Let’s talk about ending subsidies

The Nevada Constitution forbids public money being spent on private business. Article 8, Section 9 reads, “The State shall not donate or loan money, or its credit, subscribe to or be, interested in the Stock of any company, association, or corporation, except corporations formed for educational or charitable purposes.” Nevada voters three times turned down constitutional amendments to allow this practice. Gov. Brian Sandoval with the attorney general’s blessing used the Governor’s Office of Economic Development (GOED) to construct an end run around the constitution and the voters by creating the “Catalyst Fund.” This economic slush fund creates a phony “pass through” system whereby the state doesn’t spend the money directly but rather pipelines it to the counties who will spend the tax money collected by the state.

Politicians believe that they can “invest” better than the market can. The actual track record proves otherwise. As Milton Friedman once explained, you are most careful with your own money, least careful with someone else’s money. Giving specific tax breaks has not produced the intended results, whether it be sports stadiums or movie production. The Catalyst Fund is worse because it takes money from competing businesses and gives it directly to their competition.

Solar City, a solar panel company, has received a commitment from GOED for a $1.2 million taxpayer subsidy. There are several Las Vegas solar installers who have been paying state taxes, but now their taxes are paying for an out-of-state competitor to move to Las Vegas. One of them, Michael Little, with help from the Nevada Policy Research Institute, has filed suit asking the Nevada courts to enforce our Constitution and end the Catalyst Fund.

The deal with Solar City smells with the stench created by cronyism. The company is under investigation by the Treasury Department for inflating prices in order to get—hold your hat—larger federal subsidies. It reported fourth quarter losses of over $3 million. The company is owned by Elon Musk, a big donor to the Democrat Party, who is also the owner of another alternative energy welfare child, Tesla Motors.

Solar energy contracts often promise that if energy prices go up their rates will remain the same. Suppose a politically incorrect technology like fracking dramatically reduces rates? Solar contracts will not go down. This creates another incentive to subsidize. If your solar installation creates more energy than you use, the utilities have to pay retail prices instead of wholesale to buy back the energy. This subsidy is paid by Nevada Energy, but Nevada Energy is running out of rebate money. Europe is scaling back its “feed in tariff” schemes.

Germany is now importing U.S. coal and is rebuilding nuclear plants because its solar and wind subsidies are draining its economy. The free market operating by the laws of supply and demand automatically sorts out these market fluctuations. Government operating by the laws of who knows what politician best provides only golden parachutes for crony capitalists.

Many environmentalists are joining libertarians to put an end to subsidies for all energy sources. Unfortunately, many other large environmental groups continue to lobby for more government involvement in energy markets. If all subsidies are ended, if the Department of Energy is abolished, if competition is allowed instead of progressive era regulated utility monopolies, we could have a robust modern energy grid that creates clean affordable energy and is better able to withstand shocks without blackouts. To get there, liberals and conservatives alike will have to put aside their beliefs in government control and let consumers pick the real winners in a free market for energy.