Well, somebody did it, and it was the mainstream media. Congratulations to the Los Angeles Times for taking the time to research and estimate the total amount of U.S. public (local, state, and federal) subsidies for companies owned or run by South African-born Canadian-American Elon Musk.
The total amount calculated by reporter Jerry Hirsch for taxpayer-backed incentives – of many different forms, including tax credits and rebates provided to customers – was $4.9 billion. The corporate beneficiaries have been Tesla Motors and SpaceX, where Musk is CEO, and SolarCity Corp., where he is chairman. The sum does not include SpaceX’s contracts with the government to carry out programs for NASA and the U.S. Air Force.
“Government support is a theme of all three of these companies, and without it none of them would be around,” said Mark Spiegel, a hedge fund manager for Stanphyl Capital Partners, to the Times.
NLPC has reported extensively about the extensive dependence on taxpayer subsidies by Musk and Tesla. Despite ongoing poor earnings reports and extensive promises that are never fulfilled, in addition to other problems, Tesla’s stock price has remained immune to bad news. The cult of Musk’s celebrity has sustained its inflated value on Wall Street, where business journalists and forecasters swoon with hearts equally aflutter.
“As his star has risen,” said Musk biographer Ashlee Vance, “every state wants a piece of Elon Musk.”
Indeed, the competition to win Tesla’s so-called battery “Gigafactory” was waged at a level of aggression usually reserved for long-established, well-capitalized corporations. Seven states wooed Musk, and he asked for the moon. He got it from Nevada, in the form of $1.3 billion that required four separate pieces of legislation to pass, to complete the deal. The package’s absurdity is highlighted when compared to Texas’s successful luring of Toyota’s North American headquarters, which reportedly cost the Lone Star State less than $50 million for a far more reputable auto manufacturer.
Amusingly, Nevada’s top economic development official Steve Hill balked at Tesla in the early going of negotiations because its demands would have required the state to write “a series of checks during the first couple of years,” which he said was an unacceptable risk, according to the Los Angeles Times report. Apparently the monstrous package they ended up with was not so risky.
Musk’s hunger for taxpayer dough is not limited to Tesla, obviously. For SolarCity, reporter Hirsch identified $497.5 million in direct grants from the U.S. Treasury Department, but also estimated that – based upon the number of solar installations since 2006 – that the government may have covered up to $1.5 billion of those costs (which include the grants).
But that’s not all! The State of New York is building a $750-million solar panel factory in Buffalo, which SolarCity will lease for $1 per year. The company will also be relieved from having to pay $260 million in property taxes on the plant over 10 years.
And not to be left out, SpaceX extracted $20 million from Texas to set up a launch pad in Brownsville. Beyond the subsidies, SpaceX also has also won $5.5 billion in contracts with the federal government to shoot satellites and send shuttles to the International Space Station. Those agreements are not included in the Los Angeles Times analysis.
Hirsch correctly noted that companies of all types receive billions of dollars in subsidies every year, with fierce competitions between states for plants and projects a common occurrence. And Musk and his lieutenants have convinced individuals and groups to pour massive private investment into his companies as well. But there’s a difference with Tesla, SolarCity and SpaceX.
“Public subsidies for Musk’s companies stand out both for the amount, relative to the size of the companies, and for their dependence on them,” Hirsch wrote.
That fact was reinforced by a revelation in Vance’s book about Musk, which claimed that Tesla nearly went bankrupt in early 2013 without investors knowing. Musk was said to have sought out an agreement with Google to buy the company, which turned out to be unnecessary. Later that year Tesla announced it would repay its $465 million loan from the Department of Energy, but according to investment lawyer John Petersen (in a NLPC report), that move was necessary to avoid default due to Tesla exceeding allowed debt-to-earnings ratios.
Nonetheless, despite all of Musk’s scrambling to cover his losses and preserve his investments, the business and Hollywood media upholds him as a quasi-mythical genius in the mold of “Iron Man” alter ego Tony Stark. The story goes that actor Robert Downey, Jr. actually modeled his portrayal of the Marvel Comics character right down to Musk’s mannerisms and mindset. And politicians seem to open the government spigot every time they are able to brush the hem of Musk’s garment.
“He definitely goes where there is government money,” said Dan Dolev, an analyst at Jefferies Equity Research. “That’s a great strategy, but the government will cut you off one day.”
We have so many superheroes whose humanity is rooted in scientific brilliance and wealth – The Hulk, Batman, Spiderman, Ant-man (in theaters soon!). And now the connection has been made between real-life Elon Musk and his official alternate identity: The Leech.
Paul Chesser is an associate fellow for the National Legal and Policy Center and publishes CarolinaPlottHound.com, an aggregator of North Carolina news.