Seeding the Future, Calling Private Money

By dennis_wingo
November 18, 2010
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Seeding the Future, Calling Private Money

We live in interesting times today, in that Chinese curse kinda way. The last three years have been a roller coaster of economic screaming, scheming, and scamming. There is a LOT of money sitting on the side economically from what those that I trust and read in the financial papers are saying. Where is a place where money can be put, risk is relatively low, and the returns spectacular or even just good? What industry stands to be able to do the most in monitoring and mapping the environment? Space. In communications, and in human spaceflight there is opportunity, but it needs a catalyst….

While the large aerospace community napped, a new industry, space, has begun to flower. The question is not if the flower is good, but where is the water going to come from? Money is the water of space, without it both public and private dreams of the future fail. Interestingly, if you look at the magnitude of expenditure that the government spends for space and contrast it to what the private sector (human spaceflight private sector) has spent in investment and development, you will see that the government has carried the burden for decades.

Why has private money not entered? No expected return on investment, at least not until recent times. The space tourism industry exists for one reason, a destination, a place to hang out, the International Space Station. The ISS, in providing a destination for every space tourist since Dennis Tito, has begun to fill its role in providing a beachhead for NASA and business.

On the artistic and spiritual side the experience can be summed up by a picture posted on NASA Watch a bit back of an astronaut gazing serenely out of the cupola on the ISS. Talk about a view from heaven! The practical is involved as well in microgravity and other ideas for using the station. Elon Musk and SpaceX today only have a contract for commercial cargo delivery because there is somewhere to deliver it and someone who wants it there. Just last week I saw on the internet that the station had won an award for the most awesome thing ever constructed by mankind. The ISS, cooler and more impressive than the great pyramid, the great wall of China, or Rome. That is something to think about.

Think about it, today there are cargo ships from Japan, Europe, Russia, and hopefully soon the United States through the commercial cargo contracts. There are still three nations that can send humans to space. Soon there will only be two – that is – until the commercial crew companies get theirs flown. But without the station, none of this would be in play right now. The station is the key enabler for cargo and human commercial spaceflight. At no time in the entire history of mankind have we had this kind of ability, it is there to use by business. Further out, the Google X Prize and NASA’s recently awarded lunar data purchase agreement is an amazing testimony, as well as are the companies that have won and where they may go to make a dollar.

What next? This is where I get back on my soapbox and say Zero G Zero Tax should be the watchword for all of us in writing about ideas for jobs for the new congress. Think about it, eager (or desperate) to create jobs without spending money, the Zero Gravity Zero Tax would be perfect in that it would exempt commercial space companies (outside of launch vehicles, remote sensing and communications satellites) from federal taxation for a period of twenty years. In the last version that I saw an investment tax credit was also there that that reduced risk for investors. This is what investors need, reduced risk. No outlay of funds, and no lost tax revenue as there are no profitable businesses in this sector (yet).

The government today is printing $600 billion dollars in order to flood the market with money so that the economy will get started. The problem is that the people with money don’t want to invest in such an incredibly uncertain political environment unless the risk is low. Banks are holding a trillion dollars in cash and a tremendous amount of silicon valley investment capital is lying fallow. Space is a place that the Silicon Valley state of mind can understand. Lower the risk, provide certainty, and money will flow into the commercial sector, lots of money.

When Zero G Zero Tax was last seriously looked at by the joint taxation committee in 1999-2000 or thereabouts, they estimated that it would cost the treasury $10 billion over ten years so the nation could not afford it. Looking back today at the amount of money that is, it seems almost trivial considering the cost of so many mega-financial government and commercial deals in real estate, finance and other industrial sectors. Be that as it may, I think that ZGZT as it is called will bring in far more money to the treasury in the form of payroll taxes and economic growth in the form of jobs, good jobs than just about any other investment by the government in the future of an industry.

The $10 billion dollar number was always interesting, especially in the year 2000, when there were no companies out there that could qualify for any of the tax breaks! To lose $10 billion dollars in corporate taxes requires a minimum of about $28 billion dollars in profit and tens of thousands of jobs. To get a total profit of $28 billion requires at least $90 billion in sales. We could use a tax break like this today. If it was scored right no one would still qualify. Elon could, possibly Richard Branson, but none of these companies are immediately profitable, but they could be beneficiaries, and breaks like this would go a long way to help both of those companies ride out potential problems and delays.

NASA’s budget is going to be under severe strain beginning this year. Yet again is NASA going to being asked to do too much with too little, or what little they have will be taken away…again. If the private sector can start to invest money and technology into commercial human in to LEO, microgravity research, or other activities on the station, and even commercial lunar enterprises, then not only will NASA and exploration be strengthened but the nation as well. Money is the water for the flowering of private enterprise. A period of no taxation, such as what has enabled the internet is in the best strategic, commercial, and political interest of the nation.