Awful Month for “Green” Stimulus

Remember how the stimulus was pitched? In order to defibrillate job creation, the American Recovery and Reinvestment Act (ARRA) was supposed to inject almost $1 trillion of taxpayer money into the economy, in a manner that was “timely, targeted, and temporary.”

About a tenth of ARRA funds were given to creating so-called “green jobs,” and a spate of recent news stories suggest that these “clean energy” stimulus dollars have been a massive failure. Instead of “timely, targeted, and temporary,” these environmentalist earmarks are better described as “late, loose, and lasting.” Consider:

• Last year, Seattle was awarded $20 million in stimulus funds to weatherize buildings. Seattle Mayor Mike McGinn promised that the money would improve energy efficiency in 200 buildings (in practice, this means calking and insulating), thereby creating 2,000 “green jobs.” This proved to be a gross overestimate. Two weeks ago, the Seattle Post-Intelligencer called the program a “bust.” The newspaper reported that a scant 14 jobs have been created, most of which were administration.
• According to a recent New York Times article on the failure of President Barack Obama’s green jobs agenda, California has spent half of $186 million in stimulus money it received for weatherization programs. The money created a paltry 538 full time jobs, at a cost of almost $173,000 per job. What a crummy deal!
• Then there’s Evergreen Solar, a solar-power components manufacturer. In April 2009, the White House issued a press-release stating that stimulus money* resulted in Evergreen Solar seeking to fill 90-100 jobs at a plant in Devens, Massachusetts. A year later, Evergreen Solar packed up its bags and moved operations to China. This month, it declared Chapter 11 bankruptcy.
• In late July, the House Oversight and Investigations Subcommittee (of the Energy and Commerce Committee) took the extraordinary step of subpoenaing documents from the Office of Management and Budget pertaining to its involvement in a stimulus-funded $535 million loan guarantee to Solyndra, a California-based manufacturer of solar power rooftop systems. The Subcommittee was piqued by the seeming shady political connections behind the loan, and the subsequent financial troubles experienced by the company—it had to shutter a plant a year after the loan was guaranteed.

All in all, this has been a horrid month of news for the “green jobs” element of the ARRA. Why is the  green stimulus failing? For starters, politics too easily corrupts the process. Members of Congress are less concerned about the economic viability of the industries into which they invest taxpayer money, and much more concerned with getting pork to their districts. This was recently demonstrated by Minnesota Senator Al Franken. Civil servants, no matter how disinterested, know that their political overlords are watching their decisions carefully, so as to ensure that taxpayers give-aways reach their constituents. Of course, political expediency is a poor substitute for sound financial analysis.

Another major problem with the green stimulus is its impetus: spending lots of money fast. For example, in 2008, the Department of Energy’s weatherization program had a $227 million budget; in 2009, as a result of the stimulus, its budget exploded to $5 billion. On top of being inundated with taxpayer dollars, the Office of Energy Efficiency and Renewable Energy, which administers the weatherization program, was given a mandate to rush stimulus money out the door. I remember in late 2009, speaking with a knowledgeable colleague, who relayed word from his contact in the Department of Energy that staffers there were overwhelmed with the task of trying to spend the billions of dollars as quickly as possible. They must have felt like Monty Brewster! It stands to reason that rushed spending makes for a poor investment.

*As is explained in this excellent reporting by NewsBusters, it’s wholly unclear which stimulus funds were received by Evergreen Solar. The best guess seems to be that the company was the beneficiary of stimulus subsidies awarded through a $55 million block grant for energy efficiency given to Massachusetts.