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Elon Musk is no corporate welfare queen


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From Market watch:

 

"Elon Musk is no corporate welfare queen

 

Trouble is, the numbers and thinking are both larded with nonsense. The government's investment in Musk Inc. has been much smaller than suggested. Most has come from tax credits and other programs available to everyone. By that standard, your mortgage tax deduction and tax-free health benefits constitute government subsidies. Finally, early returns on America's backing of Musk have been excellent, with more to come.

First, let's debunk that $4.9 billion "subsidy" number.

 

The first $500 million is the amount of government financing awarded to build Tesla's factory in Fremont, Calif. But that's already repaid. Tesla paid early to keep the Obama administration from exercising warrants, designed to protect the government against a default, that would have let Uncle Sam snag Tesla stock at $7.53 a share. Which squeaks in a hair under the $250 stock price now. The feds simply didn't spend a half-billion on Tesla.

 

We should all fund such boondoggles.

 

The next $1.3 billion represents tax incentives from the state of Nevada to build Tesla's Gigafactory for advanced batteries. Little or none of that went directly into Tesla's pocket. Most of it represents the state taking a sharp discount on future tax revenue from Tesla-related activity, including a projected 6,000-plus jobs. Tesla will still finance the $5 billion Gigafactory privately, using $2 billion of its own and more money from partners including Panasonic.

 

The next $750 million is the amount state and local governments are paying to build a solar-panel factory for SolarCity (SCTY) in Buffalo, N.Y., for which SolarCity will pay nominal rent. That's obviously useful to Solar City, but since the plant will belong to the government, calling the deal a $750 million grant is simply wrong. The subsidy is the much smaller avoided cost of private financing, and even that aid depends on SolarCity hitting hiring milestones.

 

Like them or not, state economic-development incentives are common; Musk's deals are unusual simply in the size of both the risks and the rewards. Likewise, the energy portion of the 2009 stimulus moved more than $30 billion in loans and guarantees out the door, with the biggest going to Southern Co.'s (SO) nuclear plant in Georgia and to automakers Ford (F) and Nissan. They're hardly unique to Tesla or SolarCity. Neither is the investment tax credit to promote adoption of renewable energy unique to Musk. Most of it has been used to help finance wind projects. One of the biggest users has been Warren Buffett's Berkshire Hathaway (BRK/A).

 

Lastly, the return on the government's investment is hardly shabby.

 

Governments make these deals to create jobs. The stimulus loan to Tesla is integral to the 10,000 employees the company had at year-end, with production on the Model X not quite begun. That investment would be a relatively modest $50,000 per job even if Tesla had never paid back the loan, scaled up to produce the Model X, or created a single job for a supplier. It's done all three.

 

In Buffalo, the 3,000 people working at the 1 million-square-foot solar-panel plant opening in 2017 will replace almost a third of the manufacturing jobs lost in Erie County in the past 10 years. As SolarCity CEO Lyndon Rive told me, that doesn't include 1,400 construction jobs, nor any assumptions about expansion, nor any employment by suppliers who move to Buffalo or expand there.

 

As for the return on federal "subsidies" the L.A. Times put at nearly $500 million, SolarCity employed 9,051 people at the end of 2014, before any Buffalo hiring commenced. That's up 6,500 in two years. Not the worst return on a 30% tax credit for installation of home-based solar systems, which Rive cheerfully admits gooses sales. It's meant to.

 

Anyone who's covered a statehouse knows what corporate welfare seekers look like (often, like real-estate developers, sports-franchise owners and utility executives). They play constituencies or states against one another in a zero-sum game to support low-growth businesses. They virtually never create genuinely new business models or technologies. Musk creates both.

 

Governments helped finance Musk's innovations because it was in their interest, especially when the credit-market failure of 2008-09 crashed private investment. The spread of greentech, Musk's creation of $37 billion in market value, and more new jobs than the whole U.S. securities industry has managed since January 2009 all argue that they got that calculation right."

 

That article with more is here: http://news.morningstar.com/all/market-watch/TDJNMW20150603305/elon-musk-is-no-corporate-welfare-queen.aspx

 

From the Silicon Valley Business Journal:

 

"Elon Musk hits back after LA Times report on his $4.9B in subsidies

 

Oil companies and major auto manufacturers receive far more handouts

Musk also highlighted the difference between the subsidies his company receives as compared to the breaks handed to the oil industry.

 

“If you add up all the subsidies that SolarCity and Tesla get, it is 1/1000 of what the oil and gas industry get in a single year,” Musk said.

 

The fossil fuel industry receives $550 billion in global government subsidies, according to the Times, citing a report by the International Energy Agency.

 

In an interview with the Times, Musk also pointed out the recent use of taxpayer funds to bailout out the auto industry."Tesla and Ford are the only American auto companies not to have gone bankrupt," Musk said."

 

And Tesla was a startup! After working with his own capital for six years, they finally put the first Teslas on the road, the Roadster, and into full production in 2008, with none of the assets to liquidate,or cash on hand, an established biz like Ford had. Musk, and his companies made it well past their debut of a luxury car during the "almost depression" recession starting in 2008.

 

The rest of that article is here: http://www.bizjournals.com/sanjose/news/2015/06/03/elon-musk-hits-back-after-la-times-report-on-his-4.html?ana=yahoo

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Not only is he a corporate welfare queen, but he ranks just below Boeing and GE as a queen!! Maybe he should just be a princess??

 

"Most has come from tax credits and other programs available to everyone. By that standard, your mortgage tax deduction and tax-free health benefits constitute government subsidies.".....Yep, that is exactly what those programs are....BUT unlike Musk's subsidies they are pretty much available to everybody. They are not targeted subsidies.

 

A friend of mine owns a successful software company with 50 employees. Bless his heart, he almost lost everything before his company started getting serious traction. His tax rate is FIVE times that of MicroSoft due to primarily to state of Washington tax credits and subsidies to large corporations. IF one of the large corporations goes after his market. He WILL lose everything, since at the difference in tax rates he cannot compete with MicroSoft. His hope is that the large corporations will decide it is cheaper to buy him out than compete with him.

 

Is this really how WE, as the American people, want business in this country to always favor the existing rich corporations? The subsidies and bail-outs maintain the existing corporate boards and executives. They really do need to go bankrupt. IF GM and Chrysler had been allowed to go bankrupt new management would have taken over the auto plants. Instead the "good old boys" keep running the companies. How many times has the Federal government bailed out Chrysler and GM??

 

Don't get me started on the banks!! I don't know how accurate it is.....but I did see one statement that Citi Bank (and previous incarnations) have been bailed out FIVE times over their history by the Federal Government. REALLY??

 

I firmly believe there are several reasons for our low growth rate in this country, but one of those factors is quite frankly poorly managed companies that are propped up by the taxpayers.

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Not only is he a corporate welfare queen, but he ranks just below Boeing and GE as a queen!! Maybe he should just be a princess??

 

"Most has come from tax credits and other programs available to everyone. By that standard, your mortgage tax deduction and tax-free health benefits constitute government subsidies.".....Yep, that is exactly what those programs are....BUT unlike Musk's subsidies they are pretty much available to everybody. They are not targeted subsidies.

 

Vlad,

You have a source for that? Here is one of two research papers on subsidies given out to corporate America. Tesla isn't even in the top 100!

 

Parent Company Subsidy Value Number of Subsidies 1 Boeing $13,174,075,797 137 2 Alcoa $5,635,305,059 91 3 Intel $3,867,492,085 58 4 General Motors $3,494,237,703 307 5 Ford Motor $2,522,304,454 173 6 Fiat $2,060,988,039 93 7 Royal Dutch Shell $2,038,202,298 66 8 Nike $2,024,582,002 23 9 Nissan $1,799,585,041 25 10 Cerner $1,732,784,334 15 11 Cheniere Energy $1,693,646,504 10 12 Dow Chemical $1,408,228,374 416 13 ArcelorMittal $1,338,284,411 58 14 Advanced Technology Investment $1,224,997,961 4 15 Berkshire Hathaway $1,063,809,399 310 16 Toyota $1,051,586,557 77 17 IBM $1,026,845,249 208 18 Delta Air Lines $869,754,989 7 19 Texas Instruments $727,848,327 39 20 Pyramid Companies $703,596,595 15 21 Goldman Sachs $661,979,222 28 22 Volkswagen $657,778,311 14 23 JPMorgan Chase $653,474,481 133 24 Hyundai Motor $649,041,683 7 25 Google $632,044,922 26 26 Teck Resources $597,871,991 5 27 Mayo Clinic $585,000,000 1 28 Forest City Enterprises $582,389,708 37 29 Clean Coal Power Operations $550,000,000 1 30 Sematech $550,000,000 3 31 Scripps Research Institute $545,000,000 1 32 Daimler $544,749,000 42 33 Nucor $534,974,717 46 34 Sears $534,616,673 54 35 Silver Lake $482,025,256 85 36 FedEx $456,750,126 222 37 NRG Energy $449,990,674 49 38 Apple $446,485,233 6 39 Honda $438,179,224 38 40 McEagle Properties $430,650,000 5 41 Cornell University $400,000,000 1 42 Shin-Etsu Chemical $398,842,605 40 43 Severstal $396,013,300 26 44 General Electric $394,212,107 255 45 Onex $388,603,757 118 46 Walt Disney $381,525,727 36 47 Mitsubishi Group $379,243,036 42 48 Morgan Stanley $366,284,480 47 49 Triple Five Worldwide $358,000,000 2 50 Michelin $357,416,880 46

# Parent Company (continued) Subsidy Value Number of Subsidies 51 Community Health Systems $355,703,779 94 52 Aker Philadelphia Shipyard $350,000,000 1 53 H&R Block $341,317,824 9 54 Exxon Mobil $340,271,846 71 55 United Continental $337,081,638 20 56 Amazon.com $330,756,147 39 57 LG $327,082,717 14 58 Duke Energy $325,877,242 15 59 Revel AC $323,000,000 2 60 Samsung $317,148,838 17 61 Huntington Ingalls Industries $312,056,400 5 62 Weyerhaeuser $300,575,457 92 63 Orca Bay Seafoods $296,849,235 6 64 Jackson Laboratory $291,000,000 1 65 Anschutz Company $290,000,045 4 66 Areva $289,116,137 13 67 Citigroup $286,228,767 64 68 Sasol $279,262,538 27 69 Peabody Energy $278,095,289 22 70 Electrolux $278,068,356 19 71 ConAgra Foods $271,306,014 145 72 Nestle $264,262,725 163 73 General Dynamics $262,528,332 84 74 Valero Energy $262,298,522 54 75 Yahoo $261,078,455 17 76 Eli Lilly $258,216,376 15 77 BMW $254,326,405 13 78 Orascom Group $251,000,000 1 79 UBS $247,608,178 11 80 Cabela’s $247,189,539 16 81 Wacker Chemie $241,325,051 34 82 Comcast $239,337,579 62 83 Sanford-Burnham Institute $233,600,000 2 84 Virdia $230,000,000 1 85 Prudential Financial $225,734,997 30 86 International Paper $222,836,793 196 87 Baxter International $212,892,487 20 88 Pfizer $210,072,210 123 89 Johnson Controls $210,010,267 106 90 Caterpillar $208,982,443 127 91 Blackstone $203,193,594 141 92 Convergys $199,690,351 21 93 Triumph Group $196,342,629 57 94 Max Planck Florida Institute $193,000,000 2 95 Goodyear Tire & Rubber $190,432,390 118 96 CME Group $188,000,000 6 97 Simon Property $187,000,000 2 98 Summit Power $183,221,842 2 99 CA Inc. $181,258,193 20 100Bank of America $179,959,106 119

 

The Uncle Sam's Favorite Corporations pdf that is much more readable than the cut and paste above can be found here: http://www.goodjobsfirst.org/unclesam

 

They also have a shredout report showing the biggest subsidy megadeals. They break the biggest megadeals down several ways one of which is by state.: http://www.goodjobsfirst.org/megadeals

 

I'd like to see your source putting Tesla in even the top 100.

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Vlad,

Still waiting for your source that contradicts the latest accepted research reports on corporate handouts by company and state. You are mixing up Tesla with the real corporate welfare (CW) queens. Other than your erroneous grouping of Tesla with the real welfare queens who've bilked the US taxpayers out of trillions, many who've gotten a trillion or more individually, I agree with the rest of your post. Tesla's biggest criticism by the uninformed was they paid off their loan nine years early. I agree with the rest of your post. There is a reason the big boy's media outlets try to scapegoat Tesla. Because then the folks who read no more than "who to blame pieces," don't realize who the real welfare queens are.

 

It backfired on all of them because some uninformed writers took swipes without even knowing the massive CW occurring right under their noses. That is why many of us said no company is too big to fail. No consequences for the bankers either, and within a year they are back to business as usual.

 

Take a good look at that list if you are actually concerned about CW. Then start helping to stop it.

 

Aim at the ones that don't pay back loans and/or have gotten grants and concessions while making billions/trillions too. Not those honest brokers that are starting up, and setting a bad example according to the real CW queens, by making them look bad.

 

You forget, or did not know, that Musk was literally broke along the way at one point, and it wasn't why the DOE loan was accepted. He got over that problem by moving forward, alone.

 

Remember he was a solo doing software to start in the beginning like your friend. I wish you and your friend the same results given he puts the same work into it that Musk did and does.

 

Now you can know how accurate it is for the top recipients of government subsidies. You have the source documents at your disposal.

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BTW if you go to the subsidy tracker you can track the history of any company. http://www.goodjobsfirst.org/subsidy-tracker Just click on it and then enter the company name and go!

 

Under Tesla you see the one 500 million loan everybody is so upset about them paying it back?? Folks will read a news report or article and believe it if it agrees with their overall view which sometimes is the narrative or agenda of the news they watch and read.

 

For example if you go to Tesla Motors in the tracker looking it up under the top parent company names you'll see the following:

http://subsidytracker.goodjobsfirst.org/prog.php?parent=tesla-motors

 

You'll see an interesting way they list everything. By federal monies from you and me, and state monies that are used to entice companies to establish their operations in that state and create the estimated number of jobs promised.

 

However they did not list the Tesla loan as paid off and I am about to email them about that.

If you look under Tesla you find they have $1/2 billion in one paid off early federal loan.

Their local subsidies are $1.2 billion.

 

If you look under Ford you find they have $27.5B or Billions in federal subsidies taken which I have been told on another thread they don't pay back early. Their state local subsidies are $2.5B or Billions.

http://subsidytracker.goodjobsfirst.org/parent/ford-motor

 

There are several active links in each page to other related reports.

 

"Everyone is entitled to his own opinion, but not his own facts."

Daniel Patrick Moynihan

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If you look under Ford you find they have $27.5T or trillions in federal subsidies taken which I have been told on another thread they don't pay back early. Their state local subsidies are $2.5 Trillions.

 

 

"Everyone is entitled to his own opinion, but not his own facts."

Daniel Patrick Moynihan

 

 

By writing "$27.5T or trillions" you have overstated the amount of Ford's subsidies by a factor of 1,000 times. $27.5T or trillions would be the value of nearly two years worth of the entire economy of the United States. You might want to count the digits before you write "T or trillions".

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