Andrew Cuomo’s Buffalo Billion and the Perils of Government Subsidies

Thus far, Governor Cuomo's USD $750 million subsidy of a Tesla plant has cost $1.25 million per job, as ethical concerns swirl around the pol.

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Governor Cuomo’s “investment” in Tesla has proved disastrous (NWP).

In the three years of virulent reaction against the Trump presidency, once again it is eminently fashionable for the government to manage the economy. Now virtually every serious national figure in the Democratic Party (and let’s be honest that this includes many Republicans as well) believe that actual market competition is just too chaotic, unstructured, unpleasant, and heartless. No…it is much better, they tell us, for the government to manage the economy for a whole host of euphemisms. We hear them every day.

“To ensure that everyone gets an equal shake. To look out for the little guy. To protect consumers from ‘windfall’ profits and the abuses of ‘winner-take-all capitalism.’ To level the playing field. To keep the greed of the 1% in check. To make sure no one gets left behind.”

This is the Marxist redistributive tripe of which a 120 minute Democratic primary debate is made. To listen to Sanders, Warren, Buttigieg, Harris, Biden, and friends, you would think that the American capitalist system has been one of the greatest failures of modern times… a cesspool of inequality and greed destined to condemn the wretched hapless masses to hardscrabble life of squalor and abject poverty.

We hear ludicrous suggestions from these Marxist Democrats every day…such as “the middle class is disappearing in America.”

That may be news to the 50% of American households who earn between USD $30,000 and USD $111,000 per year (the 25th to 75th percentile in 2017). The Democrats have an amazing way of forgetting some very basic facts. Yes, if you were living in the metropolitan New York City area, or San Francisco, or Seattle, a household earning $30,000 a year would be living in poverty. The vast majority of Americans do not live in such expensive areas. There are plenty of places in America where earning $30,000 or $40,000 or $50,000 is a decent and respectable living for a middle class household: places in the heartland, the Rust Belt, the Great Plains, the Deep South. These figures are all relative.

Which brings us to the latest government boondoggle involving tech visionary Elon Musk and New York Governor Andrew Cuomo, which is certain to go down as one of the worst investments in recent memory, and a terrible deal for the taxpayers.

In a bid to revitalize the economy in economically depressed Buffalo, New York (arguably where the Rust Belt begins) Cuomo teamed with Musk to guarantee USD $750 million to revitalizing a factory for the manufacture of solar-power roof tiles, billing the project the largest of its kind in the Western Hemisphere.

The project came about after Musk’s rather curious (and arguably unethical) bid to obligate Tesla to buy the failing solar energy company SolarCity, and resurrect the lackluster Buffalo region with the mega-project, providing high-tech clean, green energy jobs for blue collar workers.

Several years later, the project is in serious trouble, on several levels:

As Bethany McLean notes in Vanity Fair:

“SolarCity’s business model was to front the costs of installing solar panels and allow homeowners to pay over time, which created a constant need for cash. That required raising money from outside investors, often big banks, who were then entitled to the first chunk of the payments homeowners made—leaving SolarCity in a never-ending scramble to raise more debt. The real engineering that took place at SolarCity, in short, was financial, not environmental.”

Curious. So, instead of environmentally-based magic to save the world from climate change, using a technology that appears to not even work, it was in fact a scheme to con homeowners into buying the expensive product, without means to pay it back.

Perhaps this umpteenth example of a government boondoggle should lead us to consider whether the government should be picking winners and losers in business or industry. Perhaps the state of New York should not be giving $750 million to Elon Musk, regardless of their perspective on how wonderful solar technology is.

As it stands now, Cuomo’s brilliant plan to give USD $750 million to a Tesla facility in Buffalo has cost $1.25 million per job. Wonderful. At that rate perhaps Cuomo could just dispense a million in cash to every man, woman, and child to start their own small business. Surely, many of them would be more successful than Musk’s doomed, over-hyped solar energy venture.

An employee at Tesla noted, “ ‘They spent more time and resources trying to fabricate what people saw than they do making anything…They told employees to pretend we were busy’…while another employee noted ‘They say they are in ramp up mode…But this isn’t even start-up mode. What company spends two and a half years starting up something they were already supposed to be the best at?’ ”

This is the result of government subsidies…massive inefficiencies…as serious questions remain about the cost and quality of Tesla’s product.

This will likely prove to be a terrible investment. But don’t expect it to harm Governor Cuomo’s chances of reelection. The masses would rather have their bread and circuses, than worry about where the money is coming to pay for them.

 

The Cuomo/Musk/Solar City fiasco is a perfect example of the incredible divorce between public policy and common sense: a terrible business venture that was heavily propped up by government because solar energy is trendy, even if it doesn’t make for a good business.

Cuomo and his cronies, meanwhile, will have to wait and see where the chips fall as corruption trials move forward related to the “Buffalo Billion.” Seems that “looking out for the little guy” has been replaced with “looking out for wealthy developers and fake green energy titans.”

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