Solyndra’s bankruptcy has put federal spending for green projects under the microscope—and rightly so. Green jobs programs have been a profoundly wasteful use of taxpayers’ money and are doing more harm to the economy than helping it. They don’t even provide the promised grand environmental benefits. It’s important to keep these points in mind when discussing green jobs.
1.) Government spending does not create jobs. Government spending will “create” jobs in the sense that subsidies will allocate labor and capital to build windmills and solar panels. But the government is taking from one (by taxing or borrowing) and giving to another. When the government gives money to build a windmill, those resources cannot simultaneously be used to build other products.
As George Mason University economist Russell Roberts says, “It’s like taking a bucket of water from the deep end of a pool and dumping it into the shallow end. Funny thing—the water in the shallow end doesn’t get any deeper.” It’s what French economist Frederic Bastiat called the broken window fallacy. When it comes to spending on green energy, some of is the resources are lost in the transfer, because we’re subsidizing inefficient sources of energy when those resources could be put to more productive use, which leads to the next point.
2.) Jobs per unit of energy produced does not measure the economic desirability of an energy source. Proponents of renewable energy often argue that because renewable energy creates more jobs per megawatt hour than other forms of energy, the investment is a good one. This is a fundamental misunderstanding of what creates jobs and what grows the economy. It is the same mistake President Obama made when he said ATMs were stealing bank tellers’ jobs. By that reasoning, we could replace all of the world’s mechanized agriculture equipment and give farmers shovels and rakes, and that would create jobs. But it would also significantly reduce productivity and efficiency.
Mandating or subsidizing an inefficient way of doing any economic activity, including energy production, is baseless policy. If we can produce more energy for less human capital, that frees up human resources to be productive elsewhere in the economy. If it costs less to use human resources than machinery, that’s what businesses will do. Efficiency and cost should drive production.
3.) Environmental regulations don’t create jobs, either. Another claim that falls under the broken window fallacy is that regulations imposed by the Environmental Protection Agency will create jobs—because companies will have to build new plants, or existing power plants will have to install scrubbers or other technologies to comply with stricter rules. This claim purports that the higher the compliance costs, the more jobs will be created. This is not the case.
First, the money spent on complying with these onerous regulations could be spent elsewhere. In addition, these regulations increase energy costs and cut consumers’ income while raising manufacturers’ costs of production. Higher energy prices drive up production costs for businesses. That, in turn, causes higher sticker prices. Since everything Americans use and produce requires energy, consumers are hit again and again. To survive the higher energy prices, companies must shed jobs. More regulations and higher energy prices could force other business to close entirely or to move to other countries where the cost of doing business is cheaper. The net effect is job and income losses.
4.) Green jobs have been expensive. President Obama admitted that his “shovel-ready” stimulus program wasn’t so shovel-ready, but he never acknowledged the wasteful price tag per job created.
Thomas Pyle, president of the Institute for Energy Research, writes in U.S. News, “The president’s own Council of Economic Advisors admitted recently that only 225,000 clean energy jobs were either created or saved and cost the tax payer $355,000 per job (assuming a low-ball estimate that $80 billion in economic stimulus went towards green jobs).” For some projects, the price tag was as high as $2 million per job.
Even before the green stimulus, however, experience has shown that renewable subsidies haven’t paid off. The Manhattan Institute’s Robert Bryce writes in The Huffington Post:
In February, the Renewable Fuels Association put out a report which claimed the domestic ethanol sector directly supports 70,000 jobs. The CBO estimates that each gallon of gasoline displaced by ethanol costs taxpayers $1.78. With the ethanol sector now producing the equivalent of 9.1 billion gallons of gasoline per year, the total cost to taxpayers of the ethanol scam is therefore about $16.2 billion. That works out to $230,000 per job created by an industry that produces a product that is inferior in nearly every way when compared to conventional gasoline.”
The government-subsidized green jobs agenda was a failure long before Solyndra filed for Chapter 11. It’s time to end this bankrupt idea.