Boskin: Washington’s Knack for Picking Losers

“The government is a crappy venture capitalist.”

Michael Boskin comments in the Wall Street Journal:

Like the mythical monster Hydra—who grew two heads every time Hercules cut one off—President Obama, in both his State of the Union address and his new budget, has defiantly doubled down on his brand of industrial policy, the usually ill-advised attempt by governments to promote particular industries, companies and technologies at the expense of broad, evenhanded competition.

Despite his record of picking losers—witness the failed “clean energy” projects Solyndra, Ener1 and Beacon Power—Mr. Obama appears determined to continue pushing his brew of federal spending, regulations, mandates, special waivers, loan guarantees, subsidies and tax breaks for companies he deems worthy…

Former Obama adviser Larry Summers echoed most economists’ view when he warned the administration against federal loan guarantees to Solyndra, writing in a 2009 email that “the government is a crappy venture capitalist”…

The Bush and Obama administrations bet big on ethanol and other biofuels, providing subsidies that distorted the global market for corn. The federal government was forced to drop its cellulosic ethanol quota by 97% last year because of a lack of viable biorefineries—and the quota still wasn’t met.

Even under optimistic projections, heavily subsidized wind and solar would each amount to a tiny fraction of global energy by 2030 and thus cannot be the main answer to energy-security or environmental problems. The short-run focus of most Department of Energy funding misses the main strategic imperative: We need alternatives that can scale to significance long-term without subsidies, and we need a lot more North American oil and gas in the meantime…

Meanwhile, the administration blocks shovel-ready private investment such as the Keystone XL pipeline from Canada to the Gulf Coast, which would create thousands of American jobs, increase energy security, and even improve the environment. The alternative is shipping the Canadian oil to China; we can refine it more cleanly than the Chinese, and pipelines are safer than shipping.

America certainly has energy-security and possible environmental concerns that merit diversifying energy sources. More domestic oil and natural gas production will clearly play a large role. The shale gas hydraulic fracturing revolution—credit due to Halliburton and Mitchell Energy; the government’s role was minor—is rapidly providing a piece of the intermediate-term solution…

Read the entire op-ed.

One thought on “Boskin: Washington’s Knack for Picking Losers”

  1. “America certainly has energy-security and possible environmental concerns that merit diversifying energy sources.”

    Not to where we need to include inefficient, ridiculously expensive alternatives such as wind and solar we don’t. Fossil fuels and nuclear are all we need and all we should be investing in.

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