Don't Give Up on Green Tech Yet
When in 2008 George W. Bush signed the law creating the Advanced Technology Vehicles Manufacturing Loan Program (ATVM), which gives loans to car companies investing in green tech, conservatives were outraged. They took to talk radio to express their dismay, they introduced bills to dismantle the program, they poured contempt on Bush for trying to "pick winners and losers" with a bunch of hippie-mobiles running on patchouli and idealistic delusions.
I'm just kidding, of course. Conservatives didn't actually do those things. It was only when Barack Obama took office in 2009 that they discovered their antipathy to the ATVM (though their dislike of electric cars was evident long before). The program got some scrutiny last week when the House Oversight Committee held a hearing on the dire straits of Fisker Automotive, the recipient of a Department of Energy loan. Despite the fact that a number of the Republicans on the committee, including chairman Darrel Issa, had previously requested DoE loans for green-tech companies in their own districts, they delivered all the dudgeon they could muster at Fisker and the DoE for its unconscionable meddling in the private sector.
Before we get to what this tells us about the relationship of government and business, a bit of background. The ATVM is part of a larger initiative in which the government offers grants, loans, and loan guarantees to companies with potential to help move us toward a greener energy future. In the ATVM, loans went to four car companies: Ford, to develop more efficient internal combustion and hybrid cars; Nissan, to produce electric cars and develop new battery technology at its facility in Tennessee; Tesla, to develop the Model S all-electric sedan, and Fisker, to produce its plug-in hybrid luxury cars.
But Fisker has been plagued with problems, including management turnover, troubling tests of its first model, the Karma (one car famously died on the track when being tested by Consumer Reports), and poor sales. Just last week, they failed to make a loan payment to the government. The founder, Henrik Fisker, recently departed, the company has laid off 75 percent of its workers, and it seems headed for a bankruptcy that will end in its liquidation.
So did the DoE drop the ball? They certainly kept a close eye on Fisker. While they originally agreed to provide the company $529 million in loans, they cut off disbursements after Fisker failed to meet some of the goals of the original loan agreement. As a result, Fisker only received $192 million, less than half the agreed-upon amount, before DoE cut off payments nearly two years ago (they've recouped $21 million of the $192 million, but there's no telling how much more the government will be able to get back). Obviously, when the DoE withheld the remaining amount of the loan, it made Fisker's ultimate demise more likely. Nevertheless, the government wasn't the only one who thought Fisker looked promising; the company raised $1.2 billion in private venture capital, including $100 million last fall, after many of its problems were already apparent.
In fact, some have complained that the DoE has been too strict in giving out loans under the ATVM. A cumbersome application process and Department oversight has likely discouraged companies from applying. That may be why they haven't approved a new loan since 2011, and according to the Government Accountability Office, the program has $16.6 billion in loan authority that has never been used, out of the $25 billion Congress initially gave it.
In any case, the right's reaction to Fisker's demise can only be described as gleeful. They may dress up their pleasure as a vindication of a particular perspective on the proper relationship between government and business, but let's be honest here. In part it's just one more opportunity to rail at the Obama administration. On a broader level though, as the GOP has become radicalized on all kinds of issues, it's gone from being skeptical of efforts make the environment cleaner or more sustainable to active hostility to any clean technology. You don't hear conservatives complaining about the $8.33 billion loan guarantee the government offered to Georgia Power to build a nuclear plant.
And the reason the government gives loan guarantees to companies looking to build nuclear plants is that the companies can't raise money without them. So the government decides that another nuclear plant would be a good thing, then helps a private company make it happen, just as they decided that more electric and hybrid cars would be a good thing, and helped private companies make that happen.
The point of the ATVM was that while broad adoption of electric vehicles could have wide-reaching benefits to the environment and national security, at this stage of their development there are some real challenges inhibiting them, like the cost of existing batteries and the lack of a charging infrastructure spread throughout the country. Once these challenges are overcome, government help won't be necessary anymore.
You can make a case that government should only fund the preliminary research enabling advanced technology, and not the consumer products eventually produced. It's true that unlike private-venture capitalists, the government is subject to political pressures that make these kinds of investments more difficult to manage. On the other hand, along with some high-profile failures the federal government has helped produce some notable successes. Tesla, another recipient of ATVM loans, is now making profits, has seen its stock rise to record levels. The company recently announced it will be paying back its DoE loan five years ahead of schedule.
Finally, there's the argument that conservatives always make when it comes to federal investment in green technology: "Government shouldn't pick winners and losers." It has a certain simplistic appeal, were it not for the fact that government at all levels picks winners and losers all the time. Every time a state or local government offers a company favorable tax treatment to get them to build a factory in its borders, they're picking winners. When General Electric's army of lobbyists works with pliant members of Congress to ensure that the corporation ends up paying virtually nothing in taxes, the government has picked winners and losers. When the Defense Department decides to buy its next trillion-dollar fighter jet from Lockheed Martin and not Boeing, it picks a winner and a loser.
We don't live in a Randian fantasy world where government can just abstain from any involvement in the market, and thank goodness for that. The question isn't whether government will have an impact on the private sector, it's whether the decisions it makes as it does so are as wise as possible. Even with the failure of Fisker, so far, its record on promoting electric cars doesn't look too bad.
(If there's one thing we know about comment trolls, it's that they're lazy)