by Mitch Kokai
Senior Political Analyst, John Locke Foundation
The entrepreneurial spirit is great. But Barron’s editorial page editor Thomas Donlan explains in his latest commentary that too much of high-profile entrepreneur Elon Musk’s potential business lies outside the private sector.
Other than Elon Musk and advanced technology, Tesla, SolarCity and SpaceX share one important thing: friendly governments.
Tesla got initial financing worth $465 million from the federal government. Although the company has paid it all back out of its stock-market winnings, Uncle Sam still dishes out thousands of dollars in green tax credits to every one of Tesla’s well-heeled customers. And California adds to the benefits for Tesla through a program that promotes zero-emission vehicles (a misnomer because all electric vehicles should be responsible for power-plant emissions).
SolarCity also depends on direct tax credits and rebates, and it indirectly benefits from those cheap solar panels that were called into the market by an earlier round of government promotion of solar energy.
More than half the money that SpaceX has used to develop its spacecraft and rocket motors came from the government, and about a third of the missions that SpaceX has planned are for NASA and other government customers. Operating in the most highly regulated industry in the world, it’s certainly more than somewhat dependent on the federal government’s goodwill.
Investors, hang on tight. Businesses this dependent on the government are likely to be vulnerable to political bumps in the road.