Department of Energy Hearing before Senate Committee, of March 2012

I watched the Department of Energy Hearing in front of the Senate Committee on Energy. The questions and discussions were mostly on loans to energy companies, loan guarantees, and a few other topics.

The hearing was over 2hrs. I learned quite a lot. The items below are just a few of the things I learned.

Loan guarantees were created in 2005 in the major energy bill created that year (before Obama and the current Secretary of Energy took office). However, the people in the loan section (starting in 2007-2008) started having shady deals, giving money to wealthy people who didn't need the loans, giving money to major political players, and putting unsound investments like Solyndra at the top of the pile.

It was pointed out that some wealthy Republicans got money from these loans in shady deals, to which Rand Paul (Republican) said "I don't approve of that either".

Senator Rand Paul pointed out several public facts of companies not using money for designated purposes. This includes using the money for personal items such as cars, and channeling the money to manufacturing in other countries (instead of the United States). 

Senator Paul also said to Secretary Chu, essentially "I think you are good man, of good character, but it is your Department, and loan managers are giving money away to people and companies based on political connections, not on sound investment. It is up to you to fix it."

Other senators pointed out that every energy sector has gotten loan guarantees, and all have worked out fine. Nuclear gets loans, and those get paid back as expected.

Much of the discussion was on policy: should the government give loans to energy technology companies? Why not the private sector providing all investment money? If we should give money, then to what areas? Why? For how long?

The best arguments in favor of giving government loans to some energy companies came from Senator Al Franken. His statements were pretty much on Ben Franklin’s theme of “a stitch in time, saves nine.” Senator Franken's statements essentially said we should invest an amount now, because if we don’t the financial cost to the American public will be greater in the future.


The free market supporters say that private companies should do all the investing in energy technologies. Government should stay out of it entirely.

Some people modify this view, saying that this sounds nice in theory, however most other nations give substantial government financing to energy technologies. This is the reality of life today. Therefore we must do the same, in order to make our energy technology industries more competitive.

Those who strongly support government financing say that some research and development is in the best interest of the nation as a whole, not just the companies. Lower energy prices, greater reliability, and less reliance on foreign companies are good for all Americans. Therefore the government should invest.

Just as important, clean energy, green energy, are major industries in the world today. There are major markets. There are opportunities for economic growth.

(I know this to be true. I have long said that the "Energy Industry" will be one of America's core industries, and will provide some of the bedrock of American economy, much like the auto industry decades ago).

And therefore, perhaps we should use government funds to help grow some sectors of the energy industry which have the greatest potential. (In this point, I agree).

The government finance supporters also say that we provide research funds for cancer and highway safety, so why not research funds for clean energy?

Then there are those who can see a bit of each side, but wonder which areas are best funded. Secretary of Energy Chu pointed out the main areas where loans can be given: 

1) research and development
2) building manufacturing facilities
3) installation and service companies

However, even those who agreed with the idea of loans years ago now question the whole idea. If major loans are being given to companies like Solyndra, and almost all funds for clean energy have been misused, then maybe we should scrap the whole loan program until we fix the process.


Secretary Chu also pointed out that giving money to energy companies that already exist, being profitable for over a decade, is quite different from giving money to start-up companies with no track record. Start-ups may have great innovations, yet we just funded many start-ups and they folded. Do you then give money to only established companies?

Secretary Chu also pointed out the dilemma of the multi-national corporation. Do you want to give money to a Japanese or German company to build manufacturing facilities in the United States? At the same time, this approach makes it more difficult to track the flow of money, to ensure that it goes to the US and not abroad.

And so the discussions went back and forth with different questions and different ideas.


Personally, I have not arrived at a conclusion yet. And when I do arrive at a conclusion, it will probably be stated in specifics: “We should provide loans for ____, because _____. These loans should stop when _____ has occurred.” Something like that.

My initial thoughts are that the government should stop giving loans altogether until the loan approval process and oversight process has been totally fixed. Then start giving loans to areas one by one. However, the selection process and oversight should be tight.

On the other hand, I would like to see more investment from the private sector. (Hello Wall Street! This is what you should be investing in, not speculation, futures, or hedge funds).

There was an additional topic I found interesting. There was a discussion of $50 light bulbs. Republican senators pointed out that Americans can’t afford it. Democratic senators invited the Secretary to explain and elaborate.

The truth is that those $50 light bulbs are actually used in special places like street lights, stadium lights, and exit signs. These places are often difficult to reach or require special equipment to access, in addition to the lights being used so much of the time. These $50 light bulbs last many thousands of hours, and therefore will pay for themselves many times over when used in these areas.


Overall I learned quite a bit from this Senate Committee hearing.

During My First Term as President I Will…

If elected President, by the end of my first term I will do the following:

a) Secure our borders with an effective physical barrier, and deport at least 25% of illegal immigrants.

b) Prosecute at least 60% of financial criminals to the fullest extent of the law, and return all stolen money to proper owners.

c) Create a Small Business and Middle Class Task Force, which will evaluate the effects of all laws and regulations on those two key segments of society, as well as make recommendations to the appropriate officials.

d) Make the financial summaries of government operations easier to access, obtain, and interpret, along with an extensive set of links for more detailed information on each topic.

e) Persuade Congress to pass a series of legislative reforms which will:

1. Provide more oversight of the financial sector.

2. Establish significant restrictions of allowable financial transactions.

3. Restrict foreign ownership of federal, state, and municipal government operations, including infrastructure, security, and bonds.

4. Return authority of most government activities to state and local regions.

5. Increase personal freedoms and allow more personal choices for individuals.

These are the goals I will achieve in my first term as President of the United States.

Free Market versus Capitalism

Introduction

The Free Market is NOT the same as Capitalism. They are two very different concepts.

We must make the distinction because capitalism needs to be restrained, while the free market should be encouraged to flourish.

The Free Market is the system where things happen. People do things. People create things. People provide needed services for other people.

In contrast, Capitalism is merely a method for moving money around. No goods or services are created using Capitalism (unless the capitalists specifically invest in goods and services). Capitalism in itself does not create products or create jobs.

The Free Market

The Free Market is the best economic system available. The Free Market is a system where people create goods and services, using their passion and pride. The people then exchange those goods and services for other goods and services.

We commonly think of the goods and services being traded for money, but that is not necessarily an absolute in the free market system. People can exchange goods and services for other goods and services. For example: I will repair your barn if you give me a bushel of wheat. Or, I will provide the meat if you prepare the meal.

All that matters in the Free Market system is that there is an exchange where both parties get something they need, by providing something of value to the other person. The only reason money is involved is because money is a standard unit from which to compare the price of goods and services.

Remember, the Free Market is the system where things happen. In a Free Market people do things. People create things. People provide needed services for other people.

Capitalism

Capitalism is vastly different from the Free Market. Capitalism is all about the movement of money. Capitalism has nothing to do with real activity.

In capitalism, money is moved around. Yet no goods are created. No products are made. No services are delivered. It is simply the movement of money.

And that is the inherent problem of the Capitalist system.  This is one of the central problems which has led to the economic situation of today.

Fallacies of the Capitalist supporters

The supporters of Capitalism say that Capitalism does create products and services, because of the investment into the businesses. This is not necessarily true.

First, understand that it is the dedicated people in our nation who create products and services. Capitalism is only one means to fund those businesses. Many successful people have never used Capitalism to grow their businesses.

Second, many of the financial elite in the past 20-30 years have used the method of Capitalism for strictly personal gain. They have used Capitalism as a method to defraud investors and to destroy businesses, while taking large personal profits. So in fact, Capitalism has been used by many financial elitists to destroy businesses and eliminate jobs, rather than to grow businesses and create jobs.

Capitalism is but one tool in the Free Market System

Capitalism is not the Free Market. Rather, Capitalism is a tool used in the Free Market system. And Capitalism is not the only tool.

Over the past few years I have meet with dozens of entrepreneurs throughout the nation and the world. All of them are quite successful. Note that every one of these successful entrepreneurs used the Free Market system, yet none of them used Capitalism.

Each entrepreneur created his own business, using his own money, and building it up over time. Small investments led to small profits, which were reinvested into the business.

Many of these successful businesses were created as a partnership, where each person provided some of his own savings, as well bringing his/her unique skills to project. In many cases, the project partners worked for almost nothing until the business became profitable.

There was no capitalism in any of these cases. There were no bank loans, no stockholder investments, and no connections to Wall Street. So you see, capitalism is far from the only tool available to boost prosperity in the Free Market system.

Capitalism as a tool: for good or for evil

Capitalism is a tool. And as with all tools, Capitalism can be used to create or to destroy. Capitalism can create happiness or it can cause harm.

If Capitalism is used as a means to boost the free market, then Capitalism is a useful tool. But if Capitalism is used solely to acquire more money without providing a useful product in return, then Capitalism is very destructive.

Capitalism is a useful tool when used properly. The proper use of Capitalism is to invest money in a business. This money is used to develop new products, to acquire supplies, to hire a skilled team, and to pay for marketing. As the business grows and makes money, some of the profits are given to the Capitalist investor while other profits are put back into the company.

When used in this way, Capitalism helps to create products and services, Capitalism helps a business to grow, and thus Capitalism does help to create jobs.

However, Capitalism by itself does NOT create any of these things. When used improperly, Capitalism will cause great harm.  If Capitalism is used to just move money around without creating a product or service, then Capitalism will destroy a community. If Capitalism is used as a mechanism to defraud others, then Capitalism will cause serious harm (not only to the people who were stolen from, but also to the general economic health of the region).

This is exactly what we have seen over the past 20 years, culminating into the situation we have today.

Focus on Free Market, not on Capitalism

In order to restore some sanity in our economic system, in order to create prosperity in our nation again, we must change our focus. We must place our support on the Free Market, and we must keep Capitalism in its place.

The Free Market is good. The Free Market is the best economic system available because it will obtain the greatest prosperity and personal happiness for the largest number of people.

We must stop thinking of Capitalism as our basic economic system. Capitalism should be thought of as just one tool of our economy, and not the entire basis for our economy.

We must remember that unrestrained Capitalism is NOT a successful economic system. Unrestrained capitalism causes destruction and chaos.

We must remember that Capitalism does not create jobs. It is the Free Market that creates jobs.

Furthermore, it has been proven over the past 20 years that unrestrained Capitalism destroys successful businesses and puts many good people out of work. In contrast, the Free Market economy allows successful businesses to prosper, and allows passionate workers to have good jobs.

We can appreciate that Capitalism, when properly used by responsible parties, can be a useful tool. Yet the serious damage caused by unrestrained Capitalism proves that we must restrict the privileges of the Capitalists.

If we encourage the Free Market to grow, at the rate of the unbridled creativity and labor of the people, while at the same time restraining Capitalism to only legitimate functions, then America will prosper again.