There is no doubt the U.S. economy is in a deep hole. And the familiar advice that the first step to getting oneself out of a hole is to stop digging may not totally apply to the U.S. economy … but it does in some respects.
On one hand, our economic hole was created by reckless government spending. The obvious solution is to stop going deeper in the hole by cutting spending. However, that is not the whole reason we are in a hole.
Our economy is also in a hole because of U.S. energy policies that make energy costs unnecessarily higher. On September 13th, The Los Angeles Times reported that motorists in the U.S. are on pace to spend a record $491 billion for gasoline. In fact, households with a yearly income of $30,000 to $50,000 use 20 percent of their disposable income to pay for electricity, natural gas and gasoline; households earning less than $30,000 per year use 23 percent.
Energy costs are buried in everything we buy so current U.S. energy policies influence this energy “tax.”
Plus, the limits that have been placed on developing domestic energy sources deny access to U.S. energy resources that can spur economic growth and create millions of jobs. Instead, the Obama Administration is digging the hole deeper with massive spending on green energy programs that have produced only a few new jobs at very high costs.
The New York Times and The Washington Post have acknowledged that the federal government’s spending on green jobs has been a bust. David Brooks of The New York Times wrote “…gigantic public investments in green energy may be stimulating innovation and helping the environment…they are not evidence that the government knows how to create private-sector jobs.” Brooks then cites companies that received millions from the federal government yet failed to meet job creation expectations.
In a September 14th article, The Washington Post reported that after two years with almost half the money spent, the “… $38.6 billion loan guarantee program that the Obama Administration promised would create or save 65,000 jobs has created just a few thousand jobs.” According to the article, the program that was supposed to jump start the nation’s clean technology industry with low-cost, government-backed loans has only directly created 3,545 permanent jobs. One company that failed to deliver was Solyndra, the solar panel maker that just defaulted on a $527 million federal loan.
In other words, the Obama Administration spent $19 billion to create 3,545 jobs at a cost of more than $5,000,000 per job. Even if the $38.6 billion loan program had produced the projected 65,000 jobs, each job would have cost about $600,000. Daniel Mitchell, a tax expert at the Cato Institute, points out the average capital cost for a private sector job is about $160,000, if the money lent to green energy companies had been left in regular economy, it could have produced about 240,000 jobs.
The results from federal efforts to create a green economy are sad, but not surprising. Efforts in European countries show the investments do not pay off and they actually hurt their economies. A 2009 analysis of Spain’s efforts to create a green economy shows that for each green job created, 2.2 regular jobs were lost and each green job cost $774,000. In Great Britain, the ratio was worse: 3.7 jobs lost for each green job created, according to a study by Verso Economics.
Obviously, the first big step in climbing out of this economic hole is to stop wasting federal taxpayers’ money on green economy programs that are ridiculously expensive and that hurt the rest of the economy.
Step two is to quit digging and start drilling.
The U.S. has massive energy resources that would create millions of new jobs, adding hundreds of billions to our GDP and to state and federal revenues. Simply eliminating the backlog of requests for drilling permits and accelerating the approval process for deep water oil and gas wells in the Gulf of Mexico would add 230,000 jobs, increase U.S. GDP by $44 billion and increase state and federal revenues by $12 billion.
The federal government owns vast oil, natural gas and coal reserves. Allowed access to them would get our economy growing again and get people back to work. In addition to creating jobs in the energy sector, accessing our energy resources would decrease energy costs for households, decrease the price of gasoline, substantially reduce our dependence on foreign oil, and provide desperately needed new revenue for states and the federal government. The message from Americans to the Obama Administration and Congress should be “quit digging and start drilling.”
About the author: Gary Parlmer is president of the Alabama Policy Institute, a non-partisan, non-profit research and education organization dedicated to the preservation of free markets, limited government and strong families, which are indispensable to a prosperous society.
This article was published by the Alabama Policy Institute.