Last week Heritage Senior Policy Analyst David Kreutzer wrote a WebMemo detailing the flaws of three recent enviro/leftist reports purporting to show that massive government interference in the energy sector would lead to millions of new jobs. The co-author of one of those studies, the Center for American Progress’ Robert Pollin has now issued a response:
Kreutzer claims that “Green Recovery” is able to show that green investments produce positive job effects only by making an elementary error in logic. He claims we count the jobs that are created by spending a given amount of money, for example, $100, on green investments, but we ignore the jobs that are lost when $100 in new taxes have to be raised to pay for the green investments.
Kreutzer reaches this conclusion by ignoring all the basic arguments in “Green Recovery.” Spending $1 million on green investments, for example, will create about 17 jobs within the U.S. economy, while spending that same amount within the oil industry will create about 4.5 jobs. As a short-term stimulus program—in which an increase in spending is not offset by any corresponding rise in taxes—a $1 million increase in spending on green investments will therefore produce 17 new jobs, with no job losses elsewhere in the economy.
There are so many things wrong with this analysis, but we’ll start with just four:
False Policy Choice – Pollin wants to frame the policy question as $100 in government spending for ‘green investments’ versus $100 in government spending for the petroleum industry. On what planet is that debate actually occurring? Here in the real world policy makers are debating whether to spend $150 billion over ten years to create 5 million new ‘green collar’ jobs. Pollin does refer to subsidies given to oil, but this is primarily an investment tax credit given to all manufacturing industries and is not unique to petroleum. Whether or not we want to repeal that tax credit for all manufacturers is a worthy but separate debate.
Government Spending Not Free – By all appearances Pollin seems to live in a completely cost free world where the government can spend $1 million to create 17 new jobs without any repercussions anywhere else in the economy. How wonderful it would be if that were true! But why stop at just $1 million for a paltry 17 new jobs? According to the Department of Labor there are currently 9.5 million unemployed people currently in the United States. Since there are no consequences to increased government spending, why don’t we spend $5.5 trillion and put everyone to work in the “green collar” economy?
Not All Jobs Created Equal – According to Pollin’s own report, the “green collar” jobs Pollin wants to create are “lower, entry-level jobs” that pay “about 20% less than the average for those connected to the oil industry.”
Less Energy Produced – Also according to Pollin’s own report, “green collar” jobs produce less energy: “This would produce highly inflated employment figures for solar power and other forms of renewable energy, where, at present, the costs of generating a given supply of BTUs is much more expensive than traditional energy sources.”
As Kreutzer said in his original critique:
Energy is a valuable input to the modern economy. Cutting CO2 makes less energy available, and when the impacts are traced through the economy, some jobs are created but more are lost. Counting only the jobs that are created distorts the analysis and invalidates the conclusions.
When all is said and done, restricting CO2 cuts energy, income, and jobs. Pretending that breaking windows creates employment may make choosing among alternatives easier, but it leads to bad policy.