How Much Should Taxpayers Invest in Elon Musk?

Many Americans know a little about the life and times of Elon Musk, the visionary futurist and dynamic billionaire. Musk grew up in South Africa, moving eventually to Canada and then the United States. He received Bachelor's degrees in physics and economics at the University of Pennsylvania, and spent just two days in a Ph.D. program at Stanford before deciding to become a cutting-edge tech sector entrepreneur instead. He has never looked back since.

Few people realize that Musk played an important part in the creation of PayPal. More familiar is Musk's role as the CEO of Tesla, an innovative and increasingly successful auto manufacturer that produces stylish electric cars. He also helped found SolarCity, one of the leading companies in the United States that manufactures solar panels. Currently, Musk is planning an integrated network of satellites that could provide broadband internet access to the entire planet, and he is exploring artificial intelligence and the potential for “brain-computer interfaces.”

Perhaps Musk's greatest claim to fame is his role as founder and CEO of SpaceX, a company that has made enormous strides in the commercialization of space flight. Not only does SpaceX deliver payloads (cost-effectively) into space, for private companies and for NASA and the U.S. military, but it also has ambitious plans to build a human colony on Mars. In the near term, it plans to send two space tourists on a lunar fly-by in 2018. It is no wonder that Musk has been repeatedly recognized for his boldness and vision. Forbes, in fact, has named him as the 21st most powerful person on earth --and, one assumes, his Martian ranking must be even higher.

Like all celebrated inventors/entrepreneurs, however, Musk has had his share of failures and detractors, and more importantly his successes have always come at a price. Increasingly, that price is borne by taxpayers, in the form of costly subsidies, tax breaks, and government contracts. According to the Los Angeles Times, Musk's companies have received, or will receive, government subsidies and tax breaks totaling $4.9 billion! It is thus reasonable to ask: is Elon Musk worthy of such a giant investment of taxpayer dollars?

Musk is, as one would expect, a brilliant self-promoter. Indeed, his fame is part of his entrepreneurial strategy. Where his penchant for self-aggrandizement becomes politically problematic is in the field of lobbying, where Musk's companies excel. SpaceX, for example, has spent at least $4 million on lobbying since 2002, and, surely not coincidentally, it has received massive contracts from NASA to send supplies to the International Space Station (ISS).

The initial contract, valued at $1.6 billion, was cheap compared to the multi-billion-dollar commitments that NASA has since made to SpaceX – and costs per mission are escalating in a troubling way. SpaceX is also increasingly the space transport company of choice for the U.S. Air Force, which employs SpaceX to launch highly sensitive national security payloads. Moreover, thanks to the way SpaceX's contracts with the government are written, even in the case of rocket failures SpaceX gets paid virtually all of its fees.

Meanwhile, NASA has shown favoritism towards SpaceX in at least one instance of rocket failure, seemingly concealing the findings contained in accident reports. The recent explosion during testing of SpaceX's Block 5 Merlin engine, slated for use in manned missions, raises the stakes considerably. The public has the right to know whether SpaceX's lobbying efforts, and the Musk brand's sheer notoriety, lead the government to treat SpaceX with kid gloves. Given that the company will soon be shuttling not just supplies, but astronauts, to the ISS, the question is not merely academic or financial. It could become a matter of life and death.

Conservatives may also be troubled by the fact that Musk steers most of his political donations to Democrats (he gave the maximum allowable amount to President Obama's reelection campaign), and he has sharply criticized President Trump and even resigned from two advisory panels in protest against the President's decision to withdraw the U.S. from the Paris climate agreement. Musk is by no means as political or as “progressive” as many other California billionaires, but his agenda, insofar as he has one, is more in line with Democrats than Republicans.

Musk's ventures can also stimulate corruption and wasteful government spending. For example, much controversy surrounds the “Buffalo Billion” project in Western New York, which is investing state funds on a massive scale to underwrite the construction of a factory to produce solar panels for Musk's SolarCity company. Much of the state money has apparently been steered to contractors that donate money to Governor Cuomo, however, and it remains to be seen whether the promised 1,500 jobs will materialize. SolarCity has also faced scrutiny for its sales and pricing policies, and it has paid a $29.5 million penalty to the federal government for allegedly misrepresenting how much it invested in new facilities.

In many ways, Mr. Musk's innovations in space travel, clean energy, transportation, and artificial intelligence are the embodiment of classic Yankee ingenuity, and they help to keep the U.S. at the forefront of technological evolution. In this sense, every American should be rooting for Musk to succeed. The truth, though, is that even high-flying visionaries need to be brought back down to earth from time to time, and more importantly the beneficiaries of government spending should always be accountable to the American taxpayer. Otherwise, we, the people, may find ourselves on a Musk-supplied rocket, or perhaps an electric car, to nowhere. That would be a disappointing conclusion to the often-inspiring story of Elon Musk.

Dr. Nicholas L. Waddy, associate professor of History at SUNY Alfred, blogs at: 

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