It appears that First Solar has joined the gang of cronies receiving subsidies that it doesn’t need in the name of industrial policy.
Back in 2013, former Reagan budget director David Stockman — in a book about the corruption of American capitalism by subsidies and other crony handouts — wrote about the contrast between Solyndra and First Solar, two solar-energy companies.
You may remember Solyndra, a company whose investors and CEO were close to the Obama administration. It received $538 million in Section 1705 loan guarantees. It then promptly went bankrupt and became the poster child for cronyism.
In his book, Stockman recounts how unsubsidized First Solar successfully did what Solyndra set out but failed to do. He rightfully notes that:
It borders on the criminal to saddle future taxpayers with tens of billions of new debt in order to fund First Solar imitators. In the latter case, even the short sellers made fortunes the honest way–by being at risk. But under the Obama stimulus, the fundamental deal is that the insiders get to short the US Treasury without taking any risk at all.
I wrote a lot about the 1705 loan programs during the Obama-administration years. While Solyndra was understandably making the headlines, the true scandal was that many other large and well-connected companies that were already in the green-energy business and had tons of access to capital nevertheless got billions of dollars in government-backed loans they didn’t need in the first place. Not surprisingly, they didn’t go under.
These companies got little attention, except from politicians pointing to them as evidence that the program was successful. That’s nonsense. Giving money to a company to do what it was going to do anyway isn’t success, it’s government-sanctioned corruption of the capitalist system.
And there’s been a lot of that since Solynda, and under the Biden administration in particular.
But now it appears that First Solar has joined the gang of cronies receiving subsidies that it doesn’t need in the name of industrial policy. Chris Edwards at Cato points to this article from the AP:
First Solar became perhaps the biggest beneficiary from $1 trillion in environmental spending enacted under the Inflation Reduction Act, which Biden signed into law in 2022 after it cleared Congress solely with Democratic votes. . . .
The company will benefit from billions of dollars in lucrative tax credits for domestic clean energy manufacturers — a policy aimed at putting the U.S. on a more competitive footing with green energy giant China. Though intended to reward clean-energy businesses, the credits can be sold on the open market to companies that have little to do with fighting climate change.
Last December, First Solar agreed to sell roughly $650 million of these credits to a tech company — providing a massive influx of cash, courtesy of the U.S. government.
Investors in the company, including a handful of major Democratic donors, have also benefited as First Solar’s share price climbed.
The article also reveals that First Solar was not the role model Stockman thought it to be:
First Solar, whose chairman was called to testify before the GOP-controlled House Oversight Committee, where he was grilled about strong-arm tactics used to secure $2.4 billion in loans from the Obama administration for projects First Solar was involved in.
In an email turned over to House Republicans, a First Solar executive pressured the Department of Energy for the financing, suggesting that if it weren’t approved, a Mesa, Arizona, factory Obama administration officials were eager to tout may not be built.
“A failure to receive DOE and U.S. government agency approvals” could “jeopardize construction” and “frankly, undermine the rationale for a new manufacturing center in Arizona,” a former executive wrote to an administration official in 2011.
The loans were granted. The factory, however, was never completed.
These are all industrial-policy projects pushed by Democrats. Yet make no mistake, Republican cronyism and industrial policy will look exactly the same: Most of the government handouts will go to well-connected companies that do not need them but are happy to receive them anyway, and the rest will go to projects that were not sound in the first place and will fail.
New Right Republicans routinely rail against capitalism and big companies. In some way, they are correct that these companies have been corrupted and that the American people are getting screwed in the process.
But let’s be clear: The guilty party here is the government and its ability to distribute money to private companies, not the market or capitalism. Without subsidies, tax credits, guaranteed loans, and other special privileges, companies would have to perform on their own and compete on a level playing field. They would spend less time in Washington asking for favors and more time trying to please their customers.
This is why I favor ending all government-granted privileges to private entities. And I do mean all of them, whether they are subsidies, tax credits, loans, tax expenditures, and other bailouts. End them all. A great divorce of this sort would be true populism.