Mar 02 2013
Finally, the situation that SHOULD have been in place in 2011 (after the GOP swept the house) is finally here. President Obama, due to the rules of sequestration, must now start cutting costs. And true to form, his incompetent team started cutting melodramatically – to create political theater.
But the problem with this simpleton idea is the fact that the bloated federal government is ripe with waste, fraud and abuse – and at every level. The train of failed Solyndra’s alone will provide endless fodder for GOP to push back on team Obama’s melodramatic cuts [emphasis mine]:
The very public failure of energy company Solyndra has focused a lot of attention on the Department of Energy’s loan guarantee programs. Beyond Solyndra’s failure, it’s interesting to take a closer look at these programs. The economic justification for any government-sponsored lending or loan guarantee program must rest on a well established failure of the private sector to allocate loans efficiently, meaning that deserving recipients could not have obtained capital on their own. Absent such a private sector deficiency, the Department of Energy’s activities would simply be a wasteful at best, politically motivated at worst, subsidy to this sector of the economy.
So what does this mean? First, very few permanent green jobs were created under the 1705 loan program (or any of the other loan programs). To the extent that permanent “green jobs” were created, the $6.7 million cost per job is quite spectacular. This trend and number also dismisses this particular loan program as a job program.
Second, nearly 90 percent of the 1705 loans guaranteed by the federal government since 2009 went to subsidize lower risk power plants, which in many cases were backed by big companies with vast resources. This includes loans such as the $90 million guarantee granted to Cogentrix, a subsidiary of Goldman Sachs—a company that ranks number 80 on the list of America’s Fortune 500 companies. It’s hard to imagine that these big companies, or Goldman Sachs, wouldn’t have access to capital, if the project was worth it.
After the demise of Solyndra (with its $535 million loan guarantee) and Beacon Power ($43 million loan guarantee), last week saw the bankruptcy of Indiana-based lithium-ion battery maker Ener1. In 2009 an Ener1 subsidiary was awarded a grant worth up to $118 million from the Energy Department, with Vice President Joe Biden touring and touting its factory a year ago.
Like Solyndra, Ener1 was a foolhardy bet for taxpayer cash. Founded in 2002, Ener1 had not turned a profit by the time of its grant and has proceeded to hemorrhage the $55 million of the DOE money it has received to date. Its losses in fiscal 2010 were $165 million.
Keep those numbers in mind: 535 + 43 + 118 = $696 million. Now, let’s look at Obama’s wasting of taxpayer money – to play golf:
Sessions is the top Republican on the Senate Budget Committee.
“While the White House operatives may think this attack is clever, it betrays an astonishing elitism: the federal government is perfect and requires no reform. That is why they have no plan to make our government leaner and more efficient. The President had 18 months to develop reforms to improve the government, but instead he announced furloughs of federal workers as a political cudgel. Yet, his golf weekend at the yacht club with Tiger Woods cost taxpayers over a million dollars—enough money to save 341 federal workers from furlough,” Sessions writes.
The math here is stunning. A million dollars does cover 341 federal workers from furlough because furloughs are a way to spread the pain so no individuals lose their job completely. Instead, everyone loses a day’s pay each week, or 52 days of pay.
So if $1 million dollars can save 341 workers from pay cuts, then $696 million could have saved 237,336 federal workers from furloughs and pay cuts.
See, this is how EASY it would be to fix the spending problem. Just cut back on stupid and ineffectual programs and we would be back in the black.
In my view, the GOP should let the administration run their melodramatic cuts – for a short time. Obama must make these melodramatic statements now, or else be (rightfully) labeled a hyperventilating exaggerator. The quickest path to Lame Duckness is to lose political support. And a wounded President with a mixed Congress is a pretty impotent political entity. One unable to make dramatically bad choices. Obama is in a lose-lose spot now. He checkmated himself.
Either he makes melodramatic cuts which are answered by the GOP pointing out where cuts should have been made. Or Obama makes smart cuts, and is labeled an exaggerator whose words mean nothing.
And this is why you need a spine in this town to actually win the day. This day should have arrived 2 years ago.
Update: And so it begins: Team Obama – liars, liars, pants on fire…