Obama’s Promises: Renewable Energy

Image taken by Dirk Goldhahn

Obama’s speech last night to accept the nomination of the Democratic Party was many things.

You may have heard it called “historic,” because Obama is the first African-American to ever receive a party’s nomination.

You may have also heard it called “soaring,” because of the “hopeful” rhetoric that he includes in every speech (although, in this one, there was much less of it).

But what you won’t hear — and what you ought to — is that Obama’s many promises are patently unrealistic. His plans cost so much that, if fully implemented, they would suck the American economy down the toilet, as one of the largest redistribution plans in history was put into place via a package of programs that would rival or exceed Roosevelt’s New Deal and LBJ’s Raw Deal in cost.

This is why I’m going to begin, on this blog, profiling the truth about Obama’s proposals. Each post will go through details about the plan. The conclusion will feature a verdict on whether the plan is stupid or smart. Childish terms, I know, but blogging is about having fun, right?

Today, I’m taking a hard look at his plan to increase renewable energy in the United States.

Renewable Energy

One of Obama’s “big themes” is in the expansion of renewable energy, something that we can all applaud. Unfortunately, his method for doing so is not just about providing renewable energy. Because this is not just any renewable energy: this is government-provided renewable energy.

On his New Energy for America issue page, Obama states that he will:

“Help create five million new jobs by strategically investing $150 billion over the next ten years to catalyze private efforts to build a clean energy future.”

Really? Has the government ever “strategically invested” anything? This idea seems to revolve around a completely Keynesian idea of economics, positing that if the government spends money on alternative energy, then the economy must grow, because spending necessarily increases output. Or, that’s how the theory goes. Of course, Obama does not provide a single shred of evidence to back up this extreme assertion, and even the downloadable issue breakdown provides only slivers of fact — most of it baseless assumption. 

 

Taken from en.wikipedia.org under the GNU license

 

 

To some extent, Keynesian ideas hold true. We see this when a country goes to war, and its economy grows as a direct result of the power of government to spend resources in certain industries. Of course, it is not entirely true. When government spends money to excite the economy, one of two things (or possibly both) will happen:

1. Taxation will increase to pay for the new spending, putting the economy in a more dire situation than it would otherwise be in;

OR

2. Inflation will increase because of government’s ability to simply expand the money supply through both the physical printing of paper money and the other tools of the Federal Reserve. The Treasury can issue bonds which the Fed buys with money it has made — a cycle of debt and inflation. A fun side-effect of this is the skyrocketing national debt.

Further, in government there is always waste. How much waste?

David Osborne and Peter Hutchinson’s book The Price of Government, on page 44, points out that the cost of actually running the government is as much as “20 to 22 cents per dollar for the federal government” and as much as “35 to 37 cents per dollar for all forms of government combined,” meaning federal, state, and local.

Obama also doesn’t provide any real details as to how this plan will be implemented. Therefore, I’m going to assume that the idea is that government will step in to provide grants and to directly invest in capital for renewable energy production, because that makes the most sense and is most in line with what liberals have been calling for.

Let’s take the low end of this and assume that Barack Obama’s “strategic spending” on energy will only waste 20 cents on the dollar in the actual implementation of the plan. Because of the cost of coordination, it would probably be higher — but I’m a nice guy. At 20 cents on the dollar, implementing the $150 billion plan would cost $30 billion! And that’s only assuming that he doesn’t wish to directly provide $150 billion in physical capital for renewable energy. Then, implementation cost and the bureaucratic red tape would cost an even larger amount.

What about those beloved 5 million new jobs? Wouldn’t spending money on such a plan increase the number of renewable energy jobs in America? Of course it would. But how many would be created?

By my estimates, not even close to 5 million. Unless the $150 billion was spent entirely on salaries for these new jobs. Here’s why:

Cost of investment 150,000,000,000 divided by 5 million jobs = $30,000 salary per worker

As Scooby Doo might remark, “Ruh-roh!”. Remember, the capital equipment needed for renewable energy — wind turbines, solar panels, etc. — is expensive. So, unless Barack Obama wants to create 5 million new jobs at or below the poverty line, this plan is COMPLETELY unfeasible!

Verdict: STUPID PLAN

Tags: federal budget, Obama, Politics, renewable energy