OPINION:
Hollywood celebrities were thrilled by Tuesday’s report that the Obama administration is getting back into the venture capital business. Bloomberg News revealed the Energy Department’s plan to pour another $16 billion into the automotive companies most favored by the White House.
President Obama doesn’t want anyone to call this corporate welfare, because that’s something he firmly opposes. “I don’t think oil companies need more corporate welfare,” the president explained last year. “Congress should end this taxpayer giveaway.” He loved the line so much he repeated a version of it 17 times in the space of two months, complaining about the $4 billion in “tax breaks” the oil industry “exploits.” (They’re actually manufacturing tax deductions available to anyone.)
The administration wants to give the impression the energy loans aren’t corporate welfare because the money is going to the little guy who will take on big, bad oil, which has been standing in the way of the technology of the future. In reality, it’s just business as usual.
Since 2008, the Energy Department’s electric car subsidy program has handed out $8.4 billion in public funds to carmakers. Two-thirds of the loot went to Ford Motor Co. and another $1.4 billion helped Nissan underwrite the cost of building and selling cars that the public isn’t interested in buying. Nissan used its U.S. taxpayer cash bounty to set up factories capable of churning out 250,000 of its all-electric car model, the Leaf, each year. Americans took one look at the vehicle’s $35,000 sticker price (recently slashed to $29,000) and realized they could buy a more comfortable economy car capable of long-range journeys for nearly half the price. So far this year, only 11,703 Leafs have been sold, and that’s despite the $7,500 federal credit handed to each buyer. With a grand total of $30,000 in subsidies per vehicle, it would have been far cheaper for Uncle Sam to hand each Leaf buyer the keys to a brand-new economy sedan instead.
Support for electric vehicles has little to do with moving toward a future of energy efficiency; it’s all about posturing. The best-selling hybrid vehicle, the Toyota Prius, was successful because it had a quirky shape that allowed owners to advertise their sense of satisfaction at driving the vehicle that would help “save the planet” through reduced carbon-dioxide emissions. They could also accomplish carbon-dioxide emissions by holding their breath. Subsidies allow Mr. Obama to gain political points with gullible liberals who are ecstatic at the enormous discounts he’s providing.
The $529 million Energy Department loan for hybrid-electric car maker Fisker was a great deal for Leonardo DiCaprio, Justin Bieber and the other Tinseltown A-listers who could afford the $96,000 Fisker Karmas, only 2,500 of which were made. Fisker’s business plan was always dubious, and earlier this year, the company defaulted on its payments, joining the ranks of Solyndra, A123 Systems and Abound Solar — “green” companies that proved expert only at generating red ink.
After a series of high-profile failures, the administration took a breather and hasn’t issued an electric car loan since March 2011. Getting back into the venture capital business is a huge mistake. The reason Washington bureaucrats have made such lousy bets on bankruptcy-prone companies is that they’ve been wagering other people’s money. If they lose a few billion here and a few billion there, they can just shrug it off and ask Congress for more cash.
The Treasury is exhausted and America is $16.7 trillion in debt. It’s time for Mr. DiCaprio to step up and pay the full sticker price for the cars he wants to drive.
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