04-27-2012: Subsidizing Failure : Government Insider Addiction : Solyndra Gate, Keystone Gate

Posted: April 27, 2012 in Constitution Watch

Why is the unconstitutional intrusion of government into private enterprise through insider subsidies, discriminatory regulatory policy, etc., so wrong and why does it generate such enormously wasteful, destructive consequences?

Answer Numero Uno is “because it undermines and weakens free markets”.  Markets are weakened as government selected favorites (monopolies) are chosen for subsidy thereby establishing unfair advantage for the insider favorite over what should be “free market competition”.  Subsidies can be in the form of competition squelching regulation, discriminatory tax advantages (say 75,000 ridiculously expensive pages worth), direct grants, loan guarantees, etc.  Subsidies are invariably granted in exchange for a quid pro quo benefit (illegal by the way) to the corrupt sponsoring “grantor”, usually in the form of campaign contributions, trips or indirectly through biased media reporting, press releases, etc.  There are as many forms of subsidy as there are corrupt elected Federal Representatives (that would be 100 + 435 + 1 = 536 of them) held in the Washington D.C. political feed lots.  There are two feed lots:  Democrat and Republican.  Your wallet is the food source, 365/24/7.  {In fairness, 1600 Watch notes here, that Dennis Kucinich and Ron Paul may possibly be excluded from this list of 536…we don’t attend the meetings so don’t really know.}

Answer Numero Dos, simply put, is “a motivated person is a hungry person”.  A highly motivated human is generally hungry for something.  It can be spiritual fulfillment, a sense of accomplishment, knowledge, wealth, friendship, acceptance or perhaps as many different things as there are different people.  Motivation is the force that drives each individual within the human race to do something, not to do something, or in some cases not to do anything.  The person highly motivated to do as little as possible, to expend as little constructive energy as possible is in fact just as motivated as the world record holder in a sporting event, the wealthy business over-achiever, etc.  A business enterprise is made up of an integrated group of individual people and is motivated by the same principles as the individuals, though a common interest is usually shared.

According to the Small Business Administration (SBA), a new start-up business offering a good or service has a 50% statistical probability of surviving 5-years.  It’s best for success that the founders of this start-up be a bit hungry.  Hunger and self interested economic survival forces the start-up to aggressively and effectively develop their product or service to a level of marketable profitability.  Failure to accomplish this goal is simply failure and it happens 50% of the time over the first five years of business life.  Profit is not a luxury nor a bad thing.  Profit is absolutely essential and wholly critical to entrepreneurial success, the pursuit of excellence and sustainable business life.  It is not easy to start a business and achieve success, that is, profit.  Faced with discriminatory government involvement by self interested bureaucrats at the behest of insider cronies and lobbyists, success for the non-insider is even less likely than the usual 50%, heads or tails probability normally anticipated.

Solar start-ups such as the now bankrupt Solyndra and the ensuing cover-up, Solyndra Gate or the financially troubled First Solar are prime current examples of insider quid pro quo direct back scratching and winking – all at the expense of the hard working tax payer who’s corrupt Washington Representatives enabled their fleecing by the clever CEO’s, management and lobbyists of these companies.  Why do I suggest something as “mean spirited” as fleeced?  Are, or at least were, these two start-up companies legitimate businesses?  Frankly, 1600 Watch doesn’t know, but here’s what we do know.

A start-up must become profitable in order to become a sustainable business entity.  No profit means endless financial bleeding and ultimately, dissolution of the entire effort.  This hunger, this survival requirement motivates individuals within the company to work 80 and 100 hour weeks to develop their product or service, solve problems, resolve issues and finally, to reach the point of sustainability called profit.  Government subsidy absolutely kills this healthy and necessary, though difficult process by curtailing or even eliminating the investment risk and the hunger.  It’s back-ass-wards wrong.

Individuals within the start-up organization are viciously and self destructively trapped by the subsidy, even if self induced, into thinking “Heck, I’m already making millions every year.  I don’t have to work 80 or 100 hours a week anymore.  I’m not desperate.  I’m traveling with my family and friends to China, Malaysia, Indonesia and other places I can find cheap labor and no regulation.  I can easily work less, be a smidgen or so less effective and things will work out just fine…even my own Senator says so.  My God, it’s raining money.  It’s so easy.  We’re already a big time IPO and our product isn’t even competitive – yet.  We’re huge.  Success is certain.  Hey!  Where’s my quarterly bonus?  It should be much bigger than last quarter’s.”

The easily predictable next step is growing unsalable inventory; internal product issues becoming more and more irresolvable as responsible parties are less and less motivated to work hard; looming financial insolvency; and finally bankruptcy.  This completely predictable “crash and burn” outcome of government meddling through insider subsidies  can easily escalate to charges of criminal negligence, violation of fiduciary responsibility to share holders and even fraud.   And who caused this foreseeable disaster?   Our corrupt government Representatives did.  It is they who are culpable even when the company founders themselves are willing participants in the under-the-table subsidization process.

An exquisite current example of a more indirect approach to unethical, though apparently legal, government meddling in what should be free markets is what may eventually come to be known as Keystone Gate.  Here we ostensibly have the undermining of free market competition through the axiomatic interplay of various government agencies such as EPA and the Interior Department, elected officials such as Nebraska’s known to be for sale U.S. Senator,  Ben Nelson acting as private lobbyist (along with others) and Berkshire Hathaway, through its holdings in the Burlington Northern  Santa Fe LLC railroad as the private component all working behind the scenes in a classic Reverse Fascism political play, whereby the private sector uses government agencies to eliminate competition for itself.  This is a fantastic insider play by monopolists that will cost consumers a train load of money over the years (pun intended).

Environmental impact studies show the proposed Keystone pipeline to be preferable to shipping by rail in terms of impact.  The pipeline is economically the lowest cost, most viable, most efficient method of transporting large quantities of northern state crude oil to central and southern Gulf refineries.  Yet Berkshire Hathaway, through its holdings in the Burlington Northern Santa Fe, using its close insider (quid pro quo) ties to Senator Ben Nelson is slowly but surely winning the battle to benefit themselves immensely, thereby costing American as well as overseas beneficiaries the lowest cost oil and the most environmentally friendly alternative for shipping Bakken area crude.  In this case, indirect regulation is employed in place of direct subsidy, but the end result, as usual, is not in the best interest of consumers and tax payers.

Our elected Presidents, Senators and House Members each take an individually administered oath to protect and defend the Constitution of the United States.  When they engage in activities not in legal conformance, or at best unethical practices, clearly out of step with the overall public good and intent of our Rule of Law; they advertantly or inadvertently violate their elected trust and set the stage for these start-up founders as well as established cronies, all of whom are part of their electorate flock, so to speak; to injure not only themselves, but potentially every tax payer in the country, for which these Representatives supposedly stand.  This is wrong and is guaranteed tragedy before it even begins.  In the Keystone case, Berkshire Hathaway does not appear to be damaged, but U.S. citizens will be unnecessarily subjected to higher oil prices and an inferior environmental solution, which is damage aplenty.

As an aside, it should be noted that the gullible environmental groups fighting the pipeline, handsomely funded by Berkshire Hathaway and its friends, foolishly played straight into the fishing nets of Globalist hypocrite, Warren Buffett.  This deal is good for Mr. Buffett;  good for those rewarded by Mr. Buffett;  and bad for American citizens.

There is no moral justification for the under-the-table antics of Burlington Northern Santa Fe in Keystone Gate.  This is not free market capitalism.  It is government sanctioned monopoly, is abuse of power and is wrong.  In the more direct subsidy case, assuming Solyndra, First Solar and other start-ups began as legitimate private investments – and 1600 Watch believes that to be the case – as soon as they became “profitable” in an imaginary sense via loan guarantees, grants, etc., went public under the illusion of their subsidized cash flow and immediately began paying high salaries and bonuses from tax payer loan guaranteed largesse – THEY WERE DEAD COMPANIES TRADING, whether or not they realized it.

They were already swimming in money, thank you very much Washington D.C.  Burning entrepreneurial hunger was neutralized and with that motivational fire extinguished, the desperate need to effectively develop their product vanished.  The company founders had already become rich without actually having to endure the excruciating process of developing a viable, financially feasible product.  Now, the likely outcome, given the coming investigations, law suits and possible criminal charges will be the loss to our country of what may have been a viable technology had our stupidly corrupt Representatives kept their quid pro quo mitts to themselves and acted within their Constitutionally limited authority.

These pathetically short sighted business founders will be the bad guys, but just as in the case of the subprime debacle – it was and is our corrupt elected officials who are guilty of setting the stage and creating the contextual opportunity for stupid business, ultimately assuring imminent failure and the disastrous consequences for all parties involved.  The most highly damaged parties are the swindled tax payer and the home buyers, whose credit in good standing was trashed largely because the uneducated buyers trusted their bankers, who in turn were forced, though willing, conspirators in league with the corrupt Congressional Members who had been abusively intimidating them since the economically illiterate passage of the Community Reinvestment Act of 1977 (CRA).

1600 Watch does not respect nor defend the short sighted founders of these delusional green companies, nor with Mr. Buffett’s Berkshire Hathaway, but it does empathize with their dilemma;  a dilemma perhaps any otherwise decent person could easily fall victim to.  We’re not throwing stones here;  just sayin’ it really ought to be fixed.  America could use some responsible Representation.  We don’t have a legal problem in Washington D.C.  We have an integrity challenged people problem.

The people of these United States and these start-up founders deserve better Representation than this corrupt herd of self serving career politicians currently serving in nearly all of our duly elected positions.  Since we the people are the voters – whose fault would the consistent moral failure of these integrity challenged politicians actually be?  Financially unfeasible green companies like Solyndra and First Solar will be the popular scape goats;  families will be destroyed;  folks may go to prison, but rest assured – our career criminal politicians will remain unscathed.  The true victims in the end are ultimately we the people as we are now deprived of what may have eventually become a wonderful green technology – if our government had just left it alone.

Mr. Steven Chu, our disappointing Secretary of Energy and Mr. Ken Salazar, our disappointing Secretary of Interior have shown themselves to be no better than corrupt consiglieres of street wise crime syndicates.  Their arrogantly reckless abuse and abhorrent waste of tax payer earnings to serve their own short sighted, collectivist agenda appears at best, to be criminally negligent and ought result in the investigation of their actions and if warranted, indictment.  As easy as it is to pick on Steven Chu or Ken Salazar;  where on earth are our trusted Representatives and their Congressional oversight?  I guess they’re all too busy lining their pockets and protecting their political career turf to actually spend time doing the job we pay them so handsomely to do?

Unconstitutional behavior can be a heavy burden as well as a conflict of interest.

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