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Obama rubs elbows with regulatory robber barons

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President Obama on Monday was scheduled to give a pep talk for American manufacturing at a factory in Durham, N.C., where Cree Inc. makes LED light bulbs. Cree embodies Obama-era capitalism: profiting from government grants, political connections, revolving-door lobbyists and regulations that force people to buy your product.

Cree deals mostly in light-emitting diode technology. The company makes LED light bulbs and sells LED components to other manufacturers to put in their own bulbs, automobiles or electronics. This is by far the fastest-growing part of Cree's business.

Company Vice President Greg Merritt spoke about the LED boom in April 2009 at a green-tech conference. "We are in a perfect storm in some respects," he said. After talking about new manufacturing efficiencies, Merritt added, "The political environment for sustainable technologies and energy efficiency is perhaps more favorable today than it's been for quite a while."

Merritt should know -- he and his colleagues helped shape that "political environment." Merritt lobbied Congress on the 2007 energy bill, "Specifically, provisions related to energy-efficient lighting." That is, Merritt and Cree's other lobbyists supported the law that will effectively outlaw the incandescent bulb, thus creating unwilling demand for their more expensive LED bulbs.

Energy-efficient lighting has value even without regulations, but Cree conceded that government is driving demand for its product. The company's latest filing with the Securities and Exchange Commission lists, among the risks the company faces, the risk that consumer choice might be restored.

"The Energy Independence and Security Act of 2007 in the United States imposes constraints on the sale of incandescent lights beginning in 2012," Cree's 10-Q states. "These constraints may be eliminated or delayed by legislative action, which could have a negative impact on demand for our products."

President Obama doesn't see this as the regulatory robbery it is. He sees it as stimulus. After all, the regulation has helped Cree hire new workers. See? Everyone wins!

Well, except for the hundreds of former General Electric factory workers who used to make the old incandescents in factories in Winchester, Va., Niles, Ohio, and Lexington, Ky. Those factories closed last summer thanks to the same law that is benefitting Cree. (Don't cry for GE, though -- the company's lobbyists also supported the regulations, which will drive business to their more profitable fluorescents and LEDs.)

Another loser: the American consumer, who loses the freedom of choice. Columnist Virginia Postrel put it well last week: "The bulb ban makes sense only one of two ways: either as an expression of cultural sanctimony, with a little technophilia thrown in for added glamour, or as a roundabout way to transfer wealth from the general public to the few businesses with the know-how to produce the light bulbs consumers don't really want to buy."

It's not only regulation that helps Cree, but spending, too. From its 10-Q: "Historically, government agencies have funded a significant portion of our research and development activities. In addition, government agencies have purchased products directly from us and products from our customers for which we supply components."

Since 2001, Cree has received more than $78 million in federal grants, according to USASpending.gov, and more than $96 million in federal contracts. And overseas, the Chinese government is Cree's biggest customer. State and local governments also subsidize the company.

When government is your profit driver, political connections are crucial. The company's closeness to this White House is clear. Obama visited Cree's Durham plant during the 2008 campaign, and Joe Biden visited to tout the renewable energy subsidies given to Cree. In 2009, Cree CEO Chuck Swoboda took part in a White House "Clean Energy Economy Forum."

As with any company that plays in the world of subsidy-seeking and regulation-for-profit, Cree retains a former congressman as a lobbyist. Democrat Max Sandlin of Texas is Cree's leading outside lobbyist. Sandlin's wife, Stephanie Herseth Sandlin, was a congresswoman until she lost re-election last November.

Cree is Obama's type of company. Obama would explain his fondness by pointing to the company's use of domestic manufacturing and its green products. But just as important is its cooperative attitude toward government -- supporting government power, hiring former government officials and feeding gratefully at the government trough.

We see this Obama preference everywhere. Obama's jobs czar, who will be in Durham today, is Jeff Immelt, the GE CEO who sees government as a "champion" of industry. Obama's commerce secretary nominee comes from government-dependent companies like Boeing and Southern California Edison.

So Obama's rule seems to be that profit is good, as long as it comes from government.

Timothy P.Carney, The Examiner's senior political columnist, can be contacted at tcarney@washingtonexaminer.com. His column appears Monday and Thursday, and his stories and blog posts appear on ExaminerPolitics.com.

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