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Comment by watchandwait | Hacker News Reader

So policymakers have wrecked traditional capital markets through regulations on raising capital, interest rate distortions, twisted tax policy, patent law abuse, and anti-hiring labor policy, and now they are going to "fix" VC markets for us. Thanks.

The feds can't even protect the border or catch Osama bin Laden and now they want to run some fascist incubator to give the political class even greater control over our society.

This is the first step of course. As the program grows, Congress will start creating demands like set-asides for racial groups or veterans, and it will just so happen that a phone call from a politician will seal the deal.

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... now they want to run some fascist incubator ...

Are you seriously calling this fascism?

From Wikipedia:

"An inherent aspect of fascist economies was economic dirigisme, meaning an economy where the government exerts strong directive influence, and effectively controls production and allocation of resources. In general, apart from the nationalizations of some industries, fascist economies were based on private property and private initiative, but these were contingent upon service to the state."

Not to be flippant, but 'strong directive influence' and 'contingent upon service to the state' for the entire economy is a far cry from a tiny fund of money.

The fund only backs businesses "contingent upon service to the state". Literally it is in the fact sheet that his money will go to "disadvantaged" (eg: politically connected businesses that can be counted on for electioneering) and to "clean energy", which is a category of businesses serving the political agenda.

At the next election, Obama can talk about how he gave $2B to politically correct businesses (though he won't use that term) and he'll have lots of "high tech" plants to tour where he can say "they said we couldn't, but I say we can, and we did, build this company! Making clean energy solar cells for the future!"

That's "contingent upon service to the state". He didn't say the "entire economy" was fascist, just that the fund was.

Let's call if corporatism. It means the same thing but people will whine less about the semantics.

Fair enough, fascism also has non-economic context and that's not the point I was making.

But it's not corporatism or fascism, or socialism, it's a frickin seed program that may be a small waste of money. The government funds basic research all the time, with a pretty good track record.

Fascism is telling Volkswagen to make tanks.

> The government funds basic research all the time, with a pretty good track record.

Maybe, but this isn't basic research.

> Fascism is telling Volkswagen to make tanks.

This is saying "we'll fund {you} to make {whatever}" when folks spending their own money don't believe in the combination of {you} and {whatever}.

Synfuels anyone?

Which reminds me, what fraction of the US govt-seeded/assisted solar biz haven't moved much of their operations to China?

The decision will be made on a political basis. That's how govt always works.

Good god, man, you can't be defending this tripe.

Fascism has a definition, and it involves getting all of the biggest corporations on the same page with the government to create a totalitarian state. (Communism differs in that the government is the whole deal).

We've been funding energy research for decades, and there are a lot of reasons for the government to try and kickstart green energy. This is an experiment with the funding mechanism, people complain about the grant system all the time, silicon valley works, so someone said hey let's give this a shot. It's not fucking fascism.

If it was under the DARPA line item would you be more ok with it?

> Fascism has a definition,

Yes, but I didn't mention fascism. I merely described what the program in question is actually doing.

> We've been funding energy research for decades,

Yes we have. Is it unreasonable to ask whether said funding has been worth what it cost? Is it unreasonable to ask whether proposed funding will be worth what it costs?

Or, are you claiming that the decision to fund synfuels obligates us to fund every alt energy proposal?

> and there are a lot of reasons for the government to try and kickstart green energy.

Unless you think that said reasons justify any and all things that one can call "kickstart green energy", that statement isn't all that useful.

You don't get to assume "we're going to have good results" in the abstract. You need to show that the specific proposal is likely to work. Surely experience is relevant - if something has failed before, why will this time be different?

> silicon valley works

Actually, silicon valley doesn't work in the sense that is required by your argument.

The part of silicon valley that works is folks risking their own money and they don't agree on winners before the race. Govt programs lack both of those features.

Also, VC model actually doesn't work that well. The average is fairly low which means that the standout funds mask a lot of horrible performance by the vast majority. What are the odds that govt will be like Kleiner and not the typical fund?

> If it was under the DARPA line item would you be more ok with it?

No, but it's nice of you to try the ad hominem slam.

I'm happy to concede that I'm a bad person and you're a good person. However, that doesn't change the fact that these sorts of programs have been a disaster.

I suspect that you place a lot of weight on "good intentions". Are those intentions really all that good when they consistently have bad results?

The program might be a minor league failure. Approximately 90% of research spending consists of minor league failures. Drawing a comparison to fascism, oblique or not, is ridiculous.

The DARPA comment was serious. There's a huge military component to getting green energy moving.

> Approximately 90% of research spending consists of minor league failures.

The program in question isn't research. It's startup funding.

> Drawing a comparison to fascism, oblique or not, is ridiculous.

Surely you're not arguing that if it isn't fascism, it's good?

While you're vehemently insisting that it isn't fascism, you haven't responded to the fact that it is a close cousin, corporatism....

> The DARPA comment was serious. There's a huge military component to getting green energy moving.

So what? The military does lots of dumb spending. It also has different needs. So, even if green energy makes sense for certain military applications, that doesn't imply that funding it for general applications is a good idea.

Yes it will distort the startup market slightly - but the people creating startups are smarter than the government!

We started a company in "a special development area" = 30 years of high unemployment since the shipyards closed and a civil war didn't help. Every government department was queuing up to give money to create new entrepreneurial industries.

Department 'A' required you to have less than 5 employees - no problem you just count the founders.

Then Dept 'B' had a grant if you had created 10 jobs - no problem you just count every web designer and contractor.

Dept 'C" gave you money if you worked in a green technology - no problem you just sign up another startup doing green stuff as a customer and do some work on their website.

It actually did a fantastic job of creating an unofficial network of startups who all borrowed staff off each other and discussed the latest tricks to get the latest grant.

Still cost less than having the army on the street,

So, you're arguing against someone claiming that people will game the system by talking about how people gamed a similar system?

When this was first announced a couple weeks ago, I read the "fact sheet" posted. In it they talked about an emphasis on putting the money into "disadvantaged areas" and "focusing on innovative technologies like clean energy". So, your concern about investments being made more based on political pull than on merit is well founded.

Over 50 years ago an environment of heavy government regulation and anti-competitive legislation (as you describe in the first part of your post) was posited by Ayn Rand in Atlas Shrugged. The argument being that it is in politicians interest to make business hard so that businesses are beholden to politicians. She called it the "aristocracy of pull".

I like to point out that taking $2B out of the economy will prevent the creation of- in my estimation- 4,000,000 jobs over the next 10 years. The money must come from taxes or inflation, and that lowers the bottom line at the end of the year when business owners large and small are deciding whether to expand or not. The lack of expansion in the first year means the businesses lose out on the profits that would have come from it on the second year, and like compound growth the missed opportunity compounds as well.

Better to let people allocate their own resources and capital. Central planning doesn't work, and inevitably leads to the aristocracy of pull.

"The money must come from taxes or inflation," that's not how gov economics work. You borrow that money, hence you only pay the interest (until you can't). Now this model can be sustained as long as the economy grows faster than the interest you have to pay. This is why deficits spending isn't in itself that bad, it's the size of the deficit that's the issue. (probably oversimplified the whole issue but that's what I got from second semester of macroecon)

Sorry, the government can't create wealth for free. If the government wants to allocate dollars, it must at some point come from taxes (pulling dollars in the economy back out of it) or inflation (printing more dollars and decreasing the value currently held dollars). Now, the economy may grow such that the amount of wealth in the future is much larger than the amount we have now, and therefore represents a smaller fraction of the economy, but the fact remains that the wealth comes from somewhere.

What if the money allocated by the gov ends up creating more wealth than it would have previously? This is important to consider I think. This kind of program in my view can be a good idea if it creates more wealth than taken from the economy. I know it's unpopular to say this but government can create wealth (internet, space, health research...) that I don't think would have happened without.

When you borrow money, you create a bond, right? So you have the money you borrowed (the principle) that you spend into the economy, and yet there's also this new bond out there. That bond is an asset. That bond is an increase in the money supply.

Borrowing money is the mechanism by which the currency is inflated.

> "The money must come from taxes or inflation," that's not how gov economics work. You borrow that money, hence you only pay the interest (until you can't).

Not so fast. Borrowed money is money that is unavailable for other purposes. That happens immediately.

It's not like the borrowed money was under a mattress.

The payback is from taxes or inflation, and the latter works only if the inflation is a surprise to the lender. Expected inflation is factored into the interest rate.

I was with you until you mentioned 4,000,000 jobs lost over 10 years on a $2B mix of taxes and inflaton. $5k per job? You sure about that?

> "I like to point out that taking $2B out of the economy will prevent the creation of- in my estimation- 4,000,000 jobs over the next 10 years."

That's quite an estimate. I'm not quite sure how you got to this figure, but this seems to say that each $500 of additional taxes reduces job creation by one ($2B/4M). Inverting this logic would mean that the recent $120 billion reduction in payroll taxes, which was only part of the package extending the Bush tax cut, should allow for the creation of 240,000,000 jobs. Way to go Obama...although now we need to find a couple hundred million more Americans to fill all these awesome jobs you created!

I'm surprised there are such wild claims in such a highly rated post.

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