Andrew Cuomo's Corporate Welfare

The New York governor tries his hand at crony capitalism.

Which high-tech material will be the silicon of the future: silicon carbide, gallium nitride, or some other substance yet to be discovered?

No one knows for sure. But Governor Andrew Cuomo just bet $135 million of New York taxpayer dollars on backing GE's silicon carbide manufacturing efforts and IBM's gallium nitride efforts.

Cuomo's bet, on manufacturing facilities in Albany and Rochester, comes months after President Obama announced a $70 million federal Department of Energy grant to a similar program based in North Carolina, with the involvement of the light-bulb company Cree and the tractor manufacturer John Deere.

Which raises the question: if this technology is so terrific, why can't the private sector do the research and development on it without extra funding from taxpayers?

Part of the answer may be that the productivity gains from the technology are incremental rather than exponential. A GE report on silicon carbide touts that the material "could" improve the efficiency of wind and solar farms "by more than one percent."

The other part of the answer is that the companies are able to find politicians, like President Obama and Governor Cuomo, who are willing to put public funds on the line. For the politicians, the danger is that the investment will result in a well-publicized failure, like the Obama administration's investment in Solyndra, the solar energy company that went bankrupt. But in a lot of cases, the politicians will be out of office and on to other things before success or failure becomes obvious.

There is the chance that the politicians might be embarrassed by appearing to provide favors for campaign contributors. Unfortunately, however, while the press editorializes in favor of campaign finance "reform" and obsesses over the influence of the Koch brothers, when it comes to an actual government expenditure benefiting a company that is a significant campaign contributor, there is a remarkable lack of curiosity.

New York has one of the most competitive and robust press corps in the world. But so far as I can tell, not a single article about Governor Cuomo's announcement until the one you are reading now has mentioned that GE gave $30,000 on November 12, 2013 to the New York State Democratic Committee's "housekeeping" account, $30,000 on December 6 to the same account, and another $30,000 on May 1, 2014 to the same account. That's $90,000 to the state Democratic Committee in less than seven months, shortly before the state's Democratic governor announces a plan to subsidize a new silicon carbide factory for GE in Albany. Where's the New York Times editorial decrying corporate campaign contributions?

I am not suggesting that Governor Cuomo agreed to the subsidy because of the campaign contributions. And I believe that if the people who own a corporation want to participate in the political process by making campaign contributions in the name of the corporation, they should be able to. But all that said, one reason to avoid big government handouts to private companies is that they breed justifiable public cynicism about corruption, and whether the little guy who doesn't donate will get the same benefits as a giant like GE.

New York says its facilities will benefit not only GE and IBM but a long list of smaller and less well-known companies. Maybe so. But there's an even longer list of individuals and smaller and less-well known companies in un-subsidized industries who are being taxed to support the beneficiaries of Governor Cuomo's and President Obama's largesse.

If Obama and Cuomo want to be high-technology investors, there are plenty of well-paid opportunities awaiting them in the private sector following their stints in public service. Right now, they are investing while in office, using money that we taxpayers could be investing better on our own. If I want to invest in GE or Cree or IBM or John Deere, I'd rather do it through a stockbroker than through President Obama or Governor Cuomo. America and New York have enough problems to solve without the president and the governor taking on side jobs as high-tech speculators.