(p. A13) Like the mythical monster Hydra–who grew two heads every time Hercules cut one off–President Obama, in both his State of the Union address and his new budget, has defiantly doubled down on his brand of industrial policy, the usually ill-advised attempt by governments to promote particular industries, companies and technologies at the expense of broad, evenhanded competition.
Despite his record of picking losers–witness the failed “clean energy” projects Solyndra, Ener1 and Beacon Power–Mr. Obama appears determined to continue pushing his brew of federal spending, regulations, mandates, special waivers, loan guarantees, subsidies and tax breaks for companies he deems worthy.
Favoring key constituencies with taxpayer money appeals to politicians, who can claim to be helping the overall economy, but it usually does far more harm than good. It crowds out valuable competing investment efforts financed by private investors, and it warps decisions by bureaucratic diktats susceptible to political cronyism. Former Obama adviser Larry Summers echoed most economists’ view when he warned the administration against federal loan guarantees to Solyndra, writing in a 2009 email that “the government is a crappy venture capitalist.”
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