Issues & Insights

SpaceX and the Dangers of Corporate Entitlements

‘You should be thankful that you were spared a larger debate,” announced Chairman Adam Smith to the Armed Services Committee after markups for the 2020 National Defense Authorization Act. The goading declaration was a victory lap for the Chairman, a SpaceX sycophant who managed to secure the aerospace company an earmark within the NDAA to the tune of $500 million. Presumptuous, self-assured, and yet terribly misguided, Smith’s proclamation perfectly illustrates the dangers of corporate entitlement, and why it must be resisted.

Smith’s provision, appropriately characterized as the “SpaceX earmark,” would award the titular firm half of a billion dollars if it is selected to participate in the second phase of the Air Force’s Launch Service Agreement (LSA) program. As if the government isn’t subsidizing enough within the space industry already. In August, the U. S. Air Force will choose two launch providers to provide the federal government with a viable launch vehicle to replace the current RD-180 rocket engine — a contract that will already cover most of the rockets’ development costs as well as launch expenses. What is the rationale for granting a company like SpaceX an even greater monetary reward?

While Chairman Smith has argued that the provision would help to create “maximum competition” within the LSA, the actual effect of the earmark will be anything but. In reality, the bill functions as an effective bail-out for SpaceX, unfairly compensating the company for failing to garner contracts last year. Through the NDAA’s passage, Smith is ensuring that SpaceX receives preferential treatment from the United States government, paid for by the American taxpayer.

Smith’s earmark only serves to bolster the growing climate of corporate entitlement — the belief that individual companies are owed both federal tax dollars and lucrative government contracts. And within the aerospace industry, SpaceX has become the poster child for such behavior.

Indeed, Elon Musk’s rocket company has an unfortunate history of just this type of action. In 2016, Musk attempted to obtain his own earmark that could have made SpaceX the sole distributor of rockets to launch new satellites in space. In February 2019, SpaceX filed suit against NASA for not awarding it a contract. And just recently, in May, SpaceX sued the federal government over the Air Force’s decision not to grant it funds under the first phase of the LSA program.

In the most recent lawsuit, SpaceX argued that the Air Force’s decision to deem their aerospace portfolio as high risk was “unreasonable,” despite the firm’s ongoing struggle with quality assurance. The company also alleged that the Air Force “wrongly awarded” launch services agreements to SpaceX’s competitors. These allegations are unlikely to hold much legal weight, considering that the SpaceX CEO already admitted the real reason his firm wasn’t chosen. According to Musk himself, SpaceX was not selected for the job was because the company wrote a poor LSA proposal. The Air Force didn’t rob SpaceX of its right to a government contract; the aerospace industry titan just blew its opportunity to obtain one.

The reality of the situation, though, hasn’t stopped government officials like Chairman Smith from trying to appease Musk’s company by funneling it heaps of cash. That’s the true danger of corporate entitlement: companies working to carve out exemptions for themselves within the American political and legal systems. It not only erodes fair and honest competition — the bedrock of America ingenuity — it also fosters a system of crony capitalism, where politicians and businesses trade favors to exploit and subvert the system entirely.

SpaceX, with its frivolous litigation, sycophantic politicians, and legislative earmarks, currently epitomizes the dangers of the government’s subsidization of industry — even in instances where it is necessary, such as national defense. The company’s efforts to curtail competition must be resisted because if it is not, other companies will only be more incentivized to follow suit.

Joe Messina is host of the nationally syndicated The Real Side/with Joe Messina, he is a former tech industry executive and analyst for Johnson Controls, Entex Technologies and American Express.

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