Can we wean Elon Musk off government support already?

Tesla’s new Model 3 has finally arrived, and not a moment too soon. The critics seem to love it, and Tesla management says it’s already received deposits for 500,000 of the vehicles. Perhaps now Elon Musk can finally get his hand out of U.S. taxpayers’ wallets?

Musk is, to be sure, an ideas man. Private, commercial space travel? Check. Washington to New York in less than half an hour in what he calls a “hyperloop” train that will travel at 800 miles per hour? Check. A new kind of tunneling engineering? Check. Solar energy? Check. Electric cars? Check, check.

As wide-ranging as these various entrepreneurial ventures may be, they all have one thing in common – not a single one of them would get funding in a competitive private capital market if it weren’t for massive (and I do mean massive) taxpayer-funded government subsidies.

{mosads}A study published two years ago by The Los Angeles Times revealed that just three of Musk’s ventures – SolarCity Corp. (which manufactured and installed solar energy systems before its 2016 merger with Tesla Motors Inc.), Tesla Motors Inc. (which manufactures electric vehicles), and Space Exploration Technologies Corp., known as SpaceX (which builds rocket ships) – had received $4.9 billion in government subsidies to that point in time. By now, Musk’s various ventures have sucked well over $5 billion from government coffers.

But granting literally billions of dollars in taxpayer subsidies to Musk’s firms isn’t the worst of it. No, that honorific is reserved for this little gem: In order to induce car buyers to spend their money on electric vehicles, the federal government offers a $7,500 rebate on the purchase price.

Some states enhance that rebate with rebates of their own. In California, for instance, purchasers of electric vehicles get a state-funded rebate of $2,500 more.

There’s a phrase for that – it’s called “crony capitalism.” And it stinks.

Crony capitalism relies on government picking winners and losers. It depends on government choosing to move resources to a favored enterprise, even as it refuses to move resources to disfavored enterprises.

As such, it adds a political aspect to the economic criteria of the investment financing decision-making matrix. Those who can curry favor with key government officials have another avenue of funding available to them that those who cannot curry such favor do not.

By definition, that distorts the marketplace, and warps investment decisions better made by private stewards of finance unencumbered by political considerations, whose only fiduciary responsibility is to those whose funds they manage. By adding the political calculus to the decision-making matrix, it alters outcomes, and prevents the most economically efficient deployment of limited financial resources.

That’s all fancy economic professor talk I learned in college.

Here’s the question I hear when I’m talking to friends in Georgia who ask me to explain Washington to them: “Why should those guys in Washington take my hard-earned tax dollars and use them to lower the price of an electric car for some movie star in Hollywood?”

That’s a good question. Given that the average household income of a Tesla Model X owner is $503,000, that the average household income of a Tesla Model S owner is $267,000, and that we can only assume the average household income of a Model 3 owner will be somewhere in six-figure territory, it’s a tough question to answer. 

If Leonardo DiCaprio – who commands $20 million per movie (and there’s nothing at all wrong with that, if Hollywood studios think he’s worth the investment) – wants to buy a Tesla electric car, more power to him. But he certainly doesn’t need to be taking money out of the pockets of middle-income people elsewhere to do it. He can afford it on his own.

So that’s why I’m hoping Tesla’s Model 3 is a yuuuuuuuuge hit. I hope Elon Musk sells enough of those cars that he can make a profit on his own, without needing to dip any further into our pocketbooks and wallets.

Maybe then we could actually get a tax cut, and get some of our money back, so we can make our own choices about how best to spend them, rather than letting bureaucrats and politicians in Washington make those decisions for us.

President Trump, are you listening?