One of the more frustrating, and fundamentally incorrect, arguments continually repeated during the attacks on Solydnra and clean energy investment is that government should not be in the business of “picking winners and losers,” meaning that the government shouldn’t provide incentives or subsidies to any specific industry or business. This argument is wrong both on a factual level and on a policy level.
Solyndra is not a case of government picking winners and losers because the specific Department of Energy loan program funds a wide variety of alternative energy technologies and more broadly, the government invests in an extremely diverse array of sectors. In the last few years alone, the government has provided support to the financial sector, the mortgage sector, the auto industry and the airline industry. Don't forget also the ongoing subsidies to agriculture, the timber and mining industries and, of course, sixty years of lavish support for the defense industry.
Come to think of it, is there any industry that government hasn't supported in some way?
To be sure, there are plenty of examples where government subsidies are misguided. But these don't mean the government should get out of the business of helping business altogether. Federal funding was instrumental in developing the microchip. The technological underpinnings of the Internet were developed and funded by the Department of Defense Research Projects Agency. The Department of Defense programs underwrote the origins of the Global Position System (GPS). One hundred and fifty-three drugs and vaccines were developed by public sector research institutes in the past forty years.
Beyond technological advances, government funded research creates jobs and economic growth. A recent report by the Science Coalition profiles 100 companies that were able to build businesses due to federal investments in research. The 100 companies profiled collectively employ over 100,000 people and have annual revenues close to $100 billion.
Clean energy development is exactly the type of technology that benefits from government investment. A recent report issued by Bill Gates, Jeff Immelt, chairman and CEO of General Electric, and other top CEOs lays out several arguments for why the government must play in integral role in clean energy development. The report points out that the government has a long and successful history of investing in research and development projects that spur new technologies. It also points out a very important point that often gets ignored: There is no private market for certain benefits, like public health or protecting the environment. Therefore, advancements in these areas must necessarily come from public funding.
For economic and environmental reasons, government investment in a clean energy future must be a priority. As the Gates report states, “Even in these challenging fiscal times, we believe underfunding energy innovation would be a grave mistake. Supporting innovation is an investment, not a cost.”