Fortune magazine announced its annual list of Business people of the Year. Elon Musk came in at number one on the list. The magazine noted him for his cultural impact, his first place rank as “revenue gainer”, and his second place rank as “stock price gainer.” However, the magazine failed to note that a lot of the revenue his companies generate comes from the federal government.
Musk is perhaps most famous for starting the electric car company Tesla. The company’s 2010 stock IPO was hailed as a great success. But a lot of the company’s car sales come from a mandate for electric vehicles in California known as the zero emission vehicle program. Car companies either have to produce electric vehicles or buy electric vehicle credits from companies that do, such as Tesla. Buyers of Tesla’s luxury electric vehicles also receive a $7,500 tax credit from the federal government upon purchase. Musk’s two other companies, SolarCity and SpaceX, both heavily depending upon government contracts and financing.
SolarCity develops solar power projects and has several government clients in its portfolio. It also has benefited from hundreds of millions of dollars in a government subsidy program known as 1603. The Department of the Treasury is responsible for administrating the program and currently the Treasury Inspector General is investigating whether SolarCity overstated the fair-market value of its solar projects in order to receive more in subsidies. Musk is the chairman of SolarCity and his cousin is its founder and CEO.
Musk also founded and runs SpaceX, which officially goes by the name Space Exploration Technologies. SpaceX builds rockets and spacecraft that help launch satellites and other cargo into space. According to USASpending.gov, SpaceX has received over $1 billion in contracts from NASA and $243 million in contracts from the Air Force. SpaceX also benefited from $105 million in financing from the Export-Import Bank that supported the launch of a commercial satellite.
If you’re interested in the cronyism that occurs inside the beautiful Palmetto State, then we suggest checking out the South Carolina Policy Council’s economic research. Whether you’re interested in subsidies, economic development programs, or targeted tax breaks, SCPC has it all.
Andrew Huszar, the former “quarterback” of the Federal Reserve’s quantitative easing program, offers up an apology to the American people. Mr. Huszar states what many people have believed for a very long time: quantitative easing is a backdoor corporate welfare program to many of America’s largest banks:
I can only say: I’m sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed’s first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street.
Christina Cassidy, a writer for AP Sports, covers the debate on the use of public funds to help finance new stadiums for privately-owned entities such as the Atlanta Braves. While it’s nice to have a professional sports team in your city, it is quite costly to the taxpayer and often doesn’t deliver on the job-creation promises:
When Atlanta Mayor Kasim Reed found out a neighboring community had made a generous offer to help finance a new Braves stadium, he balked and said the city simply couldn’t compete.
Danny Westneat, a columnist for the Seattle Times, laments at the latest corporate welfare megadeal for Boeing. In fact, this is the largest state-based tax subsidy deal in the history of our country, totaling $8.7 billion over 16 years. Hooray, Washington! You’re number one! (Ignore the misguided jab at Wal-Mart):
Here’s a factoid that’s been floating around, but of course was not to be heard last weekend amid the din of politicians a-swooning, en masse, over Boeing.
The Atlanta Falcons are a bad football team this year; they’ve won two of their seven games, so far. However, equally bad is the revised estimate for the cost of the new stadium being built for the team — about $200 million bad. This Columbus Ledger Enquirer op-ed has all of the details:
The team in the Atlanta Falcons’ corporate offices and the one down on the Georgia Dome turf need to coordinate their timing better. Because together they’re giving us some of the worst PR since the Big Three automakers took separate company jets to Washington to plead for hundreds of billions in corporate welfare.
In this Washington Post interview, Lally Weymouth asks the newly-elected Prime Minister of Australia, Tony Abbott, his views on a variety of subjects. Of particular interest to Crony Chronicles was his response to the following question:
That is part of diversifying the economy?
Caterpillar, a company with a market cap of nearly $55 billion and 125,000 employees, wasn’t sure if it wanted to stay in York County, PA, an agricultural county in southern PA. Faced with the threat of losing such a prestigious firm, PA decided to give Caterpillar a host of economic incentives to entice them to stay. When faced with the prospect of real job loss, it’s hard for states and counties to just let them leave:
That package, Frank said, includes a $350,000 Pennsylvania First Grant and a $88,650 Guaranteed Free Training Grant. In addition, the company has been “encouraged” to apply for a $2 million Pennsylvania Industrial Development Authority Loan and a $4 million loan from the state’s Machine and Equipment Loan Fund, Frank said.
In this post for The Federalist, Scott Lincicome responds to a post by Common Dreams on calculating the true cost of corporate welfare. Lincicome says it’s important to not let your ideology interfere when calculating these costs. Don’t let “anti-capitalist” beliefs bleed over into “anti-cronyist” arithmetic:
There’s plenty to like in this article, and its general theme – hardworking American taxpayers forced by Big Government to line the pockets of large, well-connected corporations – certainly warrants more bipartisan attention (and criticism).
In the October 2013 edition of Reason magazine, Veronique de Rugy says it’s time for the Ex-Im Bank to be retired. She argues the bank is “pointless and ineffective” and engages in misleading accounting practices that understate the riskiness of the loans it hands out:
The bank, also known as “Ex-Im,” provides taxpayer-backed loans, loan guarantees, and insurance to foreign companies, such as Air China, to buy products from some of the richest U.S. exporters, such as Boeing.