Crony Capitalism Pays Big For Democratic Donor Elon Musk
Our friends at the Taxpayers Protection Alliance (TPA) recently criticized tech entrepreneur Elon Musk for defending his taxpayer-subsidized businesses of SpaceX, Tesla and SolarCity. In response to a Los Angeles Times article noting Musk’s $4.9 billion in taxpayer subsidies, Musk defended his subsidies to CNBC when he noted that, "none of the incentives are necessary, but they are all helpful."
The continued subsidies of SolarCity, TPA believes, is nothing more than corporate welfare to a failing technology. In a report released in February, TPA noted that, “American taxpayers spent an average of $39 billion a year over the past 5 years financing grants, subsidizing tax credits, guaranteeing loans, bailing out failed solar energy boondoggles.” According to one estimate by the Los Angeles Times, state and federal subsidies to SolarCity have eclipsed the $1.5 billion mark. Meanwhile, less than one percent of the electricity used by Americans comes from solar energy sources.
Another report released by TPA in April details SolarCity’s financial House of Cards, “SolarCity reported a net loss of $141 million for the 4th quarter of 2014, despite a 52 percent increase in revenue, strong demand, and clear dominance in the rooftop solar market."
But SolarCity isn’t Musk’s only corporate welfare gig.
Less than a year ago the Washington Free Beacon reported on another Musk corporate welfare enterprise – this one subsidized by the state of Texas no less.
In his revealing article “Political Clout Pays Off Big for Elon Musk’s SpaceX” the Free Beacon’s Lachlan Markay detailed how Musk used a sophisticated influence operation to secure more than $15 million in public financing to build a launch pad in Cameron County, Texas, near the Mexican border.
The subsidies came after the billionaire tech mogul and pop technologist made campaign contributions to key state lawmakers and hired lobbyists with ties to Austin.
As Texas looked to secure its place as a destination for commercial spaceflight operations Musk took notice.
A prolific political donor, especially, but not exclusively to Democrats, he began pouring money into the campaigns of key state lawmakers. On November 7, 2012, he donated $1,000 to state representative Rene Oliveira (D). Two weeks later, he gave state senator Eddie Lucio Jr. (D) $2,000.
The next month, the Associated Press reported that Lucio and Oliveira were working to secure state backing for a potential SpaceX launch pad in Brownsville.
As Lachlan Markay detailed in his article for the Washington Free Beacon this is how it all came about:
The incentives were contingent on the company actually selecting the Brownsville location. “The rider tells SpaceX that the money is waiting for you but you can’t touch any of it until you commit to set up your program here,” Lucio explained.
He later complained that few of his colleagues on the state senate’s Finance Committee helped him shepherd the rider into an annual budget bill. But one colleague who did aid the effort was the committee’s chairman, state senator Tommy Williams (R), Lucio said.
Just months earlier, Musk had donated $2,000 to Williams’ campaign.
He also donated $1,000 to state representative Jim Pitts in December 2012. Pitts chairs Texas’ House Appropriations Committee. He and his then-chief of staff, Aaron Gregg, visited a SpaceX facility in January 2013, as Oliveira pushed financing that would eventually make it into his budget rider.
On January 25, SpaceX lobbyist Demetrius McDaniel reported spending $1,000 on food and drink for Pitts and Gregg at five Los Angeles restaurants, and another $500 on “entertainment” at the Staples Center.
The Lakers beat the Utah Jazz in a home game on that date.
Lauren Dreyer, an in-house SpaceX lobbyist, paid another $464 in entertainment expenses for Pitts and Gregg’s Staples Center visit. She footed $98 in food expenses on January 25 at two of the same restaurants listed in McDaniel’s expense report, and another $200 for Pitts and Gregg at the SpaceX Restaurant in Hawthorne, CA.
The following night, Dryer took the two to Hollywood’s swanky Greystone Manor nightclub. Over the next two days she bought another two meals for each of them, then gave them each a package of SpaceX swag, including “t-shirt, track jacket, iPhone case, mission patch, rocket pen, baseball hat, and keychain flashlight/pointer.”
The lobbyists’ work paid off. Pitts “was very helpful in obtaining the commitment to spend $15 million,” Oliveira would later tell Bloomberg.
McDaniel and Dreyer were two of six in-house and external lobbyists employed by SpaceX in 2012 and 2013. The company paid between $200,000 and $445,000 for their services, according to the Texas Ethics Commission.
SpaceX’s long running government relations efforts in Austin secured them more than just financial incentives. Oliveira also authored legislation to close a public beach in Brownsville for hours at a time in order to permit SpaceX launches there. Lucio wrote its Senate companion bill.
The eventual law was considered a crucial step in attracting SpaceX to south Texas.
In addition to the $13 million SpaceX will get from the spaceport trust fund, noted Markey, it will not have to pay Cameron County taxes for 10 years, saving the company an estimated $2 million.
Even with its lobbying expenses and Musk’s campaign contributions, SpaceX will enjoy more than a 3,000 percent return on its investment in Texas’ political process if it decides to build its new launch facilities in Brownsville – not bad in an environment where beating a 6% rate of return is considered very difficult for the average small business.
“If Musk is correct and the incentives aren’t necessary, he should then give up those handouts and survive based upon private investment rather than taxpayer subsidies,” said TPA President David Williams of the Musk federal solar subsidies. “Subsidies to the solar industry are a waste of money and need to be stopped immediately.” The same could be said in our opinion for the rest of the subsidies in Elon Musk’s crony government-fed portfolio.
