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Tuesday, 25 October 2016 12:53
Elon Musk's failing ventures reek of aroma of government funding
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muskBillionaire Elon Musk is a brilliant entrepreneur, futurist and visionary. From humble origins in South Africa, Musk has become one of the richest men in the world.

 

He earned his money through successful high tech ventures such as the first online version of the Yellow Pages, X.com, and another company which he founded and merged to create the incredibly lucrative and transformative online payment site, PayPal. 

 

He eventually became involved in a variety of businesses that are fantastic conceptually, but have problems translating into financial solvency. Musk owns Tesla Motors, which is trying to make the electric car profitable, SpaceX, which is working on a plan to transport humans to Mars and SolarCity Corporation, which is attempting the impossible, turning a profit on solar energy.  

What has saved Elon Musk from total collapse has been a very healthy dose of federal government subsidies and contracts. In each of his businesses, Musk is facing product questions and fierce competition.  

While Tesla require most customers to travel great distances to purchase and service their vehicles, the Chevy Bolt will soon be available nationwide and will be easily serviced at accessible dealerships.  

Musk’s ambitious goals for SpaceX might need to be adjusted after the recent failure of the Falcon 9 rocket. This explosion cost at least $62 million and destroyed a payload including a $195 million Facebook satellite.  

It was the second explosion of a SpaceX rocket in the last fifteen months, even after launch delays that have averaged two years or longer. In the process, the explosions also destroyed $118 million in taxpayer cargo.  

For the first failure, Musk blamed a vendor for an inferior product and in the last catastrophe, there has been wild speculation about potential sabotage from a rival company including images of an unidentified flying object coming from a neighboring building. An investigation has turned up no smoking gun. While some conspiracy theorists believe that SpaceX was the victim, the American taxpayers are the true victims.   

With such a track record, it would seem investors might be worried about the future of SpaceX, but the good news for Musk is that he has healthy government subsidies and contracts to carry him through the tough times. For SpaceX, Musk has reportedly received federal government contracts valued at $5.5 billion, and government subsidies worth $4.9 billion, which also benefit his other two enterprises, SolarCity and Tesla. 

Overall, Musk’s companies have accumulated over $10 billion in federal government subsidies and contracts with a very minimal track record of success. Surely, Musk is a dreamer who inspires others to support his fabulous journey, but in a federal government with a debt approaching $20 trillion, the taxpayers are being taken for a ride on a rocket that keeps crashing.   

In the private sector, these companies might very well be bankrupt after so many failures, but in the fiscally irresponsible realm of the federal government, the bailouts continue undisturbed. It is time Congress starting exercising their responsibilities for fiscal oversight.  

It is time that questions were asked about accountability. Is this the best use of $10 billion? Why should our government play favorites and fund Musk’s enterprises at the expense of his competitors? 

SpaceX’s competitor is United Launch Alliance, a collaboration of Boeing and Lockheed Martin. It performed 106 space launches successfully, but at a higher price tag than SpaceX promised. Thus, SpaceX just won its first Air Force contract worth $82.7 million, to launch a satellite in 2018.  

Musk is an incredible salesman and has wowed the federal government with his promises and his ability to market his companies. According to Forbes, he is worth $14.3 billion; however, it is time to analyze whether taxpayers are getting their money’s worth with these investments.  

Incredibly, all three of his heavily subsidized companies have experienced massive delays and none of them are making a profit. Tesla Motors produces cars that can cost up to $115,000. While consumers can utilize some tax breaks and credits to ease the pain of a new electric vehicle, the price tag is still out of reach for most Americans. This is a product with a very limited potential audience, so it is worthwhile to question why the government is investing so heavily in Tesla, including $1.3 billion in government assistance from the U.S. Department of Energy other sources. 

To propel the use of solar energy, SolarCity has been the recipient of over $300 million in local, state and federal grants and subsides. With the price of oil and natural gas so low we should not expect this investment to make a profit anytime soon, especially with tax credits for consumers ending in 2017.  

If Musk can achieve his dreams of widespread space travel, solar energy use and electric vehicles, he should be applauded. However, this should be accomplished with private sector funding. In this arena, mistakes are costly, but triumphs are handsomely rewarded. 

In the world of federal subsidies, a company can fail for years and still receive generous taxpayer funding. It is a symptom of what is wrong in our Nation’s Capital and it needs to be fixed before we accumulate another $20 trillion in debt. 

 

Jeff Crouere

Jeff Crouere is a native of New Orleans, LA and he is the host of a Louisiana based program, “Ringside Politics,” which airs at 7:30 p.m. Fri. and 10:00 p.m. Sun. on WLAE-TV 32, a PBS station, and 7 till 11 a.m.weekdays on WGSO 990 AM in New Orleans and the Northshore. For more information, visit his web site at Ringside Politics.

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Website: www.ringsidepolitics.com
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