An op-ed in the Wall Street Journal today indicates that Edwards’ Law of Cost Overruns is an international standard. If a politician says that a project will cost $100 million, it will end up costing $200 million or more.
After Solyndra collapsed, the Department of Energy (DOE) should have learned it lesson. Guaranteeing loans for energy and industrial companies is a bad idea. The failures of Beacon Power and Fisker Automotive should have driven home the message. Now, we have further proof that the DOE isn’t paying attention.
In today’s issue of Nature, scientists from the National Ignition Facility (NIF) in California are trumpeting their advance in achieving fusion ignition. However, the National Ignition Facility is just like so many other projects from the Department of Energy. It’s behind schedule and over budget.
The Department of Energy spends $29 billion per year on various schemes with a disastrous track record, often with bipartisan support. From regulations that destabilize markets, decrease domestic output and harm consumers, to subsidies that pick and choose winners and losers, this department is a perfect example of a white elephant – an expensive project of little to no useful purpose.
If we did a poll of free market economists about federal programs that are the most wasteful and ridiculous, energy subsidies would be near the top of the list. It’s not just that energy subsidies make no sense in economic theory, but also that there are so many news stories highlighting the folly that it’s hard to see why policymakers persist in wasting our money.
The federal government has been subsidizing so-called clean coal for decades, and the hand-outs have resulted in one bipartisan boondoggle after another.
In a recent op-ed for the Indianapolis Star I discussed the symbiotic relationship between federal and state government when it comes to doling out corporate welfare subsidies. The focus was primarily on Indiana, but the issue is a national concern.
The Indianapolis Star’s July 21 investigation of a contractor hired by the Indiana Economic Development Corporation to select companies to receive taxpayer handouts is further evidence that a separation of commercial interests and state is needed. For that to happen, however, the states will need to separate themselves from the federal money that perpetuates “crony capitalism.”
On a drive back from a visit to Monticello yesterday, I listened to Jon Meacham’s biography of Thomas Jefferson. In 1784 Jefferson was interested in a project to improve trade routes to the West from the Potomac River. In a March 15 letter to George Washington, he wondered whether it might be a (state) government-supported project, but admitted one problem with that idea:
Perhaps President Obama has been reading about Margaret Thatcher’s policy successes. He is apparently considering selling off the federal government’s Tennessee Valley Authority. This is a great idea. As this story notes, it would allow the struggling electric utility more flexibility in dealing with the many challenges it faces.