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  • What’s Another $45 Million at the Energy Department?

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    The Department of Energy (DOE) announced it is spending $45 million of taxpayer money for 38 different projects for advanced transportation technologies. But private companies should be making these investments on their own to provide the best products available for consumers.

    The 38 projects funded by DOE are going to universities, laboratories, and private companies for development of more efficient batteries for electric vehicles, advanced fuels and lubricants, efficient heating ventilations and air conditioning systems, and the next generation of lightweight materials to make cars lighter while not compromising safety.

    The list of projects come across as innovative, cutting-edge, and perhaps transformative of the transportation industry. But automakers and other manufacturers are not paying for this research themselves; they’re relying on taxpayer money.

    If companies believe it is in their best interest to invest in research and development, they should make those investments with their own money. The companies that identify opportunities will capture the economic benefits, and those that don’t will remain stagnant or suffer. When companies have to make those choices with their own money, risk and reward are properly aligned.

    In some instances, the DOE spending is blatant corporate welfare. DOE awarded $1.5 million to Caterpillar, $1.75 million to General Electric, $3 million to 3M Company, and $350,000 to Ford Motor Company. If these companies believe it is valuable to work with the DOE laboratories and universities, they should do so, but there is no need for taxpayers to subsidize them.

    Proponents of the $45 million in spending argue that private-sector spending on research and development has atrophied and that the research will help the auto industry broadly. But there are a lot of companies that still invest in research, and those that don’t have good reasons for doing so.

    First, there is little reason to invest your own money when you can get someone else to pay for it. Government-funded research is crowding out research that could be done privately.

    Further, these companies may have better uses for their money and may not find the research investments worthwhile. Removing DOE initiatives such as this latest one would prevent the government from nudging private-sector investments in the wrong direction and allow companies to manage their resources as they see fit to capture the most value for their company and the best product for the buyer. The ones that succeed in being entrepreneurial and innovative will be properly rewarded.

    Markets drive innovation forward, creating new wealth and new opportunities and improving efficiency along the way. Some of these research initiatives may be worthwhile projects, and if they are, the private sector will recognize that and find ways to finance it. Having the DOE fund the research merely wastes taxpayer money.

    Posted in Energy [slideshow_deploy]

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