Yet something came up in the news this month that helps put these events in perspective. This one is an internet provider which went bankrupt recently despite federal loan guarantees from the federal government. The company's name is Open Range and it was supposedly going to bring broadband internet to rural areas:
However, this company was backed by the Bush administration in 2008 as part of a White House policy pushing high speed internet nationwide, a goal the Obama administration shares. So this sort of idiotic cronyism and backing risky start ups because of political goals is not something unique to the Obama administration. In fact I wouldn't be surprised to find the Open Range guys donated to President Bush's election campaigns.
As the government prepares Thursday to commit billions of dollars to bring high-speed Internet to rural areas, the biggest-ever such project has collapsed.
The company Open Range, backed by a commitment of $267 million in loans from the Agriculture Department, filed for bankruptcy this month. Taxpayers are on the hook for $74 million that the upstart hasn’t repaid. And now the company, some analysts and a senior government official are blaming poor judgment and Washington bureaucracy as the reasons Open Range failed.
There is an Obama connection, too - Open Range is a sister company to Light Squared, the company that the Obama administration apparently pressured a general to change his testimony about.
While I think these are both worth looking into, to see if the procedure was properly followed and find out if any favoritism or foolishness was involved. But the problem goes deeper than that.
Nowhere in the US Constitution is the federal government given the power to hand out money to companies in order to help them succeed. Nowhere. In fact, the founding fathers would have considered this corrupt and reprehensible. And what the government is not given the power to do in the constitution, it is prohibited from doing by law.
So no company, whether a prudent investment or not, whether green or not, whether high tech or not, whether they need the money or not, whether they are donors or not, no company is to be handed taxpayer dollars as a bailout or in loans or any other such manner. That's illegal, in addition to being bad policy and a foolish idea.
If a company cannot make it on its own - and most of these are spinoffs of already vastly rich companies to begin with - then it can't make it. That's a sad fact of life, but any company that has to rely on a continuous stream of federal dollars to survive is not just ENRON but it deserves to die.
*Hat Tip Ace of Spades for this story.