Can the Department of Energy Really Spend All That Money?

Nicolas Loris / February 17, 2009

Or should the question be how much will they waste?

Economist Arnold Kling has a list of risks associated with a large stimulus. Number one on the list is: It is harder to spend larger amounts quickly and cost-effectively. One of Obama’s chief economists, Larry Summers, emphasized that stimulus spending must be quick and temporary. That doesn’t seem to be the case with the energy projects in the bill.

From the WSJ:

Minnesota’s Sage Electrochromics Inc. has been ready for months to move on just the sort of project the Obama administration hopes will bolster the U.S. economy: a $65 million factory that would make energy-saving windows and generate 250 new jobs.

So what’s holding it up? The Energy Department, whose fledgling loan-guarantee office has yet to approve a single project, including the proposed Sage glass factory, since the loan program launched in early 2007.

President Barack Obama plans to rely heavily on agencies like the Energy Department to approve contracts and issue loan guarantees and grants at a record clip in the $789 billion stimulus plan.

The spending demands could prove particularly taxing at the DOE. The Energy Department has had limited experience pulling off big, transformative energy projects. Most of the department’s $25 billion budget goes toward maintaining the nation’s nuclear stockpile, cleaning up former weapons plants, and doing basic scientific research.”

The article goes on to discuss the history of delays associated with the DOE. The question now becomes: What’s worse? The wasted spending that will result from the stimulus bill or the chance that the Obama administration and Congress will take credit for the economy successfully recovering. Number five on Kling’s list against the big stimulus reads: There is a risk that much of the spending will kick in after a recovery is underway.