The Solyndra bankruptcy after receiving over $500 million in DOE loan guarantees is fast becoming the first political scandal of the Obama administration. Republicans are eager to make political hay out of the failure, and they will probably be successful. The entire situation reeks of worst excesses of crony capitalism. Yes, there are direct political aspects of administration officials pressuring overseers to approve the loan without full due diligence. But the loan program itself exists because of a structure put together by the Bush Administration and passed by a Republican controlled Congress. This Solyndra release touting their receipt of the loan guarantee in 2009 identifies the authority for the loan as Title XVII of the Energy Policy Act of 2005 (pdf of act here). This act was originally criticized by Democrats as unfairly supporting and subsidizing oil and gas companies. When their party took control of both the White House and Congress, they amended the act to the benefit of their favored energy constituents as part of the massive 2009 stimulus bill (American Reinvestment and Recovery Act). The Republicans crafted the structure and authority under which this sort of scandal could occur.
The government should not be in the business of picking winners. This is true regardless of which party has its hands on the controls. The government’s role is to institute a neutral set of rules and then enforce them, period. EGP has a clear policy position – eliminate all energy subsidies. Eliminate all energy taxes except a single Pigovian-type tax which prices in negative externalities (i.e., a carbon tax). Combine that with a tradeable tax credit that rewards the amelioration of those negative externalities. Institute open policies which favor no particular energy source and let the market determine which is the cheapest and most efficient.
