The introduction of government influence into the market places an incentive for businesses to use the government’s power in order to garnish a larger share of the market. Perhaps better known as cronyism, this attempt to use politics in favor of private business is often characterized by campaign contributions for politicians who can then use political power to steer government funding and prowess to private firms.
Could the Department of Energy Loan Guarantee Program be characterized as a breeding ground for cronyism in the distribution of loans through the 1703, 1705, and Advanced Technology Vehicle Manufacturing Loan Guarantee Programs?
Cause of Action was able to determine, through publicly available data combined with a FOIA production[1], that for corporations[2] who have received a loan guarantee of any amount, the likelihood that it made campaign contributions increases significantly. Of the data available, 95% (.95) of DOE loan recipients with less than $1 billion in annual revenue documented political contributions by the organization or senior level staff. Comparatively, only 31% (.319489) of similarly sized organizations that did not receive loans made political contributions in one way or another.
To date, ATVM, 1703, and 1705 loans have awarded guarantees in the amount of $34.5 billion. [3]
The Department of Energy defines each of these programs as follows:
- Section 1703 of Title XVII of the Energy Policy Act of 2005 authorizes the U.S. Department of Energy to support innovative clean energy technologies that are typically unable to obtain conventional private financing due to high technology risks. [4]
- Advanced Technology Vehicles Manufacturing (ATVM) loans support the development of advanced technology vehicles (ATV) and associated components in the United States. They also meet higher efficiency standards.[5]
- The Section 1705 Loan Program authorizes loan guarantees for U.S.-based projects that commenced construction no later than September 30, 2011 and involve certain renewable energy systems, electric power transmission systems, and leading edge biofuels.[6]
With that amount of money at stake, it is easy to see why Loan Guarantee Programs (LGP) have attracted a large number of applicants during the course of the program. This could potentially lead private corporations, who stand to significantly benefit from receiving a DOE Loan Guarantee, to make attempts to better the chances of being a recipient through means of political persuasion.
The program itself, while touting its ability to create jobs, has proven riddled with pitfalls and failures and may in fact be taking away jobs from other areas of industry—ones that may prove more valuable to the citizens who fund DOE LGPs with their tax dollars[7].
[2] ‘Corporations’ refers to privately owned business who was given a loan guarantee through the DOE LGP that also had less than $1 billion in annual revenue. In the cases of subsidiaries, organizations whose parent corporations made political contributions were considered to have made political contributions by proxy.
[3] United States Department of Energy, accessed 27 February 2013, https://lpo.energy.gov/.
[4] United States Department of Energy, accessed 27 February 2013, https://lpo.energy.gov/?page_id=39.
[5] United States Department of Energy, accessed 27 February 2013, https://lpo.energy.gov/?page_id=43.
[6] United States Department of Energy, accessed 27 February 2013, https://lpo.energy.gov/?page_id=41.
[7] Mercatus Center, accessed 27 February 2013 http://mercatus.org/sites/default/files/DeRugy_testimony_final.pdf.