Mar 20 2014

Government investment works

Published by at 5:42 am under Rainey

rainey BARRETT
RAINEY

 
Second
Thoughts

In a sort of bipartisan piling on, critics of federal support for auto makers or of that proposed oil pipeline from Canada or lost tax dollars in failed alternative energy company Solyndra have captured a lot of attention. Filled with political expediency, what all the critical voices have failed to articulate is any sort of long term view or alternatives dealing with each subject. And there are many.

Before dealing with them, here’s a basic fact: government – and government alone – is often the best (if not only) entity that can make major investments in very large undertakings. Despite our love of “independence” and those who cling to our lost system of “free” enterprise – which hasn’t existed for 150 years – sometimes government has to go first, pay the heavy bills for development and then step aside for private capital to take over at some point.

There are many examples but the best I can think of is our space program. If President Kennedy had not led us into it in 1961, we would likely be speaking Russian. No private company – no group of private companies – could raise the billions and billions of dollars to do what government did. As a nation – and as individuals – we are massively richer for that undertaking. And it’s almost impossible to count the ways we benefitted from computers to cell phones to – well – thousands of things.

And where are we now? Private companies are using that taxpayer-bought engineering, incalculable experience, hundreds of thousands of patents and thousands of highly-trained taxpayers to open space travel to all. We’ve got hundreds of private satellites and even private space shuttles flying around.

For those who say government had no business putting billions into the auto companies – that we should have let them sink – Road Apples! Anyone with any economic smarts knows it had to be done to avoid even more massive unemployment, disaster for thousands of small businesses and a financial mess that would have been incredibly costly.

And look what happened. GM has closed its most profitable year in history – reopened several plants – ramped up production – and has built more and better vehicles than ever. It’s paid back most of the taxpayer loan while GM stock many Americans own has gotten even more valuable. Chrysler basically avoided corporate death – threw out many bad models while developing new lines – reopened closed plants – rehired thousands – and has paid off the loan. And both companies are using new, cutting-edge technology to build the best cars in both their histories. A lot of that new technology the government pioneered in other programs.

No private companies were ready to do what government did. No investors or venture capitalists were willing to ride to the rescue. The results will be taught in business schools for decades to show how government and an entire industry can build huge successes in the face of certain disaster.

Some of this same logic applies to Solyndra, too. The alternative energy business is very much like other new technologies in their infancy. Just as computer and software pioneers, weapons system developers, aircraft builders and others needed government participation to get going, so have those firms trying to build us new energy systems. The much-touted Silicon Valley would have been Death Valley without direct government investment in the early days, favorable tax treatments, regulation relief and other federal and state support. Solyndra failed. So will others. But some won’t. Eventually, more will thrive. And we’ll be better for it.

As for that pipeline, there are many facets to that story. Will oil shale eventually be turned into petroleum? Yes. Would that Canada petroleum reduce our need for as much foreign oil? Probably not since even developers say most of it would be exported. Would it bring gas prices down? No, for the same reason. But, even without it, projections are we will still be our own largest supplier of oil within a decade.

Oil shale conversion to usable petroleum is an expensive and dirty process. It produces huge amounts of greenhouse gasses. Conoco-Phillips currently has a TV ad touting it can refine shale with “no more adverse effects on the environment than current production.” In other words, “It will be bad but no badder than we’re already doing.” Marvelous corporate double-speak.

Maybe that pipeline should be built. Someday. But it should be built for rational reasons using the best technology. At the moment, the whole project is a political football with a lot of demagoguery. Even the developers say there are environmental concerns not completely addressed. Nearly all the eventual output already has been designated for export. Not all the rights-of-way have been obtained. Those don’t sound like sufficient reasons to jump into this at the moment. Any decision on this project should be scientifically-based for the long-term and not as a political “fix.”

And that word “fix” is important. Producing more and more petroleum products should not be our only national energy goal. Developing other, non-petroleum energy sources should be equally important. Our dependency on the stuff – especially foreign – is foolish. And risky. South Sudan, Syria and Yemen are in turmoil with a lot of oil production offline. Canada and North Sea are having production problems for one reason or another. Iran is out – or may soon be – as a source. Market disruptions elsewhere – for many reasons – are adding to our pump pain.

As Kennedy did with the space program four decades ago, we should undertake a new national priority with the same zeal and commitment of all our resources. Large-scale, sweeping development of alternative energy sources. Top to bottom. All sources. We should dedicate ourselves as completely to that as to our previous commitment to send man to the moon.

Ironic, isn’t it? Those astronauts and their moon buggy? Damned thing ran on electricity. That was about 40 years ago.

Old Tom Edison had a saying. “I’ve not failed. I’ve found 10,000 ways that didn’t work.”

Well, Solyndra didn’t work. The auto industry investment of tax dollars did. And the oil shale pipeline might. Critics of all – and critics mad about government dollars being involved – need to look at the larger picture. Like Edison.

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