In 2009, the Obama administration guaranteed $535 million of loans to Solyndra, a solar panel manufacturer whose prospects were, to be charitable, uncertain. The president appeared in person to sanctify the arrangement. Two and a half years later, the company imploded; the triumphant photo op turned into a half-billion-dollar write-off for the American public.
Republican leaders reacted with understandable outrage. House Energy Committee Chair Fred Upton denounced the arrangement as “a classic case of fraud and abuse.” Senator Marco Rubio called it a waste of taxpayer money. During his first presidential debate with Hillary Clinton, Donald Trump implied the deal was a disaster.
They weren’t wrong. The criticism reflected a classic strain of Republican thinking: When politicians gamble the public’s money without proper incentives or accountability, partisan priorities will always transcend market discipline.
How times have changed.
During the second half of 2025, the Trump administration went on a buying frenzy, acquiring stakes in several semiconductor and critical minerals enterprises. This activity would have provoked apoplectic denunciations from Republicans if conducted under a Democratic president. And justifiably so. The administration’s departure from GOP orthodoxy embodies the same defects as the Obama strategy, only metastasized to a scale unprecedented in American peacetime.
Consider the government’s $8.9 billion investment in Intel. As with Solyndra, Intel’s difficulties stemmed from strategic missteps. Outmaneuvered by competitors, the company’s stock price cratered. In an attempt to stabilize the situation, management eliminated 15,000 jobs and suspended its dividend.
These problems cannot be solved by injecting cash while praying political resolve will repeal the laws of economics. They are warning signs that oblige prudent investors to weigh a multitude of risks and benefits cautiously before deciding to proceed.
Bureaucrats are incapable of performing this task. With no skin in the game, they are unbound by market constraints. Sound investment decisions are impossible when failure is consequence-free.
Private investors provide capital on terms reflecting financial reality rather than political wishful thinking. When outside investment is otherwise unavailable and the government steps in, one of two things has happened. Either the private markets saw risks the politicians missed, or electoral imperatives outweighed economic logic. In either case, markets allocate capital more efficiently than civil servants do.
If national security demands increased domestic capacity—one justification offered in defense of the recent government investments—the true government solution is to remove the onerous regulations that caused the problem in the first place. The United States possesses abundant rare earth reserves and once dominated global semiconductor manufacturing. The exodus of these industries was a predictable consequence of decades of deliberate policy, not an accident of geology or the result of a decline in talent.
The permitting gauntlet alone is paralyzing. Various federal agencies operate under numerous statutes with no coordinating authority. State-level mandates duplicate and contradict federal obligations. Sequential requirements compel project developers to endure Kafkaesque odysseys. As a result, rare earth mining approvals take eight to nine years in the U.S., only two to four years abroad. Building a semiconductor fabrication facility on American soil costs twice as much and requires twice the time as one built elsewhere.
We didn’t lose these industries to chicanery; we regulated them away. American companies with American capital, American talent, and American supply chains found it cheaper, faster, and less litigious to produce elsewhere. Now we are vexed by their absence, and we’re throwing money at the problem to coax them home. But the problem is excessive interference, not insufficient capital. The path forward doesn’t require yet another subsidy layered atop the suffocating regulatory apparatus. It requires the removal of the apparatus itself.
Even if one assumes that active intervention is required to return these industries to American shores, a question naturally follows: Should the state designate particular enterprises in those industries to receive aid?
Traditionally, Republicans answered this query with a resounding no.
Paul Ryan articulated the party’s stance in the 2011 GOP response to the State of the Union: “Washington should not be in the business of picking winners and losers.” The sentiment was and is sound. The government should adopt company-neutral policies, not play venture capitalist. For example, it could provide broad-based tax credits to those constructing foundries in America, or offer research grants to any qualified manufacturers. Such policies also create inefficiencies. Government programs almost always do. But at least they avoid the inefficiencies created when the state puts its thumb on the scale.
The alternative—permitting elected officials to select beneficiaries—substitutes political patronage for market constraints, creating the winner-and-loser dynamic that the GOP once reflexively opposed. National security becomes a pretext for favoritism. Even when such arrangements dodge the spectacular collapse of a Solyndra, they rarely redound to the benefit of ordinary Americans.
Let’s go a step further and accept the dubious premise that national security concerns justify supporting hand-picked “essential” firms; the question of method remains.
Howard Lutnick, the secretary of commerce, insists investments are superior to grants. He declared taxpayers deserve equity returns on the $8.9 billion granted to Intel under the Biden-era CHIPS Act. The president concurred, implausibly claiming that re-cutting the original deal created $11 billion in value “at zero cost” to taxpayers. To Trump and Lutnick, those who advocate for grants over investments are suckers.
Trump and Lutnick misunderstand the fundamental purpose of government intervention. It is decidedly not to make money. The U.S. isn’t a private equity fund, and taxpayers are not its limited partners. The goal should be to advance a particular societal interest, not commercial gain. And this interest should be advanced in the least intrusive way possible, minimizing knock-on problems that arise from any state intercession.
Grants afford a clean separation between public largesse and private management. Once a grant is bestowed, government involvement typically ceases; private investors keep control and bear the consequences of future failure or success. As a result, once awarded, a grant preserves market discipline.
Of course, grants are not immune to abuse. Congress passed the CHIPS Act to strengthen the domestic semiconductor industry. In implementing the act, the Biden administration channeled funds to the “underserved and economically disadvantaged” and required grantees to provide childcare, pay union-set wages, and foreswear stock buybacks. None of that did a thing to reduce dependence on foreign suppliers, illustrating that partisan priorities corrupt even well-intentioned programs.
Even so, if the government insists on bolstering individual firms, then grants remain preferable to equity investments because, unlike grants, equity arrangements encourage continued meddling even after they have been made.
As long as the government is a shareholder, it will continue to push the company to do more and more things having nothing to do with profit maximization. Perhaps that will be jobs, or domestic production, or alignment with some environmental goal. Whatever it is, the perpetual interference creates continuous market distortions—not just of the anointed firm but of its business partners and competitors as well—as political considerations influence business strategy long after the investment is made. Ironically, these distortions undermine the advantages the policy aims to deliver.
The problem is the incompatibility between partisan ambitions and commercial efficiency. Politicians want political outcomes. Businessmen want profits. When you merge those two, you don’t get the best of both. You get the worst of both. They are as compatible as Lindsey Buckingham and Stevie Nicks.
On top of this, government investment leads to capital misallocation, as rent-seeking private investors flock to state-backed firms not because they are efficient but because they are state-backed. This reduces resources otherwise available to genuine innovators. The result is inefficient and counterproductive, as the capital markets starve the next Apple to feed the next Amtrak.
The original planned grant would have furnished Intel with identical financial resources while preserving its independence. As a result, it would have been much more likely to achieve the legislation’s stated aim. If the threat to the country is as considerable as the administration contends, that concern, rather than the prospect of investment returns, should be the focus. The gap between the rhetoric and the mechanism unveils the administration’s true priority.
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Faced with the choice of honoring the grant framework of the CHIPS Act or leveraging already committed funds to acquire equity in Intel, it is no surprise that this administration chose the latter. But this choice set a dangerous precedent, enabling the retroactive conversion of any existing commitment into an ownership interest in a wide variety of industries and enterprises.
By the end of 2025, the U.S. had acquired stock in at least a half dozen corporations, confirming that the Intel investment was part of a deliberate strategy, not an isolated occurrence. The tools to implement this strategy extend beyond equity purchases to include many other mechanisms designed to subordinate private business decisions to executive-branch determinations of “national interest.” Among other things, the president demanded royalties as a condition for granting AMD and Nvidia licenses to export their advanced AI chips to China. He insisted on a “golden share” (a non-pecuniary instrument that grants him veto power over major corporate decisions) before approving Nippon Steel’s acquisition of U.S. Steel. And he issued an executive order curbing the ability of defense contractors to repurchase stock, pay dividends, and set the compensation of their executives.
It appears the administration is far from done. In January, the Commerce Department agreed to buy a stake in USA Rare Earth, a critical minerals and magnet-manufacturing company, and administration officials recently announced they are considering acquiring equity in several quantum computing and defense companies. President Trump seems indifferent to the possible consequences.
Continuing on this path risks transforming America’s free enterprise system into something resembling Europe’s sclerotic mixed economies, a sprawling maze of state-backed enterprises entangled in patronage and cronyism. Not socialism exactly, but a system that shares socialism’s fundamental defect: substituting bureaucratic judgment for market discipline.
The outcome will be both predictable and calamitous. By almost every measure, European economies have stagnated, while America’s has thrived. U.S. GDP per capita exceeds that of Western Europe by 37 percent. Adjusted for purchasing power, Mississippi, the poorest American state, enjoys a higher per capita GDP than the United Kingdom, France, Italy, and Spain. American median disposable income substantially exceeds that of every major European nation except Luxembourg.
Even in mundane domestic details, the contrast is revealing. American households own clothes dryers at twice the rate of Western European households. And 90 percent of American homes have air-conditioning versus a mere 20 percent in Europe. These differences reflect economic reality, not a stoic aversion to comfort.
Europe’s underperformance has many causes, but state interference in critical enterprises ranks prominently among them. The damage extends well beyond the firms that receive government largesse, as private actors face relentless pressure to conduct business with state-backed enterprises, even when they deliver inferior value. The result is a market corrupted by politics.
History provides an instructive counterexample. When Margaret Thatcher took office in May 1979, Britain’s economy suffered from double-digit inflation and stagflation; productivity had fallen significantly relative to other Western European countries. In response to these circumstances, the Iron Lady set about denationalizing Britain’s expansive state sector. By privatizing British Telecom, British Gas, Rolls-Royce, British Airways, and dozens of other firms, Thatcher converted the “sick man of Europe” into one of its most vibrant economies.
The British example is not a fluke. A 1992 World Bank analysis found the benefits of properly executed privatization “to be considerable,” with domestic well-being increases in 11 of 12 cases across the globe. The authors of the study conclude that private ownership “makes a difference. Some state-owned enterprises have been efficient and well managed for some periods, but government ownership seldom permits sustained good performance over more than a few years.”
Ignoring the lesson of these examples, the Trump administration continues to embed itself deeper and deeper into private enterprise. Convinced it will succeed where others have failed, it embraces the state corporatism that cripples other advanced economies.
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The transformation of the U.S. economy would pose an even greater hazard than material decline: loss of political liberty.
Friedrich Hayek published The Road to Serfdom in 1944. Milton Friedman published Capitalism and Freedom in 1962. These classic works warn of the menace at the heart of state corporatism: Financial dependency erodes political freedom. When individuals depend on government-controlled or -influenced entities for employment or business opportunities, the capacity to challenge authority becomes, for all practical purposes, impossible. The stakes become existential; opposition invites economic ruin.
China offers the purest example. The Communist Party’s dominance over the economy enables suppression of dissent. Citizens who challenge orthodoxy face exclusion from careers and commercial prospects. The Soviet Union operated identically.
Some contend that the robust democratic institutions in the U.S. prevent government interference from threatening individual autonomy. These people overlook the potent constraint fiscal dependency imposes on political participation. Transforming disagreement with the government from a civic right into an economic liability corrodes the independence necessary for democratic engagement, even here.
Is there any doubt this process is already underway? The Wall Street Journal reported on a meeting of top-level CEOs and other executives convened by the Yale School of Management. Despite harboring serious qualms about the legality and consequences of Trump-administration policies, participants refused to “speak publicly for fear that their companies could be targeted by the administration.” Separately, David Rubenstein, co-chair of the Carlyle Group, declared his amazement at the number of business leaders who sound alarms about the administration’s actions when they speak to him in private yet refuse to say a word in public. A K Street lobbyist told Politico: “There is absolutely a sense that the administration is keeping a list, and no one wants to be on it.” These accounts indicate that the mechanism Hayek and Friedman described is more than theoretical.
The evidence is overwhelming: Countries with greater economic freedom outperform interventionist economies on growth, living standards, health, and general life satisfaction. This is not just correlation. A large body of research establishes that economic freedom leads to affluence. These countries are also substantially more likely to enjoy elevated levels of political liberty. These connections illuminate a fundamental axiom: When government officials substitute their own judgment for the guidance that market signals provide, the consequences will range from inefficient to catastrophic.
Too many in this country no longer recognize these facts. Recent polling shows a large majority of Democrats embrace “socialism.” Many, including New York City Mayor Zohran Mamdani, urge the government to “seize the means of production” or “nationalize major industries.” The Trump administration’s extraordinary interventions show that leadership on the opposite end of the spectrum is tempted to pursue a similar end. Both parties are sprinting toward increased state intrusion in private markets, united in the delusion that central planning will work this time because they will be the planners. This assumption has failed every time it has been tried.
The president’s supporters insist that this time will be different. They argue that Donald Trump is the most accomplished businessman ever to hold the office. His résumé, they believe, qualifies him to micromanage the private sector. But a talent for navigating the market hardly qualifies one to command it.
Moreover, their conclusion rests on a fantasy: that the same hands will always hold the levers of control. By January 20, 2029, President Trump will be gone. Then what? How will these supporters react when a President Newsom uses his inherited authority to nationalize corporate decision-making in the name of decarbonization, DEI mandates, or unsustainable wage floors? The precedent, once established, stops being “Trump’s tool” and becomes the president’s, to be used by whoever comes next.
While the administration’s actions to date won’t topple American capitalism, we are careening in a perilous direction. If this continues, government equity ownership and other corporatist interventions will become normalized, then routine, then inevitable. The incremental nature of this process makes it particularly insidious. Each decision may seem justified in isolation, but the cumulative effect erodes the market independence essential to both our economic well-being and political autonomy.
Despite the catastrophic outcome of Solyndra, the true peril isn’t that taxpayer dollars will be squandered but that the foundations of our national greatness will be gutted. Both parties now embrace the delusion that they can manage what markets cannot. History offers no example of this ending anywhere but in stagnation, corruption, or worse. The question is not whether the U.S. can survive this development. It is whether Americans will tolerate the loss of prosperity and freedom that inevitably follows.
Photo: Andrew Harnik/Getty Images
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