Green, Baby, Green
Yesterday, the Wonk Room highlighted a new report by the Center for American Progress called Green Recovery, which lays out a plan to spend $100 billion over two years to create approximately 2 million new jobs, focused in particular on the construction and manufacturing sectors, which have been particularly hard-hit recently. According to the Bureau of Labor Statistics job report released on September 5, the manufacturing lost 64,000 additional jobs in August, and construction has shed approximately 388,000 jobs since peak employment rates in February 2006, though losses in that sector have slowed considerably since the first half of this year.
The CAP report was prepared by Dr. Robert Pollin and University of Massachusetts Political Economy Research Institute economists, and would focus investment in six separate strategies:
- Retrofitting buildings to increase energy efficiency
- Expanding mass transit and freight rail
- Constructing "smart" electrical grid transmission systems
- Wind power
- Solar power
- Advanced biofuels
The report's plan for job creation would divide the total investment between tax credits ($50 billion) to assist small business and private homeowners in retrofitting buildings with green technology, direct government spending ($46 billion) for public building retrofits and the expansion of mass transit, rail, and updated energy infrastructure, and federal loan guarantees ($4 billion) to underwrite private credit extended to perform retrofits and an expansion of renewable energy technology.
Dr. Pollian is also careful to mention that this report is not a magic bullet cure for the current economic difficulties facing the U.S. economy:
It is important to note that this recovery program does not replace the possible need for more immediate action to boost the economy. The nature of the investments described in this paper precludes their full implementation in the three to four months that are usually expected of short-term economic stimulus programs. Depending on conditions, such a stimulus may be needed in addition to this program. ("Green Recovery", p. 3-4)
Whether this plan is the right one for transitioning towards a more energy efficient and environmentally conscious economy certainly remains to be seen -- the GOP has already threatened a government shutdown over a compromise energy plan to embrace both more drilling, and renewable energy-conscious investment. If I had to (and I haven't seen numbers or a prediction on this), I would wager that the $100 billion proposed in this report would fall well short of the scale of investment actually necessary to a) update our infrastructure, b) comprehensively apply green technology to existing infrastructure/buildings, and c) stimulate large-scale job growth. That said, it is exactly this kind of government program - with a balance of offering private incentive and active public engagement - that can encourage businesses (of all sizes) and individuals to make their own investments in both our economic and environmental well-being. It is increasingly clear - obvious, in fact, if you ask me - that it is a time for bold, new ideas, and the solutions to both climate change and the changing nature of the economy will not be found a few miles underground off the coast of Florida. Reports such as this one (and also the T. Boone Pickens Plan) - and a rigorous investigation of their likely success - should be widely encouraged.
"Rigorous investigations" are always to be encouraged.
But why do we need tax credits and direct government investment (federal?) in non-federal projects? If such projects are economically sensible why wouldn't owners, public and private, go ahead and invest their own money in them? If they're not economically sensible, why build them?
September 10, 2008 9:15 AM | Reply | Permalink
Ask Boone Pickens. The Pickens plan that I keep seeing praised here so much is really just a conservative billionaire asking for corporate welfare. It's hard to blame Pickens, that's just modern conservatives do, not sure when liberals started praising them for it, though.
September 10, 2008 9:43 AM | Reply | Permalink
destor23 - just to clarify, i'm not advocating the Pickens Plan, i'm advocating encouraging the publication and review of plans, in general. I was simply offering a counterpoint to the CAP idea on the other side of the aisle. i would advocate only giving plans like these hard looks to determine potential feasibility. I'm not sure our best solutions will come from the government itself, so private efforts are worth paying attention to, we might strike a winner.
September 10, 2008 10:12 AM | Reply | Permalink
Were it about jobs alone, one might argue that the federal government has little or no justifiable role in selecting which sectors deserve federal support and which do not. In this way, the marketplace could be said to be the best arbiter of such decisions.
On the other hand, government does have a role in establishing strategic decisionmaking related to national security. At present, energy technologies, both on the demand side and on the supply side, are directly relevant to the nation's economic performance. I believe It can be shown that energy also affects our "national security" too.
I heard Thomas Friedman on Sunday morning address the only other reason that government may be justified in participating in these decisions: The current business environment has a bias toward short-term thinking these days. Friedman described a need for businesses to "receive market signals" showing that their bets on efficiency have a likelihood on delivering adequate return on investment in the medium term.
I believe, finally, that national economic security needs are well served by having a strong industrial base.
September 10, 2008 10:06 AM | Reply | Permalink
I understand your point, Ellen, about government incentives for private investment. But it's often the case that new technologies require economies of scale - and refinement - before production and implementation strategies become economically self-sufficient (i think hybrid vehicles are an example in this area). i would say that government incentives in the area of clean technology and the greening of current buildings and infrastructure are necessary both for that reason, and because the economic benefits of such improvements are often spread over a long horizon, which is what often makes the move infeasible for a private/small investor. By helping those individuals up-front, the government can help to lock in those long term energy savings that will help to draw down energy demand in the future in a way that would not be possible if left to pure market-forces.
September 10, 2008 10:08 AM | Reply | Permalink
Carefully targeted governmental intervention can work. Done poorly, it backfires though. It's tricky to get it right.
September 10, 2008 3:37 PM | Reply | Permalink
Sigh, capital L Libertarianism.
1) Private Industry does not do much basic research. I worked in Silicon Valley for 20 years and the only company I was employed at that did anything close to basic research was Xerox, and they were deemphasizing it.
2) Business majors and MBA's are neither the boldest nor the brightest students. And when they become ensconced in a corporation, they learn where success lies. It's not in rolling the dice.
3) Businesses manage by the quarter. Looking 3 years ahead makes a businessman a visionary.
4) Technology is often ridiculously expensive when done on a small scale before manufacturing scale and innovation make it ridiculously cheap. LCD's were once 1 inch gee whiz gizmos. Now they are 42" DTV's. The government gets the ball rolling.
And so on and on and on. Don't get confused with ADM corn ethanol (can we say they are on the Dole?) and cellulosic ethanol.
September 12, 2008 4:40 PM | Reply | Permalink
Questions about government intervention aside, I'll start taking proposals like these seriously when the investment amounts to more than a week's worth of the Iraq occupation. Clinton's nickel-and-dime approach only freed up money for what the Republicans really wanted to spend it on. Now, we're back to nickel-and-dime. Let me see a green program comparable to NASA and the moon landing.
September 10, 2008 11:53 AM | Reply | Permalink
With slightly differing emphasis lenski, Jared Craft, and ct each mentions the usual justifications for government top-down (known pejoratively as "statist") investment in "new" technologies.
But to accept these justifications is to accept that the result will be statutes promoting boondoggles (ethanol, for example) and lobbyists throwing money at Congresspersons as all of them belly up to the trough.
The better policy -- if government intervention is called for -- is to tax what we see as a good or service being inefficiently used. Here, we should be increasing taxes on all energy use. Higher costs induce efforts to lower costs ("demand destruction" of gasoline this summer, as one example).
You say the American people would never put up with that? You say we should rely on the people's sloth and ignorance and slip these laws for their betterment in when they're not looking? You say keep them in the dark?
Well, we live in a democracy. Let's act like we're Democrats!
September 10, 2008 6:20 PM | Reply | Permalink
Ellen, I don't think I've said any of those things, and neither did ct or lenski, above. Nor did I advocate for supporting any "boondoggles" (i am no fan of our ethanol policy, to be sure). Further still, I am not suggesting that people are either slothful, or ignorant, or that we should "slip these laws for their betterment in when they're not looking" [sic].
What I did suggest was that big, bold ideas are needed if we are going to successfully face the monumental economic and environmental issues facing this country (and the globe), and we should be encouraging and determining the potential feasibility of reports like the one CAP produced. Something has to be done and we should be listening as well as we can to all of the ideas that smart people put forward.
In the realm of the theoretical, higher energy and gas taxes might, overall, drive up efficiency across all sectors - we definitely saw the cutbacks in driving to a substantial degree during the oil price shock this summer. And a realistic expectation of higher prices would drive technology in the direction of better fuel/energy usage. But as a realistic policy approach, energy/gas taxes are incredibly regressive, and effect most severely those who can afford the taxes the least.
Taxes can change incentive structures to an extent, but the IRS should not be in the business of driving national energy policy. (If you want to talk about boondoggles, have you seen the Internal Revenue Code recently? Take a look and tell me that the lobbyists you worry about aren't operating full steam ahead there already - and with FAR less transparency than most statutory law provides.)
The investment required in updating our infrastructure (which is primarily public in nature), and promoting what I think is a great idea from tenaclousd - a green Apollo Project - will take big involvement from our government, from the top-down. But if we're smart about it, we'll also build in very real, bottom up incentive structures that will induce private business, industry, and individuals to innovate and proactively invest/innovate to fill in the gaps. Some of those incentives will almost certainly involve tax benefits/penalties. But maybe they'll involve more - this is why we need to welcome and encourage these reports.
And to be perfectly clear, none of this should be slipped by the voters, nor should they be kept in the dark. They should active participants. We're all in this together.
September 10, 2008 8:41 PM | Reply | Permalink
Of course people are "slothful and ignorant" -- generally. Or we could call them inattentive. But make them pay the true costs of some benefit they're receiving and you'd be surprised at how smart they suddenly become.
Add to the basic costs of energy the costs of (perennial?) war and of containing the health and environmental damages energy use imposes and you can be sure the people will take care of seeing to energy use reduction and will find the most efficient methods of doing so.
Jared raises a couple of objections in opposition to taxing energy -- namely, tax code loopholes and the harm those user taxes will do to the poor.
But there are few tax loopholes in respect to user taxes as distinguished from income taxes, and the poor will learn to live with higher energy costs; they've proven themselves able to live with unjust, oppressive cigarette taxes aimed directly at them (Note: in the event raising the minimum wage and the EITC can solve the regressive tax problem).
September 10, 2008 11:52 PM | Reply | Permalink