Internal communications and testimonials from former Solyndra employees provide a stunning window into the consequences of federal support for private companies. Political backing, in short, made the company sloppy, wasteful, and spurred it to focus more and more resources on securing federal handouts – even while the company’s everyday business operations faltered.
“Solyndra’s ability to secure federal backing also made the company eager for more assistance, interviews and records show,” reported the Washington Post on Thursday. “Company executives ramped up their Washington lobbying efforts, hiring a former Senate aide to work with the White House and the Energy Department. Within a week of getting a loan guarantee commitment from the Energy Department, Solyndra applied for another, worth $400 million. It never won final approval.”
As the federal government gains more power to dole out resources to companies of its choosing, private firms will focus their resources on securing a slice of that pie. Solyndra’s $535 million loan apparently convinced the company that lobbying the federal government for more handouts would be a more fruitful exercise than running a productive company.
Even while Solyndra was pleading for another loan guarantee, its business was faltering. “As the $344 million factory went up just down the road from the company’s leased plant in Fremont, Calif.,” the Post reported, “workers watched as pallets of unsold solar panels stacked up in storage. Many wondered: Was the factory needed?”
But Solyndra decided that despite its troubles, Washington D.C. was still a good investment – and proceeded to pour money into its lobbying shop.
Although [Solyndra CEO Brian] Harrison stressed in a Post interview earlier this year that he focused on business, not “the political aspect of what happens in Washington,” public records show that since 2008, Solyndra has spent more than $1 million on lobbying inside the Beltway.
Lobbying expenditures of $160,000 a year in 2008 and 2009 accelerated as Solyndra’s financial and political troubles mounted. By 2010, such spending had grown to $550,000. So far this year, Solyndra has reported spending $220,000, but that number will grow as more reports filter in.
At the time, even Solyndra’s employees began noticing that the company was struggling. So why was the company focusing on its lobbying shop while the company itself was careening towards bankruptcy?
Bankruptcy records show that Solyndra desperately needed a cash infusion to continue operating. It had apparently decided that the federal government should be the source of that financing. And that is just the trouble with government intervention in private markets: companies tend to decide that Washington is an investment in itself, and subject their operations to the political whims of federal bureaucrats – often at the expense of more basic, fundamental responsibilities.
Solyndra became a hub of waste due to that dysfunctional business climate. After all, with Washington and its $3.7 trillion budget as one’s benefactor, what need is there for frugality or efficiency? Heritage’s Nick Loris had this to say:
Stricter rules on lobbying is one way to fix the problem, but it doesn’t address the real cause: the federal government making decisions best left for the private sector. Reducing government control of the energy economy reduces the incentive to use the political process for gain. It should be a priority for Congress to remove all direct expenditures, tax breaks, loan guarantees, and other government subsidies that allocate resources away from more competitive projects.
