Last week, The Washington Post pointed out one near-fatal flaw to Obama’s plans for subsidizing green energy and electric cars: snowstorms. On Wednesday a snowstorm hit D.C. commuters harder than usual, causing gridlock on the road and dragging a normally 20-minute commute into, in some cases, over six hours as people crowded the roads struggling to get home.
With current technology, electric cars typically have much shorter battery lives, especially in cold weather. In an instance where a regular combustion engine car would keep its occupants safe and warm while idling for hours, an electric car would have left them stranded. In his State of the Union address last week, President Obama expressed his desire to keep the U.S. one step ahead technologically and environmentally by embracing electric vehicles. However, a single snowstorm has shown, once again, that the market has always been and will always be better at spurring innovation and picking product winners and losers than the government could ever be.
To aspire to be environmentally conscience and technologically savvy is a good thing. Our nation produces the best entrepreneurs and innovators in the world. The President is right to inspire these innovators, but he is wrong to tax Americans so heavily to meet government goals that he causes undue strain and unintentional discouragement. In his speech, President Obama’s goals included ideas that may be admirable: 80 percent of America’s electricity from green sources by 2015 and being the first country to have 1 million electric vehicles on the road by 2015. What is wrong is that the President plans to drive these aspirations from Washington through government directives and subsidies.
The problems with the government mandating certain forms of energy are numerous. Americans will be paying higher prices for energy and consumer goods, and many more will find themselves out of work due to these increased costs on businesses. Additionally, mandating certain forms of energy has the unintended result of favoring special interests and industries and hurting the poor—who cannot afford the price hikes.
Directing how the country gets its energy through subsidies is backward thinking and mirrors a failed European model. When Spain attempted to subsidize green jobs, 2.2 private sector jobs were lost for every one that was subsidized, contributing to an unemployment rate of 20 percent—the highest in over a decade. How much better would it be to reduce barriers to starting a business and innovation—cutting taxes and excessive regulations—and see how very quickly innovation spreads and the market produces?
The reactions on the part of green energy project developers to the President’s goals have been guarded. Some felt the goals were achievable but were skeptical that it was another “false start.” When government subsidizes an industry, it necessarily sets it up for false starts.
Look at Solyndra and Evergreen Solar, two companies that were earlier touted as leading the way in being green job providers. Solyndra received a $535 million government loan and months later withdrew its initial public offering because of a sub-par review from an independent auditor. Around a year after receiving the funds, they laid off nearly 200 people. Evergreen Solar received subsidies up to $76 million and is now shutting its factory, laying off 700 workers and moving production to China. If the engine for innovation is government subsidies and direction, America will lose. There is no way we can out-compete with China in centralized government bureaucracy. But if we still believe in the American dream and believe that freedom can inspire people to do better—we will remain the global leader.
Government can push for innovation through subsidies and regulations, but the results will always be inferior— and costlier to the economy—to what the free market would have produced. Why heavily subsidize products that consumers do not demand? If we do, we may also inadvertently be subsidizing a few tow trucks as the “green” vehicles lay stranded on the road, unready to compete with non-subsidized alternative.
As times change we must innovate, but we must also remain true to our core principles of economic freedom. If we restore our nation’s economic freedom, reversing the decline we have seen recently, you may find our going “green” much faster than if the government tried to micro-manage every business from Washington. And the poor commuters who are stuck on a highway for six hours will not have been forced to buy a vehicle unsuited for that emergency.