David Boaz

Just reading the headlines of the Solyndra stories in major newspapers the past month tells a story that just keeps getting more discouraging: Obama-backed green firm shuts down The Washington Post, September 1, 2011 Solar firm to cease operations; Solyndra had received a $535-million loan guarantee. It plans to seek Chapter 11. Los Angeles Times, September 1, 2011 A Third Solar Company Files for Bankruptcy The New York Times, September 7, 2011 FBI raids offices of solar-panel firm The Washington Post, September 9, 2011 E-mails cite rush on loan to solar firm The Washington Post, September 14, 2011 Treasury to probe loan to Solyndra; The Federal Financing Bank's role in the failed firm's borrowing will be the focus. Los Angeles Times, September 16, 2011 White House official: Funding Solyndra further was risky The Washington Post, September 16, 2011 Amid Solyndra probe, Energy Dept. moving billions in loans The Washington Post, September 17, 2011 SOLAR FIRM'S OBAMA LINKS PROBED; A fundraiser's role in a loan program that aided Solyndra stokes concern about the company's influence. Los Angeles Times, September 17, 2011 Questions Raised Over Letting Another Lender Help a Failing Solar Company The New York Times, September 17, 2011 Justice Dept. urged to probe Solyndra The Washington Post, September 20, 2011 Solyndra officials to invoke Fifth before House panel The Washington Post, September 21, 2011 Solyndra's ex-employees tell of high spending, factory woes The Washington Post, September 22, 2011 In Rush To Assist A Solar Company, U.S. Missed Signs The New York Times, September 23, 2011 Government OKs new green loans; Two execs of bankrupt solar firm Solyndra plead the 5th before a congressional panel. Los Angeles Times, September 24, 2011 A solar pariah had Republican parents, too The Washington Post, September 27, 2011 Where Solyndra said yes, others demurred The Washington Post, September 27, 2011 Obama aides voiced doubts about loans like Solyndra's; A top concern was that the vetting process wasn't rigorous enough. Los Angeles Times, September 27, 2011 Energy Dept. knew Solyndra had violated its loan terms The Washington Post, September 29, 2011 U.S. Backs New Loans For Projects On Energy The New York Times, September 29, 2011 Energy chief cleared Solyndra loan breaks The Washington Post, September 30, 2011 I found these headlines on Nexis, but of course they can be found on the newspapers' websites. I linked to two of the stories last week. Some have tried to dismiss the Solyndra story. Private investors make plenty of mistakes, too. Companies fail, sometimes through no fault of their own. But this story has all the hallmarks of government decision making: officials spending other people's money with little incentive to spend it prudently, political pressure to make decisions without proper vetting, the substitution of political judgment for the judgments of millions of investors, the enthusiastic embrace of fads like "green energy," political officials ignoring warnings from civil servants, crony capitalism, close connections between politicians and the companies that benefit from government allocation of capital, the appearance -- at least -- of favors for political supporters, and the kind of promiscuous spending that has delivered us $14 trillion in national debt. It may end up being a case study in political economy.

Is the taxpayers' lost $535 million in the green-energy company Solyndra just an unfortunate business failure, or is there something more scandalous involved? You should read every word of this front-page New York Times article. Sure, it says that "no evidence has emerged that political favoritism played a role in what administration officials assert were merit-based decisions." But the story is full of smoking guns. Here's the opening:

President Obama’s visit to the Solyndra solar panel factory in California last year was choreographed down to the last detail---the 20-by-30-foot American flags, the corporate banners hung just so, the special lighting, even coffee and doughnuts for the Secret Service detail. “It’s here that companies like Solyndra are leading the way toward a brighter and more prosperous future,” the president declared in May 2010 to the assembled workers and executives. The start-up business had received a $535 million federal loan guarantee, offered in part to reassert American dominance in solar technology while generating thousands of jobs. But behind the pomp and pageantry, Solyndra was rotting inside, hemorrhaging cash so quickly that within weeks of Mr. Obama’s visit, the company canceled plans to offer shares to the public. Barely a year later, Solyndra has become one of the administration’s most costly fumbles after the company declared bankruptcy, laid off 1,100 workers and was raided by F.B.I. agents seeking evidence of possible fraud. Solyndra’s two top officers are to appear Friday before a House investigative committee where, their lawyers say, they will assert their Fifth Amendment right against self-incrimination.

Read more...

Tom Palmer is very fond of this quotation from Voltaire on the connections among commerce, toleration, and the erosion of prejudice:

Go into the Exchange in London, that place more venerable than many a court, and you will see representatives of all the nations assembled there for the profit of mankind. There the Jew, the Mahometan, and the Christian deal with one another as if they were of the same religion, and reserve the name of infidel for those who go bankrupt. There the Presbyterian trusts the Anabaptist, and the Church of England man accepts the promise of the Quaker. On leaving these peaceable and free assemblies, some go to the synagogue, others in search of a drink; this man is on the way to be baptized in a great tub in the name of the Father, by the Son, to the Holy Ghost...

You can find it in Tom's essay "Globalization and Culture," which is included in Realizing Freedom: Libertarian Theory, History, and Practice. I found a very similar thought in a Wall Street Journal review of the book Ghetto at the Center of the World by Gordon Mathews. The book focuses on "the most notorious flophouse in Asia," which accommodates people from all over the world, but especially from Africa and South Asia and especially merchants who trade cheap Chinese-made goods to buyers from other countries. The review notes:

Interpersonal relations at the building, the author says, might not be reliably friendly, but "they are generally peaceful." He adds: "As a Pakistani said to me vis-à-vis Indians, 'I do not like them; they are not my friends. But I am here to make money, as they are here to make money. We cannot afford to fight.' "

Voltaire and Mathews, like many other observers, have noticed that people trying to make money don't generally get too upset about other people's race or religion. This is part of the "doux commerce" or "sweet commerce" thesis that goes back to the Middle Ages. Albert O. Hirschman wrote about it in 1982, and much of Deirdre McCloskey's current work explores the idea of "doux commerce" and bourgeois virtues.

President Obama says the rich should pay higher tax rates, citing billionaire Warren Buffett, who says he pays a lower tax rate than his secretary. Various analysts have pointed out that Buffett takes very little salary and gets most of his income in the form of dividends and capital gains, which reflect income that was already taxed once at the corporate level. But what about the broader argument, that the rich don't pay enough in taxes, that maybe they even pay less than the middle class? In May, the Wall Street Journal ran an article headlined, "High-Earning Households Pay Growing Share of Taxes." John D. McKinnon reported:

Upper-income taxpayers have paid a growing share of the federal tax burden over the last 25 years. A 2008 study by the Organization for Economic Cooperation and Development, for example, found that the highest-earning 10% of the U.S. population paid the largest share among 24 countries examined, even after adjusting for their relatively higher incomes. "Taxation is most progressively distributed in the United States," the OECD study concluded. Meanwhile, the percentage of U.S. households paying no federal income tax has been climbing, and reached 51% for 2009, according to a new analysis by the Joint Committee on Taxation.

An accompanying graphic shows the growing share of income taxes paid by the wealthy (in green) and how the U.S. ratio of taxes on the wealthy in relation to their income compares to that in other rich countries:

Rachel Donadio reports in the New York Times:

COMITINI, Italy — With only 960 residents and a handful of roads, this tiny hilltop village in the arid, sulfurous hills of southern Sicily does not appear to have major traffic problems. But that does not prevent it from having one full-time traffic officer — and eight auxiliaries. The auxiliaries, who earn a respectable 800 euros a month, or $1,100, to work 20 hours a week, are among about 64 Comitini residents employed by the town, the product of an entrenched jobs-for-votes system pervasive in Italian politics at all levels.

She goes on to explain that much local spending comes from the national government, which is now in dire straits:

But what may be saving Comitini’s economy is precisely what is strangling Italy’s and other ailing economies throughout Europe. Public spending has driven up the public debt to 120 percent of gross domestic product, the highest percentage in the euro zone after Greece’s.

The Washington Examiner reports:

Six of [the Washington-area mass transit system] Metro's top executives are assigned agency-owned vehicles that they can drive home, the transit system acknowledged Tuesday, one day after saying none of them had take-home vehicles. That is in addition to the 116 Metro employees who receive take-home vehicles, including 88 managers and superintendents, first reported by The Washington Examiner.

I wonder if executives and managers at automobile companies get free subway passes?

Lots of media are reporting that a new poll from the Associated Press and the National Constitution Center shows that 53 percent of Americans believe that "the government [should] give legal recognition to marriages between couples of the same sex." Google "gay marriage poll," and you get 284 news items. Good. It's news. Even though it's just about what other recent polls have found. And even though 48 percent also said they supported a federal constitutional amendment to ban gay marriage, suggesting that at least 1 percent of respondents are as confused about their position as Rick Perry and Michelle Bachmann. But the survey had much else in it, as well. In fact, here's an interesting data point from the survey, released a day earlier than the gay-marriage results:

82 percent of respondents say "The Federal Government should not have the power to require all Americans to buy health insurance."

That is, 82 percent of Americans oppose the central plank of President Obama's health care policy, the one that's roiling the courts right now and headed for the Supreme Court. But Google "poll health care mandate," and you get no national media results. It's sorta like it didn't happen. But it did, and Democratic campaign consultants have no doubt noticed it. As usual, not everything in the poll was encouraging. 61 percent say they oppose "giving the President more power at the expense of the power of Congress and the courts," but that's down from 73 and 75 percent the past two years.

Two months ago I suggested that it might not be too late for another presidential candidate to enter the race. And I cited some ancient history:

Barry Goldwater announced his candidacy for president on January 3, 1964, about nine weeks before the New Hampshire primary. A decade later, Ronald Reagan announced his challenge to President Gerald Ford on November 20, 1975. After that unsuccessful race, he announced another, this time successful candidacy, on November 13, 1979.

Now the William J. Clinton Presidential Center (whatever happened to good ol' Bill? I guess "William J. Clinton" sounds more presidential) reminds us of a more recent president who started his campaign later than any of today's contenders. From September 30 to October 3, the center will celebrate the 20th anniversary of Bill Clinton's announcement of his candidacy, which happened on October 2, 1991. Is time running out? Or could a candidate with something attractive to offer still get into the race? It's still earlier in the season than when Ronald Reagan and Bill Clinton announced their candidacies.

Can people on one side of a political debate understand why others disagree with them? Sometimes it doesn't seem so. Take Adam Gopnik's article about "declinism" in the September 12 New Yorker. (Online for subscribers only, alas.) It's an interesting review of new books about the decline of America and/or the West by Ian Morris, Niall Ferguson, and Thomas Friedman and Michael Mandelbaum. In the course of it Gopnik explains that there is "another side" in American politics from the good and decent side of President Obama and such people as Friedman and Mandelbaum. And that side is "inexorably opposed to these apparently good things."

The reason we don't have beautiful new airports and efficient bullet trains is not that we have inadvertently stumbled upon stumbling blocks; it's that there are considerable numbers of Americans for whom these things are simply symbols of a feared central government, and who would, when they travel, rather sweat in squalor than surrender the money to build a better terminal. They hate fast trains and efficient airports for the same reason that seventeenth-century Protestants hated the beautiful Baroque churches of Rome when they saw them: they were luxurious symbols of an earthly power they despised.

This is the sort of place where it's a good idea for an author to stop and think: Is that really what advocates of smaller government think? They actually hate the very idea of fast trains and efficient air travel? They'd rather sweat in squalor than pay for better service? He goes on:

We don't have a better infrastructure or decent elementary education exactly because many people are willing to sacrifice faster movement between our great cities, or better-informed children, in support of their belief that the government should always be given as little money as possible.

Sure, he's claiming, we small-government folks would like our kids to learn to read. But not if it means giving up one solitary dime to the predatory state. Gopnik might have added that we crotchety libertarians would rather a hundred guilty men go free than a single innocent be jailed. Or that we'd rather see the people of Iraq suffer under Saddam Hussein rather than send a single American to die in the desert. Except that those are "ideological convictions" that New Yorker writers share. In those cases they understand that there are trade-offs, that benefits come with costs, that the end does not always justify the means. And having identified those concepts, I wonder if Mr. Gopnik might try again to understand why some Americans oppose an array of government spending programs. Is it really that they "simply" fear good schools and fast trains? Or is it possible that they -- we -- have actual arguments? That we have actually enunciated those arguments in blog posts, op-eds, essays, and even books? And that few of us have said we'd rather sit in traffic than "give too much pleasure" to liberals? Let me suggest to Mr. Gopnik a few reasons that some us oppose the various spending programs that concern him:

1. We know that vastly increased government expenditures often don't achieve their intentions, such as the 190 percent increase in both inflation-adjusted federal education spending and school infrastructure spending that hasn't budged test scores.
2. We know that many wonderful things, perhaps including truly fast trains, could be created at massive cost, but that you always have to weigh costs and benefits. Children say, "I want it." Adults say, "How much does it cost, and what would I have to give up to have it?"
3. We believe that people spend their own money more prudently than they spend other people's money. So goods and services produced in the competitive marketplace are likely to be produced more efficiently and with more regard for real consumer demand than goods produced by government, and thus we should try to keep as many aspects of life as possible outside the control of government.
4. We believe that you'll get better schools, trains, and planes if they're produced privately than if they're created by government. And thus, since we want good schools and good transportation, we want them produced by competitive enterprise.
5. We believe that the burden of taxes, spending, debt, and regulation is already reducing economic growth, and that our society would have more wealth for more people and better technology if it had a government smaller in size, scope, and power. Try plotting government spending vs. the increase in the speed of human mobility; I think you'd find an inverse relationship, with very little increase in the past generation of massive government spending.
6. Yes, we have a philosophical preference for freedom. Not freedom at all costs, not anarchy, but liberty and limited government as the natural condition for human flourishing. We believe that liberal society is resilient; it can withstand many burdens and continue to flourish; but it is not infinitely resilient.  Those who claim to believe in liberal principles but advocate more and more confiscation of the wealth created by productive people, more and more restrictions on voluntary interaction, more and more exceptions to property rights and the rule of law, more and more transfer of power from society to state, are -- perhaps unwittingly -- engaged in the ultimately deadly undermining of civilization.

And you know, when I think about Mr. Gopnik's point that my Scottish Protestant ancestors "hated the beautiful Baroque churches of Rome [because] they were luxurious symbols of an earthly power they despised," it occurs to me: Those churches are beautiful. So are the pyramids. But if President Obama or Paul Krugman or the AFL-CIO proposed to tax productive working people to build beautiful churches and pyramids, I would oppose it. Even if I wanted more beautiful churches, I would not be willing to force my fellow citizens to contribute to my satisfaction. And the same principle applies to faster trains between Washington and New York, which I absolutely do want. And which I believe the market would deliver, if we had a market in transportation and if faster trains are in fact a good use of our economy's scarce resources. Bryan Caplan recently challenged Paul Krugman and other intellectuals to an "ideological Turing test" -- a test to see who could state an opposing view as clearly and persuasively as its proponents could. I think Gopnik would fail that test. Assuming that he has in this article stated as fairly as possible what he actually believes his opponents believe, then he seems far off the mark. Would he like to try again, to explain and then criticize the views laid out above or in books by Hayek, Nozick, Friedman, and Epstein? In the meantime, I found much of his article interesting, and I agreed with many of his conclusions about the achievements of Western liberalism. But as he wrote, after taking issue with some of Niall Ferguson's analyses of the French Enlightenment, Darwinianism, and the sixties, "when someone gets the sixties Beatles this wrong you have to wonder how well he really is doing with the sixth-century barbarians." And when somebody gets the argument for limited government this wrong, you have to wonder whether he's accurately described the books under review.