“Commercial space”: subsidies for billionaires?

I grow fatigued*…

…By the claims of so-called “commercial” space companies and their proponents that – at last! – NASA’s doing business in a new way, the right way, the free-market way, buying launch services on the market.

It’s not a new way – NASA’s been buying launch services from private companies for decades. It’s not the “right” way – there is no “right” way…at least not until some business can offer the government cheaper space launch services without first demanding subsidies to develop the services.

And – and this is what keeps sticking in my craw – it’s not the free-market way, not with the government doling out hundreds of millions of taxpayers’ dwindling dollars in subsidies.

NASA’s April 18 announcement of its “Next Set Of Commercial Crew Development Agreements” http://www.nasa.gov/home/hqnews/2011/apr/HQ_11-102_CCDev2.html – a total of $269.3 million to amazon.com magnate Jeff Bezos’ Blue Origins, the egomaniacal Elon Musk’s SpaceX, the mysterious family-owned business Sierra Nevada Corp., and The Boeing Company

“These awards,” says the agency, “are a continuation of NASA’s CCDev [Commercial Crew Development] initiatives, which began in 2009 to stimulate efforts within U.S. industry to develop and demonstrate human spaceflight capabilities.”

Why do these “commercial” space companies need government handouts? The awardees are not hard-up start-ups (and these government handouts are not their first).

Jeff Bezos, founder and, presumably, owner, of Blue Origins, has a personal net worth of $18.1 billion, according to Forbes – equal, ironically, to NASA’s annual budget. The company provides no financial information whatsoever on its web site, nor is it available from the usual business web sites.

Elon Musk is not forthcoming about his net worth. Some say he’s invested most of his money in his companies. In addition to this month’s $75 million subsidy from NASA, SpaceX also has a $1.6 billion contract with NASA to provide cargo resupply services the International Space Station, “with an option to order additional missions for a cumulative total contract value of up to $3.1 billion.”

Musk’s Tesla auto company, producer of $100,000-plus electric cars for movie stars and others with money to burn, has received close to a half billion dollars in low-interest loans from the U.S. Department of Energy.

According to Bloomberg Businessweek, Mr. Musk co-founded PayPal and served as its Chief Executive Officer from May 2000 to September 2000. In 1995, he co-founded Zip2 Corp. with investments from the New York Times Co., Knight-Ridder, MDV, Softbank, and the Hearst Corp. In 1999, he sold Zip2 to Compaq “for the largest cash deal in Internet history.” compensation from Musk’s annual compensation from SpaceX is reported to be around $33,000. The total value of his stock options in his privately held company is reported to be $134.2 million.

According to campaignmoney.com, for the 2009-2010 election cycle Musk contributed $118,000 to political candidates and groups. For the 2007-08 election cycle his contributions totaled $93,000, including $28,500 to the National Republican Congressional Committee in 2007 and $25,000 to the same group in 2008.

Sierra Nevada Corp. (SNC) may be new to the civilian space business, but it’s a well established member of the military-industrial complex, until recently doing business largely on classified government projects. The privately owned company offers no financial information on its web site (though the company does report it has earned “Top Woman-Owned Federal Contractor” status), and information on the net worth of SNC’s CEO and president Eren and Fatih Ozmen is equally elusive. See USAspending.gov for information on SNC’s (or any other company’s) contracting history with NASA.

Last August, SNC “proudly announced that Inc. magazine ranked Sierra Nevada Corporation in the Top 10 for Growth in Dollars out of the 5000 companies selected on its 29th annual Inc. 500, an exclusive ranking of the nation’s fastest growing private companies.” Inc. magazine reported the following details about SNC: 3-year growth, 189 percent; 2009 revenue, $993.7 million (2006 revenue: $344 million); company founded 1963.

According to campaignmoney.com, during the 2009- 2010 election cycle SNC’s CEO and president contributed more than $50,000 to political candidates and their organizations plus SNC’s company PAC (their contributions for the 2007-2008 election cycle totaled around $62,000).

As to the aerospace behemoth Boeing, its 2010 profit – or “net income,” as Boeing calls it – was $3.3 billion, on revenues of $64.3 billion, with a year-end backlog of $321 billion. I won’t even try to sort out how much money Boeing invests in lobbying and political campaigns.

Why do these companies need subsidies? If I had a say in how the government invests my tax dollars, I’d say “No!” to all four of these outfits.

*“Star Trek: The Wrath of Khan”


3 Responses to ““Commercial space”: subsidies for billionaires?”

  1. Mike Puckett Says:

    Yeah, and the post office should have never given those air mail contracts to those rich airline start-ups in the 20’s and 30’s either……..

    This amount is seed money, it is a rounding error in the context of the national budget that amounts to half the cost of ONE shuttle flight!

    I think it’s a brilliant investment in a new industry that will ultimately create an enormous number of high-tech, high-paying jobs. If you can move up its creation by just five years, you are adding a ton of revenue-generating activity to our GDP, way more than this seed money.

    In time, this money will find it’s way back to the treasury in spades! Just like the seed money spend by the DOD and NASA in the 60’s helped greatly accelerate the development of the semiconductor industry. I am typing on the fruit of that crop right now.

  2. gaetano marano Says:

    “Five Vehicles Vie To Succeed Space Shuttle” … in 2017 (Dragon, CST-100 and Orion) or 2020 (the BlueKliper) or never (the Dreamchaser) and ONLY if NASA will give to these companies $5+ billion of government money in CCDev-3 and CCDev-4 funding programs
    read why in my comments posted in these two AvWeek articles:

  3. chuck Says:

    But for the NASA subsidies, and but for the expectation of future business from NASA, none of these companies would be in this business. Moreover, the amount of the “subsidies” is being misrepresented by those handing them out – closer scrutiny of NASA and other agency support to “commercial space” below the budget line item would reveal an iceberg of spending that is arguably contrary to Congressional direction. The last time I checked, Congress had power of the purse, not agency bureacrats. Not to mention that civil servants are not qualified to make decisions best left to investment bankers. Reagan prohibited such subsidies, favoring indirect support like tax credits and loan guarantees for such an unproven market – which remains unproven today. Look at the checkered history of the commercial remote sensing and telecommunications market, as well as the commercial launch business, and you have to wonder why bureaucrats are throwing billions at a new market for rich tourists.

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