Consider the statement from a government spokesman about a loan guarantee that might cost taxpayers about $535 million.
“We have always recognized that not every one of the innovative companies supported by our loans and loan guarantees would succeed,” U.S. Energy Department spokesman Dan Leistikow said. “But we can’t stop investing in game-changing technologies that are key to America’s leadership in the global economy.”
This is a beauty of the clichés of the new in-dustrial policy. Find something “innovative,” with “game-changing technologies.” Throw in some “guarantees” or “loans,” which is a way of not sounding like it’s real money. Rumble in the background about Chinese companies dominating a market in “game-changing technologies.” Who can say no?
But when a company bellies up, even after receiving the blessing of the president and the secretary of the Energy Department, the deficiencies of the Solyndra loan — now the target of aggressive Republican investigators in Congress — point to a large problem of government interference in the marketplace. Economists rightly object to the principle of heavy subsidies to particular industries, because those distort the marketplace.
However, those benefits given through tax breaks that aren’t tied to individual companies cost more than the type of loan guarantee given to the now-bankrupt California maker of solar panels.
The virtue, if you will, of loan guarantees to individual companies is that when the companies fail spectacularly it is easy enough to see. Broad tax breaks given to powerful industry lobbies leech off the U.S. Treasury under the radar, usually for decades, whether the industry is profitable or not, or whether the policy goals of the tax breaks are met or not.
What is a good industrial policy? It is one that puts government money not into favored companies, a policy of picking winners, but into research and development that invents the game-changing technologies in the first place.
Then, allow the marketplace to find funding for them. No one can say that America lacks funding for good ideas.