You are here

Expensive Energy Does Not Stimulate the Economy

Last week the House of Representatives passed HR 1, The American Recovery and Reinvestment Act, which allocates $816 billion to stimulate the economy. Environmental policy figures prominently in the House’s stimulus package, including $72 in direct spending for green energy and $20 billion in clean energy tax incentives. According to the liberal Center for American Progress, this $92 billion will create 459,000 green jobs by 2010, at a cost of $196,000 per job. What a deal! The Senate will soon begin to debate over its own version of the stimulus package, S. 336, The American Investment and Recovery Plan, which would spend $887 billion to get the economy going. The bill includes $78 billion in clean energy spending, and $31 billion in tax incentives for renewables and energy efficiency. Of course, the only reason that the clean energy industry needs generous taxpayer support is because it cannot otherwise compete with conventional energy sources. Which begs the question: How is it possible to stimulate the economy by forcing Americans pay more for energy? An example will help clarify my point. President Barack Obama wants the stimulus package to spend $32 billion to provide 6 million homes with green energy by 2012. By comparison, the Navajo Nation in the Four Corners region plans to build enough coal-fired power by 2012 to supply 4 million homes in the rapidly growing southwest. Both plans would power a similar number of households by 2012. The difference between the two plans is that Obama’s renewables need $32 billion in taxpayer money to compete with conventional energy sources, whereas the Navajo Nation’s coal projects can make a profit without lavish government handouts. For a detailed account of the green pork in both bills, click here. The numbers are appalling. Virtually every energy boondoggle is well positioned at the taxpayer trough, from synfuels to ethanol. It is farm-bill politics at its worst (N.B. “farm bill politics” is a style of legislating by which every possible stakeholder is bought off, so that there are no objections to a spending bill’s passage. As its name suggests, negotiations leading to a renewal of the God-awful farm bill every 5 years are the paragon of this governing technique). Although both plans stink, they are not the same.  E&E Daily today reported that there are 3 major differences between the energy provisions of the House and Senate stimulus packages: 1. The Senate increases Loan Guarantee Program (authorized in Title 17 of 2005 Epact) by $50 billion in 2009. The program covers “commercial projects,” including nuclear and coal to liquid, which frightens environmentalists. The House keeps 2009 funding for “commercial projects” steady (at $38 billion), and amends Title 17 to include $8 billion in temporary funds for renewables and green transmission. 2. The House and the Senate disagree over tax incentives for renewable energy. HR 1 would fund up to 30% of construction costs for renewable projects that break ground in 2009 and 2010. I have not seen a cost estimate for this provision. S 336 does not have this provision. Senator Bingaman argued that grants are inappropriate because the taxpayer would not receive any compensation for its investment. 3. The Senate bill also provides about $5 billion less in direct energy efficiency investment than the House package. The greatest difference lies in the low-income assistance weatherization program, which would receive $2.9 billion in the Senate bill as compared to $6.2 billion in the House version.