Monday, May 13, 2013

Grunwald's latest

Time magazine's Michael Grunwald -- last spotted around these parts banging the drums in favor of taxpayer-funded handouts to corporations green energy subsidies -- is back at it, producing a column so bad it must be read to be believed. Starting with the fourth paragraph:
Fisker [Automotive] probably won’t [change the world], but that doesn’t mean it was a dumb bet all along. An exhaustive Republican investigation found no wrongdoing connected to the Solyndra loan, and there’s no reason to think the Fisker loan was shady either. Like Solyndra, it was once considered a game-changing example of American innovation. Like Solyndra, Fisker raised a billion dollars from private investors. But like Solyndra, Fisker couldn’t cut it in the marketplace. The $100,000 Karma broke down on the Consumer Reports test track. Its display panel is a mess; I couldn’t get the radio to work. Fisker had awful production problems and ultimately sold only about 2,000 Karmas before suspending operations. Its second model, which was supposed to revive a shuttered GM factory in Delaware, was never built. The Energy Department cut Fisker off after it drew down just $192 million of a half-billion-dollar loan.
Shorter version: yes, Fisker made a terrible product that taxpayers helped pay for, but hey, it *only* lost $192 million and it's not like anything criminal happened. Is it even possible to set the bar any lower?

Next paragraph:
So it goes. Companies that receive tax breaks and subsidies fail all the time. Ordinary Americans who get tax deductions and subsidies fail too. 
Which is a great argument for the adoption of a flat tax and end to government subsidies for individuals. But apparently in Grunwald's world, one bad policy choice justifies another. 
Success is not guaranteed in a capitalist economy. The loan program provided a jump start, not a free ride. But Solyndra’s failure has overshadowed a spectacular boom in the -solar industry, which has grown more than tenfold since Obama took office. Fisker’s failure could overshadow similarly impressive growth in plug-in electrics; there were almost none on U.S. roads before 2008, and now there are more than 100,000. 
In other words, the government subsidized something and got more of it. This is econ 101 -- what else should we have expected to occur? Why does Grunwald find this remarkable or noteworthy? 
During a presidential debate, Mitt Romney memorably lumped in Tesla Motors with Fisker as an Obama-supported “loser,” but Tesla just had its first profitable quarter and is on track to pay back its federal loan five years early. Its Model S has won the big car-of-the-year awards and received the highest Consumer Reports score of any car since 2007; its reviewers have sounded like teenage boys reviewing porn. So who’s the loser?
Tesla Motors, as has already been pointed out on this blog, had already secured over $200 million in private sector financing before the Department of Energy handed it a dollar, and turned its first monthly profit only weeks after the federal loan was approved. Does Grunwald think that a company the private sector had already invested tens of millions of dollars in, and which was showing signs of profitability, would have failed to secure additional financing absent taxpayer intervention?

Sixth paragraph:
The larger point is that overall, as an independent review by Republican Senator John McCain’s finance chairman confirmed, the Energy Department’s $40 billion loan portfolio is performing well. It’s also transforming the energy landscape with America’s largest wind farm, a half-dozen of the world’s largest solar plants, cellulosic biofuel refineries and much more.
Again, why is a highly-subsidized industry's expansion evidence of its success? And what does "performing well" mean (especially considering that Grunwald views the loss of nearly $200 million by Fisker Automotive as no big deal)? 
Obama didn’t support one company or one technology; he supported all kinds of plausible alternatives to fossil fuels. He didn’t pick winners and losers; he picked the game of cleaner energy. 
What a nonsensical insult to the intelligence of his readers. Unless Obama provided equal or proportional funding to every single company engaged in alternative energy production, he was picking winners and losers. The second sentence, meanwhile, is a self-contradiction. If Obama was picking clean energy over other forms of energy then he was picking winners by definition. The mental gymnastics that Grunwald has to perform to justify Obama's green energy agenda are amazing to behold.
And we’re winning. The U.S. has doubled its production of renewable power.
For the third time Grunwald cites the growth of a subsidized industry as evidence of its success. Get this man an econ book.
Our carbon emissions are at their lowest levels since the early 1990s.
Nice trick: Grunwald slips in a reference to reduced carbon emissions in an effort to imply a causal relationship between it and the increased deployment of clean energy without actually proving one. A front-page Wall Street Journal story from mid-April helps provide a more accurate picture:
U.S. carbon-dioxide emissions have fallen dramatically in recent years, in large part because the country is making more electricity with natural gas instead of coal.

Energy-related emissions of carbon dioxide, the greenhouse gas that is widely believed to contribute to global warming, have fallen 12% between 2005 and 2012 and are at their lowest level since 1994, according to a recent estimate by the Energy Information Administration, the statistical arm of the U.S. Energy Department.

While other factors, including a sluggish U.S. economy and increasing energy efficiency, have contributed to the decline in carbon emissions from factories, automobiles and power plants, many experts believe the switch from coal to natural gas for electricity generation has been the biggest factor. 
In other words, the chief factor behind the reduction in carbon emissions is conventional energy -- you know, the sector President Obama didn't bet on. Either Grunwald is completely oblivious to this fact -- hard to believe given how closely he appears to follow energy issues -- or he's being dishonest.
And after decades when the U.S. invented products like solar panels and lithium–ion batteries only to see them manufactured and deployed abroad, we’re finally making green stuff at home. For example, not only are we generating twice as much wind power, we’re making twice as many of the components for U.S. wind turbines.
Wouldn't it be far better if US labor was engaged in industries which make economic sense instead of those being subsidized by government largesse?

The fact remains this: politicians and bureaucrats are gifted with no special insights into the future of industrial developments or what the next big thing might be. Indeed, one suspects that for at least some of them, the sum total of their green energy knowledge consists of half-remembered Tom Friedman columns. From a moral perspective, it's also almost invariably bad to mix politicians with businessmen, and reprehensible to redistribute money from taxpayers to private corporations. 

It's amazing how far our friends on the left have come from the days of criticizing corporate welfare to openly celebrating it. 

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