The Obama administration and Democrats in Congress have argued for at least the last two years that massive government subsidies for “green jobs” programs will eventually make America an economic powerhouse — even if no one can define what a “green job” actually is. The cap-and-trade bill will tax energy consumption and put tens of billions of dollars into the hands of Congress, which they plan to spend on pet projects in alternative energy production in the hope that it will force the kind of scientific breakthroughs that will allow mass production. They insist that this will create an explosion of jobs and profit in the green-energy sector.
However, this has been tried already, in Spain and Germany, and it’s no coincidence that Spain now teeters on the edge of bankruptcy. The Spaniards lost 2.2 jobs for every subsidized “green job” created by government intervention, hiking welfare costs and undermining economic growth. When asked about the Spanish example, the Senate’s cap-and-trade co-author John Kerry called it an “anomaly”:
Senator Kerry told reporters that “every study” shows that the subsidizing of alternative energy creates jobs, telling reporters on Tuesday, “We just told you that every study that has been made says that this creates hundreds of thousands of jobs a year,” he said. “Here we are in this month, and we just had 27,000 private sector jobs created. Do Americans want to say ‘no’ to anywhere from 250,000 to 540,000 jobs a year for the next ten, twenty years?”
However, according to a 2009 study from King Juan Carlos University in Madrid, Spain showed that the subsidizing of renewable energy was a complete disaster. In fact, the study said that for every new job depending on energy price supports, at least 2.2 jobs in other industries will disappear. Bloomberg reported:
“The premiums paid for solar, biomass, wave and wind power – – which are charged to consumers in their bills — translated into a $774,000 cost for each Spanish “green job” created since 2000, said Gabriel Calzada, an economics professor at the university and author of the report.
‘The loss of jobs could be greater if you account for the amount of lost industry that moves out of the country due to higher energy prices,’ he said in an interview.”
So, “every study” does not in fact show that subsidies create economic expansion. Kerry backpedaled:
I asked Senator Kerry about Spain’s own failed experience in the area of subsidizing alternative energy, and the Massachusetts Senator’s response sounded similar to someone saying Marxism or Stalinism never succeeded, because it was never implemented correctly. AUDIO
“If you look at other European countries, it depends entirely on exactly how committed they were and how far they were willing to go in terms of the breadth of the program,” he said.
“You have some anomalies in some countries where they began slowly. They didn’t have the right incentives, they over-subsidized a couple of different things– we’ve learned something from some of those mistakes, but I’m confident that the way we’re approaching this is really private sector determined. That’s the key here.”
The Spaniards might be surprised to hear that they “began slowly.” Their top-heavy approach put them deeper in debt, and now they face junk-bond status from credit analysts concerned over their soaring government spending. They are widely believed to be next in line to Greece for a collapse.
But Spain isn’t the only country with a study showing the futility of spendy green-jobs programs. Kerry Picket also reports in the same article that Germany’s own flirtation with government green-jobs subsidies resulted in lost purchasing power for consumers, job losses in other industries, and other economy-killing effects in their own study. This study also called into questions others that limit the scope of their analysis to just one side of the ledger:
“While employment projections in the renewable sector convey seemingly impressive prospects for gross job growth, they typically obscure the broader implications for economic welfare by omitting any accounting of off-setting impacts. These impacts include, but are not limited to, job losses from crowding out of cheaper forms of conventional energy generation, indirect impacts on upstream industries, additional job losses from the drain on economic activity precipitated by higher electricity prices, private consumers’ overall loss of purchasing power due to higher electricity prices, and diverting funds from other, possibly more beneficial investment.”
The basic fact in Spain is also a basic fact in the US: we don’t have the money for it anyway. Proposing $20 billion in subsidies for poorly-defined “green jobs” is the same in real terms as proposing $20 zillion for the same project. The money doesn’t exist in our Treasury. We would have to borrow it, which will extend the national debt, and the program will create inflation in energy and transportation costs, which will erode buying power while hiking prices in real terms. That is one of the big reasons that countries who attempt to force top-down solutions end up going the way of Greece — or Spain, in this case.
Update: Add one more study to Kerry’s “anomalies.” Denmark’s subsidies for wind power ended up having no net impact on job creation, but instead just shifted workers from unsubsidized to subsidized jobs, and at the cost of two average annual salaries per job (via commenter 16MPG):
The Danish Wind industry counts 28,400 employees. This does not, however, constitute the net employment effect of the wind mill subsidy. In the long run, creating additional employment in one sector through subsidies will detract labor from other sectors, resulting in no increase in net employment but only in a shift from the non-subsidized sectors to the subsidized sector. Allowing for the theoretical possibility of wind employment alleviating possible regional pockets of high unemployment, a very optimistic ballpark estimate of net real job creation is 10% of total employment in the sector. In this case the subsidy per job created is 600,000-900,000 DKK per year ($90,000-140,000). This subsidy constitutes around 175-250% of the average pay per worker in the Danish manufacturing industry.
So what Kerry meant to say is that every hypothetical study supports his claims for green-jobs programs, while every analysis of real-world experience is an anomaly.