Stop Elon Musk's Tax Money Gravy Train

From Enron to Bernie Madoff, at the end of every great American financial scandal, the totality of the perpetrators’ greed seems to be matched only by the public’s incredulity at how such a thing could be allowed to happen.

And thanks to Elon Musk, there’s a good chance we may all be asking this question again soon.

The Senate Finance Committee and the House Ways and Means Committee have launched a probe into tax incentives paid to solar companies, according to the Wall Street Journal. The committee probes, led by their respective Republican chairmen, Rep. Kevin Brady of Texas and Sen. Orrin Hatch of Utah, have found an appropriate and disturbing target to begin this work.

SolarCity, a solar installation company set to be purchased by Tesla Motors Inc., is one of the seven companies named in the initial investigation.

Renewable Crony Capitalism

Already grossly subsidized, Musk’s SolarCity has become an albatross of waste, fraud, and abuse of taxpayer dollars. As legitimate earnings and cash become even scarcer for SolarCity, its entanglement in the Tesla empire suggests that a drastic reckoning is not only imminent but emboldening Musk to become more outlandish and reckless.SolarCity has been doubling down on the failed model of taxpayer support.

Notably, SolarCity is run by Musk’s cousins, Lyndon and Peter Rive. During his chairmanship at SolarCity, Musk’s family enterprise has taken in billions of taxpayer dollars in subsidies from both the federal and local governments. But the subsidies and sweetheart deals were not enough, as losses and missed projections continued to mount.

Ultimately, rather than endure the embarrassment of collapse and further damage to the public image of Musk and Tesla, the cousins conspired to have Tesla simply purchase SolarCity this year. The conditions of the deal screamed foul play.

To say nothing of what sense it might make for an automaker to purchase a solar installation company, Tesla stockholders were being forced to absorb a failing, cash-burning company and pay top dollar to do so.

While cost-cutting and corporate restructuring should have been the priority for a company swimming in debt and burning through available cash, SolarCity, in fact, has been doubling down on the failed model of taxpayer support. The desperate thirst for handouts has manifested itself in some of the murkiest political waters imaginable.

Thanks to Musk’s cozy relationship with New York Gov. Andrew Cuomo, a Democrat, the state has granted at least $750 million of its taxpayers’ money to SolarCity, building the company a factory and charging it only $1 per year in rent.

It would be hard to imagine such an operation would not be lucrative for its shareholders. And yet, somehow, SolarCity has never made a profit.

How Extensive Is This Problem?

It’s not just in New York. In this year’s race for Arizona Corporation Commission, the state’s public utilities overseers, only one outside group funneled cash into the contest. SolarCity has never been able to survive without serious help from government subsidies and grants.

All of the $3 million donated by that group, Energy Choice for America, came from SolarCity. The beneficiaries are candidates who have signaled their willingness to be part of the “green machine” that greases the skids for lucrative government subsidies.

Burning through taxpayer dollars, buying elections, and expanding a network of crony capitalism has become so inherent to the SolarCity model that $3 million to a public commissioner’s race, brazen though it may be, is only a drop in the bucket for Musk and SolarCity.

In 2013 alone, SolarCity received $127.4 million in federal grants. The following year, in which it received only $342,000 from the same stimulus package, total revenue was just $176 million and the company posted a net loss of $375 million.

Despite an expansion of operations and claims to be the leader in the industry, SolarCity has never been able to survive without serious help from government subsidies and grants. The failure to responsibly turn taxpayer dollars into a profitable renewable energy provider has led to SolarCity’s collapse into the welcoming arms of Tesla.

And with Tesla, SolarCity, in fact, will be right at home, compounding a disastrous shell game that Elon Musk is playing with government resources.

You're Paying to Keep Musk's Lights On

It has been widely reported that among SolarCity, Tesla, and the rocket company SpaceX, Elon Musk’s confederacy of interests has gotten at least $4.9 billion in taxpayer support over the past 10 years.

This is almost half of Musk’s supposed net worth – taken from the pockets of American citizens and put into companies that can survive only by cannibalizing each other, spending without end, and promising that success is always just beyond the horizon and yet never arrives.

The American people are being taken on a ride by SolarCity, Tesla, and Musk. The ride is fueled by a cult of personality in Musk. And it costs billions of taxpayer dollars as he promises us not only the moon but to harness the power of the sun and send us all to Mars.

In the cases of Enron and Bernie Madoff, in the end, the cheated victims wished to have woken up sooner to the hubris that enabled such a downfall – or at least that regulators had pulled their heads out of the sand before the full impact of the collapse was realized.

We’ve seen this story before and we know how it ends.

The congressional investigations underway are not only necessary but a signal that more must be done, and soon. We may not be able to help Elon Musk stop himself from failing again, but we certainly shouldn’t be the ones to pay for it.

It’s past time for the American people to stand up to Musk and demand that our legislators and other elected officials bring him back to earth before spending one more dollar of our money. He’s wasted enough of it already.

Republished from The Daily Signal

David Williams

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Ayn Rand Predicted an American Slide toward Fascism

In a letter written on March 19, 1944, Ayn Rand remarked: “Fascism, Nazism, Communism and Socialism are only superficial variations of the same monstrous theme—collectivism.” Rand would later expand on this insight in various articles, most notably in two of her lectures at the Ford Hall Forum in Boston: “The Fascist New Frontier” (Dec. 16, 1962, published as a booklet by the Nathaniel Branden Institute in 1963); and “The New Fascism: Rule by Consensus” (April 18, 1965, published as Chapter 20 in Capitalism: The Unknown Ideal [CUI] by New American Library in 1967).

The world conflict of today is the conflict of the individual against the state.

Rand knew better than to accept the traditional left-right dichotomy between socialism (or communism) and fascism, according to which socialism is the extreme version of left-ideology and fascism is the extreme version of right-ideology (i.e., capitalism). Indeed, in The Ayn Rand Letter (Nov. 8, 1971) she characterized fascism as “socialism for big business.” Both are variants of statism, in contrast to a free country based on individual rights and laissez-faire capitalism. As Rand put it in “Conservativism: An Obituary” (CUI, Chapter 19):

The world conflict of today is the conflict of the individual against the state, the same conflict that has been fought throughout mankind’s history. The names change, but the essence—and the results—remain the same, whether it is the individual against feudalism, or against absolute monarchy, or against communism or fascism or Nazism or socialism or the welfare state.

The placement of socialism and fascism at opposite ends of a political spectrum serves a nefarious purpose, according to Rand. It serves to buttress the case that we must avoid “extremism” and choose the sensible middle course of a “mixed economy.” Quoting from “‘Extremism,’ Or The Art of Smearing” (CUI, Chapter 17):

If it were true that dictatorship is inevitable and that fascism and communism are the two “extremes” at the opposite ends of our course, then what is the safest place to choose? Why, the middle of the road. The safely undefined, indeterminate, mixed-economy, “moderate” middle—with a “moderate” amount of government favors and special privileges to the rich and a “moderate” amount of government handouts to the poor—with a “moderate” respect for rights and a “moderate” degree of brute force—with a “moderate” amount of freedom and a “moderate” amount of slavery—with a “moderate” degree of justice and a “moderate” degree of injustice—with a “moderate” amount of security and a “moderate” amount of terror—and with a moderate degree of tolerance for all, except those “extremists” who uphold principles, consistency, objectivity, morality and who refuse to compromise.

In both of her major articles on fascism (cited above) Rand distinguished between fascism and socialism by noting a rather technical (and ultimately inconsequential) difference in their approaches to private property. Here is the relevant passage from “The New Fascism: Rule by Consensus”:

Observe that both “socialism” and “fascism” involve the issue of property rights. The right to property is the right of use and disposal. Observe the difference in those two theories: socialism negates private property rights altogether, and advocates “the vesting of ownership and control” in the community as a whole, i.e., in the state; fascism leaves ownership in the hands of private individuals, but transfers control of the property to the government.

Ownership without control is a contradiction in terms: it means “property,” without the right to use it or to dispose of it. It means that the citizens retain the responsibility of holding property, without any of its advantages, while the government acquires all the advantages without any of the responsibility.

In this respect, socialism is the more honest of the two theories. I say “more honest,” not “better”—because, in practice, there is no difference between them: both come from the same collectivist-statist principle, both negate individual rights and subordinate the individual to the collective, both deliver the livelihood and the lives of the citizens into the power of an omnipotent government —and the differences between them are only a matter of time, degree, and superficial detail, such as the choice of slogans by which the rulers delude their enslaved subjects.

Contrary to many conservative commentators during the 1960s, Rand maintained that America was drifting toward fascism, not socialism, and that this descent was virtually inevitable in a mixed economy. “A mixed economy is an explosive, untenable mixture of two opposite elements,” freedom and statism, “which cannot remain stable, but must ultimately go one way or the other” (“‘Extremism,’ or The Art of Smearing”). Economic controls generate their own problems, and with these problems come demands for additional controls—so either those controls must be abolished or a mixed economy will eventually degenerate into a form of economic dictatorship. Rand conceded that most American advocates of the welfare state “are not socialists, that they never advocated or intended the socialization of private property.” These welfare-statists “want to ‘preserve’ private property” while calling for greater government control over such property. “But that is the fundamental characteristic of fascism.”

A mixed economy is ruled by pressure groups. It is an amoral, institutionalized civil war of special interests and lobbies.

Rand gave us some of the finest analyses of a mixed economy—its premises, implications, and long-range consequences—ever penned by a free-market advocate. In “The New Fascism,” for example, she compared a mixed economy to a system that operates by the law of the jungle, a system in which “no one’s interests are safe, everyone’s interests are on a public auction block, and anything goes for anyone who can get away with it.” A mixed economy divides a country “into an ever-growing number of enemy camps, into economic groups fighting one another for self preservation in an indeterminate mixture of defense and offense.” Although Rand did not invoke Thomas Hobbes in this context, it is safe to say that the economic “chaos” of a mixed economy resembles the Hobbesian war of all against all in a state of nature, a system in which interest groups feel the need to screw others before they get screwed themselves.

A mixed economy is ruled by pressure groups. It is an amoral, institutionalized civil war of special interests and lobbies, all fighting to seize a momentary control of the legislative machinery, to extort some special privilege at one another’s expense by an act of government—i.e., by force.

Of course, Rand never claimed that America had degenerated into full-blown fascism (she held that freedom of speech was a bright line in this respect), but she did believe that the fundamental premise of the “altruist-collectivist” morality—the foundation of all collectivist regimes, including fascism—was accepted and preached by modern liberals and conservatives alike. (Those who mistakenly dub Rand a “conservative” should read “Conservatism: An Obituary” [CUI, Chapter 19], a scathing critique in which she accused conservative leaders of “moral treason.” In some respects Rand detested modern conservatives more than she did modern liberals. She was especially contemptuous of those conservatives who attempted to justify capitalism by appealing to religion or to tradition.) Rand illustrated her point in “The Fascist New Frontier,” a polemical tour de force aimed at President Kennedy and his administration.

There is no such thing as ‘the public interest’ except as the sum of the interests of individual men.

Rand began this 1962 lecture by quoting passages from the 1920 political platform of the German Nazi Party, including demands for “an end to the power of the financial interests,” “profit sharing in big business,” “a broad extension of care for the aged,” the “improvement of public health” by government, “an all-around enlargement of our entire system of public education,” and so forth. All such welfare-state measures, this platform concluded, “can only proceed from within on the foundation of “The Common Good Before the Individual Good.”

Rand had no problem quoting similar proposals and sentiments from President Kennedy and members of his administration, such as Kennedy’s celebrated remark, “And so, my fellow Americans: ask not what America will do for you—ask what you can do for your country.” The particulars of Rand’s speech will come as no surprise to those familiar with her ideas, but I wish to call attention to her final remarks about the meaning of “the public interest.” As used by Kennedy and other politicians, both Democratic and Republican, this fuzzy phrase has little if any meaning, except to indicate that individuals have a duty to sacrifice their interests for the sake of a greater, undefined good, as determined by those who wield the brute force of political power. Rand then stated what she regarded as the only coherent meaning of “the public interest.”

[T]here is no such thing as ‘the public interest’ except as the sum of the interests of individual men. And the basic, common interest of all men—all rational men—is freedom. Freedom is the first requirement of “the public interest”—not what men do when they are free, but that they are free. All their achievements rest on that foundation—and cannot exist without them.

The principles of a free, non-coercive social system are the only form of “the public interest.”

I shall conclude this essay on a personal note. Before I began preparing for this essay, I had not read some of the articles quoted above for many, many years. In fact, I had not read some of the material since my college days 45 years ago. I therefore approached my new readings with a certain amount of trepidation. I liked the articles when I first read them, but would they stand the test of time? Would Rand’s insights and arguments appear commonplace, even hackneyed, with the passage of so much time? Well, I was pleasantly surprised. Rand was exactly on point on many issues. Indeed, if we substitute “President Obama,” for “President Kennedy” or “President Johnson” many of her points would be even more pertinent today than they were during the 1960s. Unfortunately, the ideological sewer of American politics has become even more foul today than it was in Rand’s day, but Rand did what she could to reverse the trend, and one person can only do so much. And no one can say that she didn’t warn us.

Republished from

George Smith

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Scott Pruitt Provides an Opportunity to Rein in a Rogue EPA

Protesters with megaphones are making a lot of noise over the confirmation of Oklahoma Attorney General Scott Pruitt to lead the Environmental Protection Agency.

But Pruitt and others concerned about an agency that has grossly exceeded its statutory authority and threatened individual liberty are giving a bigger megaphone to voices all over the country that need to be heard.

They’re providing a voice to the family the EPA fined $75,000 per day for placing gravel on virtually dry land. They’re standing up for the farmers (like this cranberry farmer), ranchers, and homebuilders worried about the authority seized by the EPA in the Waters of the United States rule, which could destroy their way of life.

And they’re aiming to protect the small businesses and families across the country facing higher energy bills as a result of global warming regulations on the country’s power fleet.

Unfortunately, there are plenty of stories to pull from.

Now, environmental activists want you to believe those are necessary to prevent higher asthma rates, more smog, and allowing big businesses to willingly pollute. The left has bought into the notion that a strict choice exists between economic activity and the environment.

But that’s a false choice.

Many times during Pruitt’s confirmation hearing, senators presented this false choice and took issues completely out of context. Two issues constantly brought up during the confirmation hearing illustrate these points: mercury emissions and climate change.

Several senators attacked Pruitt on mercury, claiming he should be more concerned about mercury emission reductions, largely because of his opposition to the Obama EPA’s mercury air and toxics regulation on power plants.

But let’s put this opposition into context.

By its own estimation, the EPA said the mercury regulation for power plants could cost $9.6 billion annually. But the agency justified that cost saying the health benefits would range from $37 billion to $90 billion per year.

Sounds like a no-brainer. But upon closer inspection, the monetary benefits from the mercury reduction are a paltry $4 million to $6 million per year.

The EPA exaggerates the environmental benefits by including estimated benefits from reducing particulates (co-benefits) already covered by existing regulations. Those co-benefits account for 99.99 percent of the agency’s estimated benefits.

Exploitation of co-benefits allows the EPA to justify rules when costs greatly exceed benefits. We should welcome an end to such regulatory abuse.

And in fact, the Supreme Court agreed.

In June 2015, the Supreme Court struck down the EPA’s Mercury and Air Toxics Standards (MATS) to regulate mercury emissions from coal and oil-fired power plants. The court said the agency improperly ignored the costs when promulgating the regulation.

The problem, however, is that the court’s decision was symbolic because states had already gone down the irreversible, costly path that closed power plants and destroyed jobs.

The regulation was not a choice of environment at the expense of jobs. It was just a jobs killer with nothing in return.

Consider the second example: climate change.

Pruitt’s opponents painted him as a climate denier, despite the fact he’s never actually denied the science behind man-made warming. The reality is climatologists have a wide range of theories as to the magnitude of warming, the causes, man-made emissions’ impact on warming, and the rate of future warming and reliability of climate models to predict centuries into the future.

Despite claims from senators that the planet is experiencing more frequent and intense natural disasters, the data show no trends for extreme weather events. And despite fearmongering about sea level increases that would flood coastal cities, the current rate of sea level rise lies far beneath alarmist projections.

Pruitt led the opposition to the EPA’s climate change regulations because they would impose significant economic costs while making no significant impact on global temperature change. And as attorney general, he sued the agency because the EPA’s expansion of authority went well beyond its statutory limits.

Yet, somehow that makes him a denier.

Unsurprisingly, the critics of Pruitt questioned his ability to lead an agency he has sued as a state attorney general. But as attorney general, that’s exactly what he is supposed to do: protect his state from overreach when the EPA does not comply with the law.

And he wasn’t the only one. Twenty-seven states sued the Obama administration over the Clean Power Plan global warming regulations, and similarly, 27 states sued over the EPA’s Waters of the United States regulation that is a massive threat to private property rights.

When over half the country is suing you, it might be a sign something’s not right.

If you’ve heard anything from the activists protesting Pruitt’s nomination, you’d think he’s going to lead the United States on a path to the air and water quality of China. But the truth is that Pruitt has an opportunity to lead a responsible EPA, not an overzealous one like it is today.

An EPA that respects the rule of law, protects private property rights, and shifts environmental responsibility from the federal government to the states to better customize policies for local interests will yield greater economic and environmental results. There’s no denying that.

Commentary by The Daily Signal's Nicolas Loris.  Originally published at The Daily Signal

Why One-Size-Fits-All Infrastructure Spending Doesn't Work

On the campaign trail, Donald Trump promised to spend twice as much on infrastructure as whatever Hillary Clinton was proposing, which at the time was $275 billion. Doubling down again in a speech after winning the election, Trump now proposes to spend a trillion dollars on infrastructure over the next ten years.

America’s infrastructure needs are not nearly as serious as Trump thinks.

President Obama had proposed to fix infrastructure with an infrastructure bank, though just where the bank would get its money was never clear (actually, it was perfectly clear: the taxpayers). Trump’s alternative plan is for the private sector, not taxpayers, to spend the money, and to encourage them he proposes to offer tax credits for infrastructure projects. He says this would be “revenue neutral” because the taxes paid by people working on the infrastructure would offset the tax breaks. In short, Trump is proposing tax credits in lieu of an infrastructure bank as a form of economic stimulus.

America’s infrastructure needs are not nearly as serious as Trump thinks. Throwing a trillion dollars at infrastructure, no matter how it is funded, guarantees that a lot will be spent on unnecessary things.

As Harvard economist Edward Glaeser recently pointed out in an article that should be required reading for Trump’s transition team, just calling something “infrastructure” doesn’t mean it is worth doing or that it will stimulate economic growth.

Three Kinds of Infrastructure

Infrastructure more or less falls into three categories, and Trump’s one-size-fits-all plan doesn’t work very well for any of them. First is infrastructure that pays for itself, such as the electrical grid. Private companies and public agencies are already taking care of this kind, so if Trump’s plan applied to them, they would get tax credits for spending money they would have spent anyway. That’s not revenue neutral.

The second kind of infrastructure doesn’t pay for itself. Rail transit is a good example, and this tends to be the infrastructure that is in the worst shape. It won’t suddenly become profitable just because someone gets a tax credit, so under Trump’s plan it will continue to crumble.

The third kind of infrastructure consists of facilities that could pay for themselves but don’t because they are government owned and politicians are too afraid of asking users to pay. Local roads fit into this category. Simply creating tax credits doesn’t solve that problem either.

Politicians are more likely to ask taxpayers to pay for new projects than maintenance of existing projects.

Trump may think that local governments and transportation agencies will jump at the chance to borrow money from private investors to fix infrastructure, and then repay that money out of whatever tax sources they use to fund that infrastructure. But those government agencies can already sell tax-free bonds at very low interest rates. It isn’t clear how taxable bonds issued by private investors who get tax credits are going to be any more economical.

Most public-private partnerships for projects that have no revenue stream are entered into by the public party to get around some borrowing limitation. If the infrastructure spending is really necessary, it makes more sense to simply raise that borrowing limit than to create a byzantine financial structure that, Trump imagines, will have the same effect.

In short, whether funded by municipal tax-free bonds or taxable private bonds, those bonds will ultimately have to be repaid by taxpayers. We know from long experience that politicians are more likely to ask taxpayers to pay for new projects than maintenance of existing projects, and Trump’s plan will do nothing to change that.

The problem with a top-down solution such as Trump’s proposal is that one size doesn’t fit all. Different kinds of infrastructure have different kinds of needs, and the financial solution will be different for each one. Trump’s plan is more likely to result in new construction of pointless projects than whatever maintenance is needed for existing infrastructure.

Fortunately, a lot of people know this, so there is already criticism of Trump’s plan, including from conservatives in Congress. No doubt Trump’s plans will get refined between now and when he actually takes office. The question is whether Trump will realize that bottom-up solutions work better than ones that are top down.
Republished from The Cato Institute.
Randal O’Toole
Randal O’Toole
Randal O’Toole is a Cato Institute Senior Fellow working on urban growth, public land, and transportation issues.
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