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Fact-checking public funding Elon Musk ventures receive

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Mohamed Salih

Mohamed Salih

"Very interesting indeed! I think you ..."
NB

Nathan Briggs

"Below is proposed text to add under C..."
Mohamed Salih

Mohamed Salih

"Very interesting argument and importa..."
Charles Turner

Charles Turner

"This is great, Creighton. I encourage..."

Elon Musk entered into a Twitter debate with Existential Comics, a political-satire website with 197,000 Twitter followers. On May 11, Existential Comics claimed that libertarian support for Musk is misplaced because his ventures receive substantial funding from the U.S. government. Musk disputed the allegations, arguing his companies are actually subsidized less than his competitors. He ended the discussion by blocking Existential Comics. 

Here are the claims that require fact checking:

Claim 1: Competing automakers in the United States receive more taxpayer money than Tesla.

Elon Musk tweeted: “Our giant auto co competitors have much greater access to incentives than Tesla, which means Tesla has prospered in spite of gov’t subsidies, not because of them” (“Incentives” are tax breaks and subsidies typically used by state and local governments to lure in businesses and the jobs that come with them.)

Elon later tweeted a 2015 article from The Guardian, which states that “fossil fuel companies are benefiting from global subsidies of $5.3tn (£3.4tn) a year, equivalent to $10m a minute every day, according to a startling new estimate by the International Monetary Fund.”

Fact Check

Musk’s argument is generally true, according to data from the U.S. non-profit Good Jobs First. Good Jobs First describes itself as helping “public officials seeking to make economic development subsidies more accountable and effective.” The group tallied grants, tax credits, loan guarantees, loans, and bailouts from both state and federal sources.

Current total subsidies for U.S. carmakers are listed below. Sums include available data for federal awards (from 2000 to the present) and state awards (most statistics since 2010, but some as early as 1992). They also include future tax credits promised over the next 20 years by the state of Nevada, covering Tesla’s battery factory.

In total, Tesla has received or been promised fewer grants and tax credits than Ford and GM, but more than Fiat Chrysler. However, when loans, loan guarantees, and bailouts are considered, all three major U.S. carmakers have received vastly more government money than Tesla.

Tesla:
Total grants and tax credits: $3.5 billion
Total loans, loan guarantees, and bailout assistance: $0.5 billion

Fiat Chrysler:
Total grants and tax credits: $2.2 billion
Total loans, loan guarantees, and bailout assistance: $17.6 billion

General Motors:
Total grants and tax credits: $6 billion
Total loans, loan guarantees, and bailout assistance: $50.3 billion

Ford Motor:
Total grants and tax credits: $4 billion
Total loans, loan guarantees, and bailout assistance: $27.6 billion

 

The funniest thing about libertarians worshipping @elonmusk is that he's basically the villain from Atlas Shrugged. He makes all his money from government subsidies and contracts, and by wildly exaggerating production to pump up stock prices. Our giant auto co competitors have much greater access to incentives than Tesla, which means Tesla has prospered in spite of govt subsidies, not because of them. Tesla mkt cap has *risen* over time as EV incentives declined. How strange …
Screenshot of tweet from Existential Comics and Elon Musk’s reply.

More Context

Subsidy for the rich

Conservative columnist Phil Kerpen criticized Tesla in the National Review for creating a “transfer of wealth to a rich hobbyist” every time a model was sold.  Tesla Motors produces a premium electric car. In terms of wealth, an estimated 90 percent of electric car consumers are in the top 20 percentile, according to a 2015 study from the Energy Institute at Haas at Berkeley University. While the average income is roughly $56,000 in the United States, the average income of a Tesla owner is $320,000, according to the Los Angeles Times.

Germany briefly removed Tesla from its list of electric cars that qualified for subsidies, citing the high price of the vehicle.

The Los Angeles Times story, which was disputed by Elon Musk, cites a study from Strategic Visions, but did not include a link to the study. Include Strategic Visions study when located). 

 

Electric cars may contribute more to pollution-related illnesses than gas-powered vehicles

In the Twitter exchange, Musk points to an International Monetary Fund study that claims that the fossil fuel industry receives $5.3 trillion worldwide, every year, from government. Roughly half of this figure comes from medical costs that come from treating illness related to air pollution associated with burning fossil fuels. Authors of the study argue that taxpayers ultimately pay for treating those who become sick from coal and other fossil fuels, payments that effectively act as a subsidy for oil and gas companies.

However, gas-powered cars in the United States contribute little to these health costs, which are largely driven by the use of coal. The distinction between fossil fuels is most pronounced in countries where coal is still widely used. With coal production on the decline in the United States, and most cars not run on coal, the health impacts of traditional auto emissions are less costly than the global picture offered in the IMF study (Financial Times). 

If anything, electric cars such as those produced by Tesla may be more likely to contribute to the public health problems around air pollution, given that 30 percent of American electricity comes from coal (U.S. Energy Information Administration). 

Claim 2: The U.S. government invested more money in Tesla and SpaceX than Elon Musk did. Yet the government has no voice in corporate decisions.

Existential Comics tweeted: “The government invested more money in Tesla & SpaceX than you, by far. They have no voting shares because you sell off over inflated stocks to keep the public from having a say in your run your publicly funded companies.”

Fact Check

Existential Comics is generally correct. It’s true that government agencies have invested more total dollars in Tesla and SpaceX than Musk has personally. But, comparing Musk’s financial contributions with the U.S. government fails to account for private equity groups, such as Alphabet and Fidelity Investments, which have invested more than a billion dollars combined in Tesla Motors.

Tesla: As stated, according to the Good Jobs First study, Tesla Motors has received $3.5 billion in subsidies, including government tax breaks. Musk had invested $70 million of his own money in the company as of 2012, according to Investors’ Business Daily (need to confirm source). 

Musk has famously not accepted salary from Tesla and says he won’t do so until the company reaches $100 billion in market capitalization, meaning its value on the NASDAQ stock exchange. If and when it does reach this financial threshold, Musk could see a windfall of $55.9 billion (Bloomberg).

SpaceX: It’s more difficult to calculate the finances of SpaceX since since it’s a privately held company, and thus not required to list its earnings. Because the funding of SpaceX is less transparent, media outlets consistently refer back to an article in The Los Angeles Times claiming Musk ventures have received $4.9 billion in government subsidies. Musk disputes the characterization made in The Los Angeles Times story as one-sided. 

But based off what we know, and using The Los Angeles Times story as little as possible, Existential Comics claim is partly true. Musk has invested roughly $100 million of his own money in SpaceX, while NASA and the U.S. Air Force alone have allocated at least $5.5. billion to various SpaceX ventures, according to The Los Angeles Times.

Much of that taxpayer money has come in the form of contracts. The Wall Street Journal estimated that 70 percent of SpaceX contracts come from the U.S. government. An op-ed in Ars Technica said NASA internal documents put the figure at 85 percent.

The Air Force, in particular, is beginning to award SpaceX contracts typically reserved for the United Launch Alliance, the joint venture of Lockheed Martin and Boeing. In March 2018, the U.S. Air Force entered into a $290 million contract with SpaceX to launch three GPS satellites by 2020, according to The Wall Street Journal.

SpaceX has also received considerable investment from private equity firms. Fidelity Investments invested $400 million in April 2018. This was on top of the billion dollars Fidelity invested alongside Alphabet Inc. in 2015 (Forbes). Alphabet secured a 7.5% stake in SpaceX in that deal. (https://www.fool.com/investing/2016/06/25/how-does-spacex-make-money.aspx)

Better than the alternative?

Musk presents SpaceX as a taxpayer-reliant business that’s vastly more cost effective than the alternative. He’s criticized the United Launch Alliance, SpaceX’s competition for space contracts, for receiving around $1 billion from the U.S. Air Force regardless of how many rockets the company launches (Futurism). A SpaceX launch costs roughly $70 million less than the service ULA provides (Tech Crunch). 

SpaceX’s annual budget is between $800 and $900 million, a figure cited in 2015 by Ashlee Vance in his biography of Musk (The Motley Fool). The Wall Street Journal reported SpaceX was barely managing this budget after obtaining internal SpaceX documents that showed the company had a profit margin of about 0.2 percent in 2015, leaving the company vulnerable to an accident or bad year. But business tides have shifted for SpaceX, with the successful launch of the Falcon Heavy in February apparently persuading the government to award the space company with more lucrative contracts. 

Fox News Business calculated that SpaceX earned roughly $1.15 billion in revenue after launching 16 rockets between January and November 2017. 

Claim 3: Elon Musk prospered from closing PayPal accounts and “pocketing the balance.”

Existential Comics tweeted: “Jesus dude, market cap isn’t what was invested. You put in like $70 million of the money you got from ripping people off with PayPal. The government put in half a billion. If you allowed that money to be vested into shares, they would OWN part of that market cap.”

Screenshot of Existential Comic allegation

 

Begin fact-checking the previous two claims through EDIT STORY. Start with “FACT CHECK:“. Direct questions and suggestions via TALK. 

Sources to contact/cite: 

Good Jobs First 

 

History for stories "Fact-checking public funding Elon Musk ventures receive"

Select two items to compare revisions

17 May 2018

21:51:01, 17 May 2018 . .‎ Chuck Thompson (Updated → tweak)
20:36:36, 17 May 2018 . .‎ Charles Turner (Updated → added screenshot and title to claim 3)
19:59:08, 17 May 2018 . .‎ Chuck Thompson (Updated → copy edit, fact check)
18:07:26, 17 May 2018 . .‎ Charles Turner (Updated → update to claim 2)
02:39:44, 17 May 2018 . .‎ Charles Anderson (Updated → publish)
02:22:40, 17 May 2018 . .‎ Charles Turner (Updated → finished more context in first claim)
01:04:30, 17 May 2018 . .‎ Charles Turner (Updated → update to tesla solar)

16 May 2018

21:41:16, 16 May 2018 . .‎ Nathan Briggs (Updated → Added fact check text for the first claim)

15 May 2018

15:59:13, 15 May 2018 . .‎ Ken Snider (Updated → Typo fixes.)
15:44:07, 15 May 2018 . .‎ Ed Upright (Updated → hyphen fix)

14 May 2018

09:57:18, 14 May 2018 . .‎ Burhan Wazir (Updated → Removed copyrighted graphic)
09:56:10, 14 May 2018 . .‎ Burhan Wazir (Updated → edited claim 3)
08:52:31, 14 May 2018 . .‎ Andrea Zanni (Updated → added new tweet by EM that cited a Guardian article from 2015)
08:08:57, 14 May 2018 . .‎ Fiona Apps (Updated → Tweaking language somewhat)

13 May 2018

22:51:33, 13 May 2018 . .‎ Jasper Alt (Updated → Clearer description of claim 2)
21:19:14, 13 May 2018 . .‎ Charles Turner (Updated → merge for publication)
21:15:03, 13 May 2018 . .‎ Charles Turner (Updated → pub fact-checking project, started by Mohammad Salih)
20:48:43, 13 May 2018 . .‎ Charles Anderson (Updated → update)
20:47:33, 13 May 2018 . .‎ Charles Anderson (Updated → publish)

Talk for Story "Fact-checking public funding Elon Musk ventures receive"

Talk about this Story

  1. Rewrite

    Below is proposed text to add under Claim 1. If the authors agree that this represents good fact checking, feel free to add it word for word or edit as you like:

    Claim 1: Other automakers in the United States receive more taxpayer money than Tesla.

    According to data from “Good Jobs First”, this claim appears to true by a wide margin, when all grants, tax credits, loan guarantees, loans, and bailouts from both state and federal sources are taken into account.

    Good Jobs First is a US non-profit organization that describes itself as “The nation’s leading resource for grass roots groups and public officials seeking to make economic development subsidies more accountable and effective.”

    Current total subsidies from US carmakers are below. Sums include all available years of data, which are 2000-present for federal awards and variable for state awards (most are since 2010, but some as early as 1992). They also include future tax credits promised over the next 20 years by the state of Nevada at Tesla’s battery factory.

    In total, Tesla has received or been promised fewer grants and tax credits than Ford and GM, but more than Fiat Chrysler. However, when loans, loan guarantees, and bailouts are considered, all three other US carmakers have received vastly more government money than Tesla.

    Tesla: https://subsidytracker.goodjobsfirst.org/prog.php?parent=tesla-motors
    Total grants and tax credits: $3.5 billion
    Total loans, loan guarantees, and bailout assistance: $0.5 billion

    Fiat Chrysler: https://subsidytracker.goodjobsfirst.org/prog.php?parent=fiat-chrysler-automobiles
    Total grants and tax credits: $2.2 billion
    Total loans, loan guarantees, and bailout assistance: $17.6 billion

    General Motors: https://subsidytracker.goodjobsfirst.org/prog.php?parent=general-motors
    Total grants and tax credits: $6.0 billion
    Total loans, loan guarantees, and bailout assistance: $50.3 billion

    Ford Motor: https://subsidytracker.goodjobsfirst.org/prog.php?parent=ford-motor
    Total grants and tax credits: $4.0 billion
    Total loans, loan guarantees, and bailout assistance: $27.6 billion

    1. Rewrite

      Very interesting indeed! I think you can add it directly to the original report, Is good job first the only non-govermnal organization that track these issues? I will spend time today to investigate that.

  2. Rewrite

    Claim 1: Other automakers in the United States receive more taxpayer money than Tesla.

    This is money going from government to automaker, wouldn’t it be better to also look at money going from automaker to government?

    Maybe one automaker pays taxes and gets subsidized while the other doesn’t pay taxes through some construction but is also not subsidized.

    My suggestion would be:

    Claim 1: The sum of value flowing between other automakers and the government results in the other automakers having more benefit thanTesla.

    1. Rewrite

      I think the original claim is probably worded correctly but your point about net subsidy (money received – money paid in taxes) is definitely an important point to make since subsidy could be money given directly or tax breaks. Probably worth stating figures in absolute terms and relative to company revenues, market caps and maybe number of employees to get a good picture.

    2. Rewrite

      Do we want to include the government bailout of General Motors in that calculation? I don’t have a hard number for the net cost to tax payers, but different sources are putting the cost around 10 or 11 billion dollars. That’s net cost, not the total value of the benefit to GM.

      I think this paints a fair counter-point to the $4.9 billion in government aid that Tesla is claimed to have benefited from, as this total includes the total value of incentives that are to be received over the course of a decade. This total is inflated (in my opinion) as it includes a government benefit for solar installations to citizens. Government money ultimately goes to SolarCity, but the benefit is to the consumer who receives the solar installation at a lower cost.

      1. Rewrite

        The focus is on the availability to economic incentives. But I think the bailouts are an interesting piece to this. That should be included considering the sum.

        Can you link to the figures you provided?

        1. Rewrite

          This cites the $11.2B number for GM that is pretty common in searches: https://www.reuters.com/article/us-autos-gm-treasury-idUSBREA3T0MR20140430

          This puts the number at $11.3B for GM, but includes more companies in the bailout total, putting the number at $10.2B rolled up: https://www.thebalance.com/auto-industry-bailout-gm-ford-chrysler-3305670

          You could argue that the government was an investor in the company, so the money isn’t government aid, as the government had a majority ownership stake (60% at the peak). I disagree with this argument – at the end of the day, government money went to the company

          1. Rewrite

            This is great, Creighton. I encourage you to add this info into the story. I can do it, but it will take me a couple of days.

          2. Rewrite

            Very interesting argument and important sources, I encourage you to add the links you provided to the main report, so they will appear to anyone reading it, and we can all discuss and reach to final argument.

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