Opinion

Dan Walters: It’s open season in Capitol for rent-seekers

dwalters@sacbee.comJuly 15, 2014 

Economist Anne Osborn Krueger coined the term “rent-seeking” in 1974, the year in which Jerry Brown was first elected governor.

There is a connection between those two events.

“Rent-seekers” came to mean those who use government to enhance their ostensibly private investments.

Halfway through his second stint as governor, Brown has become the rent-seekers’ friend, eager to give hundreds of millions of dollars in subsidies from the state treasury and consumers’ wallets to a favored few.

At Brown’s behest, the Legislature abolished two long-standing subsidy programs that had been largely controlled by local governments, redevelopment and “enterprise zones.”

The rationale was that they had become expensive boondoggles that rarely, if ever, resulted in the private, job-creating investment and urban renewal they were supposed to produce.

They were to be replaced, although it wasn’t apparent at the time, with state-controlled “incentives” for investment, including a sales tax break for manufacturing equipment and a special pot that Brown could use to lure and/or retain business.

Simultaneously, the state was embarking on a massive overhaul of its electric power system, aimed at replacing fossil fuel and nuclear generation with “renewable” power and providing billions of dollars in subsidies, either from taxpayers or utility ratepayers. And it also was pushing alternatives to gasoline-powered cars, such as electric vehicles, again with subsidies.

With countless billions of dollars floating around, rent-seekers have proliferated and none has benefited more than Elon Musk.

Musk is building Tesla electric cars, his Solar City has become the state’s leading installer of photovoltaic electric panels, his SpaceX firm aspires to be the nation’s leading conveyor of satellites, and he’s planning an immense battery factory.

Each of these activities has benefited from direct and indirect state subsidies, including direct injections of money into Tesla and zero-emission credits that Tesla sells to other firms.

This year alone, Brown signed one budget “trailer bill” that extends subsidies for solar panels, another that exempts some SpaceX property from taxes, and a third that was supposed to subsidize construction of a new strategic bomber but includes an obscure amendment that would also subsidize a battery factory.

Legislators were never told about the battery factory provision. After enactment, the Associated Press reported on its existence, clearly aimed at winning the Musk project.

Finally, Brown’s administration is dickering with legislative leaders on provisions of a more straightforward battery factory “incentive.” The bill, carried by Senate President Pro Tem Darrell Steinberg, is just an empty shell now, but it could be filled at moment’s notice during the session’s hectic final days in August.

The sky’s the limit for rent-seekers these days.

Call The Bee’s Dan Walters, (916) 321-1195. Back columns, www.sacbee.com/walters. Follow him on Twitter @WaltersBee.

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