to be low turnout contests in which voters who oppose the lawmaker participate while the majority of voters remain disinterested and don't bother to vote.

When the MEA engineered the petition drive to recall Rep. Scott, it was taking a risk. If Rep. Scott manages to win the recall election, the MEA could have a tough time arguing that voters have rejected Snyder's policies. That makes the recall election a high stakes event. With no other major election issues this fall, Republicans and groups that generally support them are willing to spend money in the 51st. This, in turn, is forcing the MEA and other union forces to spend money there as well.

The contest is noticeably heating up. “We Are the People,” one of the groups supporting the recall, has sent one mailing to the district. Meanwhile, the Michigan Chamber of Commerce has sent two in support of Rep. Scott.

The mailing against Rep. Scott says the lawmaker “raised taxes and cut education” and “gave $1.8 billion to big corporations.”

The Michigan Chamber’s response in defense of Rep. Scott defends his record and fires directly at the Michigan Education Association.

One accuses “liberal teachers union bosses” of targeting Rep. Scott because he “led the fight for a common sense new law that protects good teachers, but makes it easier for school districts to get bad teachers out of the classroom.” The phrase “REVENGE of the union bosses” is spelled out in large boldface type.

The other is perhaps the most direct. It's theme: “The recall isn’t about Paul Scott. It’s about the greedy teachers union.”

The cover side shows a woman receiving a facial massage, and the flip side asserts that “the teachers union has been wasting your money.” As examples, it notes a Detroit News article profiling union contracts in many districts that allow for what the Chamber characterizes as “lavish — even outrageous — health benefits.”

The two benefits specifically mentioned are districts where the contracts ask teachers to pay only “very little” toward the cost of their health insurance, and districts where the union contract allows teachers to receive 38 free massages each year.

At the bottom, the mailer provides a photo of demonstrators holding signs with MEA logos that say “MORE PERKS” and “MORE PAY.”

“We're just getting started,” said Rich Studley, president and CEO of the Michigan Chamber of Commerce. “We don't talk about the details of our plans during an election. I can tell you, however, that we will be doing more in the weeks ahead and I'm confident you'll see other groups stepping in to support Rep. Scott as well.”

According to Studley, the MEA's effort to recall Gov. Snyder and Republican lawmakers, such as Rep. Scott, has been about union power. He claims it has nothing to do with grassroots politics or defending schoolchildren.

“You (Capitol Confidential) have shown how the Scott recall was actually financed and controlled from East Lansing (home of MEA headquarters),” Studley said. “You followed the money and showed that 99 percent of the funding was from East Lansing and 95 percent of the costs were paid back to consultants in East Lansing. I don't even know if they could have done the petition drive if the Grand Blanc teachers hadn't been gone on vacation.

“They are trying to undo the results of the 2010 election,” Studley continued. “They want to undo the Snyder reforms. They want vengeance against Paul Scott because he stood strong for those reforms. One of the most important of those reforms was to let schools get rid of bad teachers. MEA's position has nothing to do with what's good for schools, teachers or for the kids. They're one of the most powerful unions in Michigan. They're not getting their way anymore in the Legislature and so they're acting like bullies. We know you can't deal with bullies by backing down. We and others are standing up to these bullies.”

Studley said it was important to understand the political philosophy behind the MEA.

“Go to the MEA website and you'll see that they still want a tax on services,” Studley said. “In place of needed reforms they want the average family to pay extra for everything from haircuts to baby-sitting. They approach things from a very liberal, anti-taxpayer perspective.”

MEA Director of Public Affairs Doug Pratt did not respond to an email and phone call offering the opportunity to add his comments to this article.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.