Intersting article, Joe. It is a little sloppy with some of its sourcing. For example, the West Texas wind farm it mentions is reported to generate 300 temporary jobs and 30 permanent jobs [The article says "dozens" in the U.S. and "thousands" in China for manufacturing the turbines--no source is given for the China figure] The hyperbole undercuts the credibilty of the article. Nevertheless it raises interesting issues.

1. In a global economy, it's difficult for a local government (U.S.) to support an industry without benefitting foreign players. ARRA has buy-America components, I'm not sure how this squares with these windfarm turbine purchases.

2. R&D is a long term investment. It looks like other countries have been, and are, investing in wind technology, with government subsidies, while we have done less an less of this type of investment. It may illustrate that in order to be on the cutting edge of technolgy, we must invest in university R&D.

3. In order to stimulate quickly, it's necessary to enable projects that are on line. The article seems to illustrate that we are behind in this field--definitely not the world leader--which means that projects on line are using foreign turbines.

4. By enabling the projects, we are acquiring clean power generating capacity, which is good, no matter where the turbines come from. We are also creating the jobs here to buid the access roads, foundations, erect the turbines, and build maintenance yards.

5. The lesson may be not that government shouldn't do things like the stimulus. The lesson may be that to do it better we need to recognize the areas where government needs to be involved for the long haul. Promoting R&D in new energy development, and enabling a fledgling industry to get off the ground may be one of those areas.

A bit wordy and repetetive, sorry.

1. True, but the proportions do matter.

2. It may. But if so, it can't be sold as a jobs program.

3. Which may say that this sector was not a good candidate for stimulus funds, and illustrates ideology (sold deceitfully, since this situation would have been known from the get go) over economics.

4. All of which is significantly poorer performance than funds invested elsewhere. Clean power generating capacity is not an unalloyed good, if the investment has a far lower economic return at a time when that is what is most needed.

5. Generally agree,

Subsidy, and subsidy, and subsidy, to the last syllable of recorded time. There's the 'liberal' solution. Hoping that you forget to ask - at whose cost? and to whose benefit?

Having lived through the first Carter administration, I retain a memory of the subsidized windmills and solar farms that were scrapped thereafter, when technical, economic and political realities reared their ugly heads. Maybe the Keynsians are up for digging holes and filling them in again, but pardon me if I think asking the would-be 'green' businesses to earn their way in the open marketplace would be forgivable, as an alternative to shoveling taxpayer money into the pockets of their investors and management (and the Chinese).

Even then, Joe, I think you are being too generous to the 'stimulus'. We should be considering the possibility that it, in combination with other threats from Washington, are creating a negative amplification effect. Every investor and businessman knows that it's all debt spending, to be paid for eventually with taxes or inflation, and discounts his potential future returns accordingly. Meanwhile, we continue the uncertainty overhang created by the threat of cap-and-tax and healthcare 'reform', along with the near certainty of higher taxes to be visited on the maleficient creators of jobs, should they actually succeed.

Results? Capital parked on the sidelines, or hiding in foreign markets or hard assets. Small businesses cutting jobs rather than take loans that would compound risk for an unknown return. All the misery of a deflationary spiral, along with the capital flight created by sovereign risk - at the hands of our own government. Hope and change!

I know anecdotes aren't "data", but my wife helps people buy and sell small businesses. Even with SBA loans being somewhat easier, there are very few people interested in buying small businesses, and there hasn't been any since the end of 2008. Much of that was due to credit drying up - a lot of little businesses were backstopped with HELOCs and other home equity devices - but even cash-only bottom feeders aren't out. The only businesses with any demand are the tiniest ones involving lots of cash and off-the-books operations (ie, small restaurants with off-the-books staff).

Tim:

I'm not following you how the stimulus--spent wisely or poorly--leads to money parked on the sidelines, small businesses laying off workers, and a deflationary spiral? Do you have some reasoning in mind?

As you know, the last push on alternative energy was at the time of the oil crisis in the 70's. Those projects were not scrapped. Windfarms and solar projects from that era are generating power to this day. However, constructing new such projects did become economically unviable when the price of crude oil went back down.

Does it make sense for our government to plan for a time when we need to transition away from oil? I think it does. I think government funded R&D has historically played a role in us staying on the forefront of development. Tax policy can encourage development in one direction or another. Well placed subsidies can help.

Research, tax policy to encourage particular investments, and subsidies are not a liberal or a conservative thing. [Think of farm subsidies] They are a what's good for America thing. One can argue about whether a particular subsidy is necessary or wise. Farm subsidies have probably long ago outlived their justification. But everyone is on the same team here.

Very interesting, Foo, new data to me. It fits a pattern, though - see below.

I'm seeing it through a lens of venture capital, which deals in 5-10 year bets. That world is hurting, on both the investor and entrepreneur side. Exits (sales of companies) are scarce; one problem is the difficulty of setting company valuations in the current circumstances. Deal volume on a like-to-like comparison basis is way off; the trade newsletter I get is still the same length, but it's staying there by stuffing the content with deals and topics as far afield as food franchisers in China. B rounds (building marketing and sales after proving technology) are scarce, and many who took them last year and spent the money are in trouble because customers did not appear - few new project initiatives on the buy side, and few in a mood to take risks on a newcomer.

Roland, let me spell it out for you, so that those who don't invest in or run businesses can see it:

1. The 'stimulus' is just one of the more egregious bits of deficit spending by this administration (admitting in advance that it's expanding a bad trend begun in the last). It's all being financed with debt, much of it now held by China. It's going to come due about the same time that Social Security and Medicare blow up due to demographic trends exacerbated by recession. In that setting there are three choices: raise taxes to an economy-destroying level, default on debt or entitlement commitments, or inflate the currency. Or maybe the Tooth Fairy will fix it. Doubts about the future value of the dollar, taxation on level of earnings, or possibility of even partial sovereign default drives capital out of business activity and into hard assets.

2. One of the dumber bits of the 'stimulus' was supporting the employment levels and salaries of public employees at the state and local level. Meaning that they've kicked the can of dealing with state budget imbalances into this year, increasing uncertainty about state taxation levels for business. And by the way, better than half of the state unemployment funds are now insolvent and in debt to the Federal government. Those arrears are usually made up by raising unemployment insurance rates on business - increasing the fixed costs of retaining or hiring employees.

3. The healthcare 'reform' bill that refuses to die, and mutates into a zillion different combinations of mandates and taxes. Insurance is a major fixed cost of continued or new jobs. Uncertainty of its costs directly affects willingness to hire into long term positions. The possibility that coverage (or a fine) will be mandated for all positions extends that risk to entry level jobs as well.

4. Cap-and-trade that threatens to increase the costs of energy by an unknown amount. This affects any business with energy or equivalent commodities as a direct input, but also anyone with a substantial cost component that's indirectly related to energy, e.g., transportation or agricultural production.

5. It's pretty much certain that taxes on upper incomes, including those on business dividends and capital gains, are going to increase. First by the expiration of the Bush tax cuts, and secondly by the announced intent of the Obama administration and the Democrat Congress.

Business owners and investors fund new employment and other initiatives based on potential reward, discounted for risk and costs of fund (including projected inflation). Someone in the venture investment game is looking at not only the inevitable risks of technology, market acceptance and personnel, but the governmental risks above - beyond control and perhaps prediction - that are compounded across the 5-10 year life of the investment. Someone on the small business end of things is looking at those SBA loans, and wondering why they should expose their balance sheet and bust their ass, in order to be exposed to those same risks, and give away more in taxes.

What we're seeing is about what you'd expect from rational actors:

Permanent jobs continue to fall, while part-timers rise. Expect contingent jobs to continue as long as the risks to fixed cost of employment remain.

Capital is heading into hard assets (watch the price of gold) and to hedging the US dollar with offshore investment and exposure.

Such investment as occurs will be concentrated in cash-flow rich, short term payoff businesses with proven demand. This fits right along with Foo's anecdote. (These are also the easiest businesses to run on a partially gray market basis.) Long term investments in technology and new market develop will remain low.

So there you have it: All the fun of a deflationary spiral - falling employment, real wages, and trade demand. Combined with an effective discount to current value associated with inflationary periods, due to the debauching of the Federal balance sheet and the coming entitlement bomb. Good show Team Obama!

Research, tax policy to encourage particular investments, and subsidies are not a liberal or a conservative thing. [Think of farm subsidies] They are a what's good for America thing. One can argue about whether a particular subsidy is necessary or wise. Farm subsidies have probably long ago outlived their justification. But everyone is on the same team here.

Rather presumptuous of you. I'm not on your team, if that includes believing that deliberate market distortions are good for America in the long run. (Maybe they are good for GM, or at least the UAW, these days.) Subsidies might be a liberal or 'conservative' thing (for some value of conservative), but they are always a statist and crony capitalist thing.

Can price subsidies sometimes be useful? Yes, and there's a well know precedent in technology - selling early generations of a product at a loss, in order to stimulate demand and advance along the 'learning curve' towards cheaper manufacturing and eventual profit. It's 'called forward' pricing and Intel and others do it all the time. And it can be financed without government interference, since it's well understood.

As Joe pointed out in the OP, that doesn't apply here. Any 'learning curve' is being enjoyed by the Chinese, while the costs come out of the pockets of taxpayers and their future generations. That doesn't make sense - it's stupid.

Tim, thanks for that.

According to this Washington Post article venture capital investment was off 37 percent in 2009. This does not appear surprising in light of the financial meltdown and concern this might trigger a 1930’s style depression. The purpose of the stimulus is to avoid such a recession. If TARP and ARRA, and the bipartisan $86 Billion jobs program in the news today result in us avoiding such a result, that suggests to me that VC investment is likely to come back sooner than it otherwise might have; even with concern about long term issues that a large deficit poses.

Krugman and Reich, of course, believe that the stimulus is too wimpy. I know some here would disagree, but they are respected economists and hardly alone in this view.

The VC Association posted the following on December 16, 2009:

Washington D.C., December 16, 2009 – Venture capitalists are cautiously optimistic about the improving nature of their ecosystem in the coming year, yet are realistic about an inevitable contraction of industry resources, according to Venture View 2010, the annual predictions survey conducted by the National Venture Capital Association (NVCA). According to respondents, the venture industry will begin to see gradual increases in investment levels and exit transactions in 2010, but the asset class will continue to shrink in size over the next five years. Specific areas of optimism include clean technology investing, growth equity and later stage companies, and ongoing opportunities overseas.

“It is readily understood by the venture capital community that our industry is going to contract in size going forward,” said Mark Heesen, president of the NVCA. “That will mean fewer firms, for sure, but not necessarily fewer companies funded. There is a great deal of innovation taking
place and venture capitalists who have the track record to raise funds will be well positioned to build companies. Most venture capitalists will agree that a smaller industry is a better one."

The NVCA survey was conducted from November 30 – December 8, 2009 and includes
responses from more than 325 venture capitalists across the United States.”

They don’t seem to share your doom and gloom about the effect of the deficit.

Is what’s best for venture capitalists “best for the country?” This is not self-evidently true. The Bush tax cuts, low capital gains taxes, etc. are surely good for folks who have the money and want to turn a better than average profit with a 5-7 year exit horizon. The same policy is not necessarily good for the overwhelming majority of workers and their families.

Healthcare costs are of equal concern to all. Costs need to be brought under control, and coverage needs to be expanded. If, say a national one provider system would be the most efficient way to get this done, why should this not be supported? Some people distrust government to be able to do it efficiently. O.k. propose something better, but the problem needs to be tackled, no?

As to being on the same team, I’m on the team that wants the best outcome for the nation as a whole, not just for those who already have the money. If you believe that optimizing the profitability of venture capitalists is the best way to bring this about, because this leads to the most innovation, jobs, etc., then we’re on the same team, even if we disagree about the assumptions.

1. Myth of government involvement in the economy. The government should set rules, not pick winners. The market is much better at picking the winners then any government will ever be. The government will also support their chosen winners well past their expiration data.

2. Wind generated energy is another resource rat hole. Investment is driven by one thing, government payouts. A Watt generated by wind is worth less then a Watt generated by conventional plants. It isn't schedulable because you can't schedule the wind. Wind power availability is at it's lowest point when demand is highest (really hot and really cold days) over broad geographical areas.

For basic science government support is fine. For applied science it is another money rat hole. Applied science is engineering. Academics for the most part have no experience in bringing a product to market. Experience is very important.

3. Reinforcing a poor investment with taxpayers money is not a stimulant.

4. You cannot equate "clean" power with conventional generation. Conventional power generation is reliable, "clean" power generation is not. If you buy a car that is unreliable you call it junk. Conventional power generation can stand on its own because it is reliable. "Clean" power generation without conventional power backup is worth next to nothing.

The jobs you create with the "stimulus" fails to take into account the jobs that are destroyed, or would have been created, by sucking capital out of the market. See here

Two arguments are put forward for the bridge, one of which is mainly heard before it is built, the other of which is mainly heard after it has been completed. The first argument is that it will provide employment. It will provide, say, 500 jobs for a year. The implication is that these are jobs that would not otherwise have come into existence.

This is what is immediately seen. But if we have trained ourselves to look beyond immediate to secondary consequences, and beyond those who are directly benefited by a government project to others who are indirectly affected, a different picture presents itself. It is true that a particular group of bridgeworkers may receive more employment than otherwise. But the bridge has to be paid for out of taxes. For every dollar that is spent on the bridge a dollar will be taken away from taxpayers. If the bridge costs $10 million the taxpayers will lose $10 million. They will have that much taken away from them which they would otherwise have spent on the things they needed most.

Therefore, for every public job created by the bridge project a private job has been destroyed somewhere else. We can see the men employed on the bridge. We can watch them at work. The employment argument of the government spenders becomes vivid, and probably for most people convincing. But there are other things that we do not see, because, alas, they have never been permitted to come into existence. They are the jobs destroyed by the $10 million taken from the taxpayers. All that has happened, at best, is that there has been a diversion of jobs because of the project. More bridge builders; fewer automobile workers, television technicians, clothing workers, farmers.

5. Covered by the first four.

Roland: 2/3 of American jobs are in small businesses. ALL of the net job creation in the last ten years was in the small business sector. I deliberately spanned the range from my long-term techie startups to the cash flow small businesses described by Foo, as I figured some 'progressive' would show up to smear my motives. So are all the small businesses and their funders, from the Moms & Pops and Docs, to the big bad, exploitive VCs, the kulaks in Obamaland? We're counting on Goldman and Government Motors to turn this around, eh?

If you think what's 'best for the country' is to have 2/3 of the potential employment and economic capacity sitting on their hands (and capital) because of sovereign risk, we've got very different ideas of what's good for America. Government doesn't create jobs, it destroys them. Eventually, as the wise Maggie said, it runs out of other people's money.

As for the NVCA, you have to know how to read their bumpf. "...an inevitable contraction of industry resources" and "...the asset class will continue to shrink in size over the next five years..." are about as close as they are going to get to saying "The farking sky is falling and our members are dropping like flies." But since sending our tax money to pay for Chinese innovation doesn't bother you, no doubt the outcome as far as reduced private sector innovation isn't an issue either. (Why the bumpf? Some of those surviving VC members are trying to raise new funds from limited partners. Having the NVCA say "we're screwed" in as many words can be a bit off-putting to them. I'm not raising, so I can be as blunt as I want. Isn't public choice theory wonderful?)

Krugman and Reich, of course, believe that the stimulus is too wimpy.

It's economist like them that give economics the distinction of being called the dismal science. In science when a theory is tested and fails it is discarded. Keynesian economics has been tested and failed. It was tried by Roosevelt and failed. We tried it in the 70's and it failed. The Japanese tried it in the 90's resulting in what is referred to as the 'lost decade'. Keynesian economics fails because all it does is change who spends the money.

Tim:

Allow me to respond to a couple of your points.

"If you think what's 'best for the country' is to have 2/3 of the potential employment and economic capacity sitting on their hands (and capital) because of sovereign risk, we've got very different ideas of what's good for America."

That's not what I think. I do think that 2/3 plus of the economy is driven by personal consumption, and that personal consumption depends on people having jobs. I also think that to get the economy going it's important to create jobs. I don't think VC capital is at the heart of it.

VC capital may be sitting on its hands, small business on the other hand is out beating the bushes to drum up work as best they can.

Government destroys jobs, I take it is a religious principle. I don't share it.

" [S]ince sending our tax money to pay for Chinese innovation doesn't bother you, no doubt the outcome as far as reduced private sector innovation isn't an issue either."

I think that outsourcing our manufacturing to China is a very large problem in general. It goes way beyond wind turbines. I think we should have government policy that fosters domestic manufacturing. I don't know enough about this particular Texas windfarm project [total cost of $1.3B?] to judge whether it is a waste to spend [$150 million] of stimulus money to facilitate it.

Your comment about reduced private sector innovation I take it returns to your point that a large deficit reduces VC investent and other investment because it makes business afraid of the future. You are correct that I don't believe the stimulus at this time has the effect of depressing private sector innovation. I think it supports it.

I'm happy to read and learn if you wnat to point me to any credible scholarly work on this.

Here's an abandoned solar plant from the last round of subsidy follies. Hard to find documentation online, since this was all pre-Net, but I happen to have driven past this particular site both before and after. And here's an example why government shouldn't be picking the winners in the wind industry. Over to you, Roland: got some examples of full-time 'green' jobs created by the stimulus - that are actually economically sustainable?

As far as scholarly work ('peer reviewed' no doubt), that doesn't happen until after the debacle is over. If you want current commentary, you're got to read people who are watching the markets closely. Here's an example, regarding sovereign debt which is au courant this week as Greece totters on the edge of default. Take a good look at where the US stands on being able to cover its on balance sheet debt load for the long term - bad enough - and then what happens when you add in the off balance sheet obligations. It ain't pretty, and it's getting worse. Here's one of the reasons . Sweeping the mortgage mess under the rug by putting busted MBS on the Fed balance sheet isn't helping either. In every case in the past in which the US has created such a debt overhang - going back to the Revolution - the outcome has been inflation. Tell you what - we'll wait a couple of months, and then check in on how Obama is doing with that forecast of 95,000 new jobs per month (which won't even cover population increase).

Yup, the small businesses are scratching hard to stay alive. What they aren't doing is investing and hiring. The ones I know are laying off if they can, and liquidating debt if they are able. My contractor friend is down to one helper, and is spending half his time on his own place; new construction is essentially dead, and few households are ready to extend themselves for remodel loans.

My reply is held up in moderation, presumably because of the number of links included.

[...]

3. Therefore, while it is not possible to directly translate Spain’s experience with
exactitude to claim that the U.S. would lose at least 6.6 million to 11 million
jobs, as a direct consequence were it to actually create 3 to 5 million “green
jobs” as promised (in addition to the jobs lost due to the opportunity cost of
private capital employed in renewable energy), the study clearly reveals the
tendency that the U.S. should expect such an outcome.

4. At minimum, therefore, the study’s evaluation of the Spanish model cited as
one for the U.S. to replicate in quick pursuit of “green jobs” serves a note of
caution, that the reality is far from what has typically been presented, and that
such schemes also offer considerable employment consequences and
implications for emerging from the economic crisis.

5. Despite its hyper-aggressive (expensive and extensive) “green jobs” policies it
appears that Spain likely has created a surprisingly low number of jobs, twothirds
of which came in construction, fabrication and installation, one quarter in
administrative positions, marketing and projects engineering, and just one out
of ten jobs has been created at the more permanent level of actual operation
and maintenance of the renewable sources of electricity.

6. This came at great financial cost as well as cost in terms of jobs destroyed
elsewhere in the economy.

7. The study calculates that since 2000 Spain spent €571,138 to create each
“green job”, including subsidies of more than €1 million per wind industry job.

8. The study calculates that the programs creating those jobs also resulted in the
destruction of nearly 110,500 jobs elsewhere in the economy, or 2.2 jobs
destroyed for every “green job” created.

9. Principally, the high cost of electricity affects costs of production and
employment levels in metallurgy, non-metallic mining and food processing,
beverage and tobacco industries.

10. Each “green” megawatt installed destroys 5.28 jobs on average elsewhere in the
economy: 8.99 by photovoltaics, 4.27 by wind energy, 5.05 by mini-hydro.

11. These costs do not appear to be unique to Spain’s approach but instead are
largely inherent in schemes to promote renewable energy sources.

12. The total over-cost – the amount paid over the cost that would result from
buying the electricity generated by the renewable power plants at the market
price - that has been incurred from 2000 to 2008 (adjusting by 4% and
calculating its net present value [NPV] in 2008), amounts to 7,918.54 million
Euros (appx. $10 billion USD)

13. The total subsidy spent and committed (NPV adjusted by 4%) to these three
renewable sources amounts to 28,671 million euros ($36 billion USD).

14. The price of a comprehensive electricity rate (paid by the end consumer) in
Spain would have to be increased 31% to being able to repay the historic debt
generated by this rate deficit mainly produced by the subsidies to renewables,
according to Spain’s energy regulator.

[...]

Study of the Effects on Employment of Public Aid to Renewable Energy Sources
by G. Calzada-Alvarez

Tim,

I think there may be a security argument on a couple of fronts for 4 & 5, hence my increased tolerance of the concept. If we wish to fund this stuff, however, do so via the regular budget, over the long term.

My disagreement with Roland over 1-3 is that the stimulus needed to be a jobs program, rather than an anti-jobs program that fattens government long term, and aids to negative trends in industries considered important to America's future (vid. green energy).

The "green jobs" sales pitch was dishonest from the get-go, and that's becoming clearer.

Tim:

Road trip to Armed Liberal territory, so sorry for the delay in getting back to you.

Here is a site Z Facts with some basic explanation of concepts I found useful. It has charts about level of the national debt over time, and some explanation of the rationale for deficit spending in a depression.

The concern that deficit spending will lead inflation and other bad things cannot be denied, it seems to me. However, inflation did not go through the roof after the deficit spending of the New Deal or WW II. There was a spike 1946-'48, but this did not seem to cause undue harm.

I found your link to Tyler Durden's post about off-balane sheet debt of various countries interesting, but not sufficiently basic or clear for me to fully understand what is included in the off-balance sheet numbers or what to think about that. I have no quarrel that the size of the national debt is a concern and that it will have to be addressed and reduced. The question is when and how best to accomplish this.

The fact that social security has been adversely affected by job loss and people retiring and claiming benefits early is interesting. That this would happen sounds correct. Funding social security, of course, would be difficult if the economy stays depressed for a long time.

You cited two examples of abandoned alternative energy projects. The solar project is very small (5.5 MW) nothing more than a pilot program. Once it's built, photovotaic cells don't cost much to maintain. I assume it was abandoned because the cost of expanding it did not make sense? The other project, the windfarm, sounds like it had a bad design concept that caused too many failures. For the most part, the issue with renewable energy projects is that all the cost is up front in technology and construction. Once built, they are much cheaper to run than fuel burning plants. So once built, they are cheaper to operate and maintain per kw than traditional plants.

ARRA, of course, is about much more than green jobs, or green energy. Here is a quick run down on ARRA as enacted on 2/17/09.

Total appropriations are $787 billion. The ostensible purpose is " To preserve and create jobs and invest in infrastructure." Money was designated for specific project types as follows:

$4.6B to repair and modernize DoD facilities and invest in energy efficiency. This includes $400M for military medical facilities.

4.6B to the Army Corps of Engineers (“USACE”)

$1B to the Bureau of Reclamation for drinking water projects in rural and drought areas.

Approximately $6B to General Services Administration (“GSA”) for Federal buildings and U.S. courthouses ($700M); Border stations ($300M)
Converting GSA facilities to high-performance green buildings ($4.5B; and purchasing hybrid or electric cars ($300M)

$84M to create Recovery Act Accountability and Transparency Board (the “Board”) to carry out the provisions of Title XV.

Small Business Administration loan guarantee program increased to $15M.

$420M for border protection

$98M to the Coast Guard for shore protection.

$142M to Coast Guard for alternation of bridges

240M to Bureau of Land Management (“BLM”), maintenance, rehabilitation, restoration of facilities, property, trails and lands and remediation of abandoned mines and wells
and BLM construction projects.

$750M to Department of the Interior for
national parks operations, construction

$800M to Environmental Protection Agency (“EPA”)for Superfund Remediation Program and remediation of leaking underground storage tanks

$6.4B for state and tribal assistance grants

$4B for clean water projects

$2B for safe drinking water projects

$300M for Diesel Emission Reduction Act

$1.1B to Department of Agriculture for Forest Service projects and wildland fire management

$218M each to the Army and Air Force for construction of child development centers, troop housing, construction of family housing and maintenance and operations of family housing

$280 to the Navy/Marines for child development centers, for troop housing, and for energy conservation and alternative energy projects.

$1.5B To the all branches of the armed forces for construction of hospitals, Energy Conservation Investment Program

$1B to the Veterans Administration for construction of medical facilities

$150M for grants to states to construct extended care facilities for veterans

$1.5B to Department of Transportation (“DOT”) for discretionary grants to states and local governments on a competitive basis.

$27.5B to Federal Highway Administration (“FHA”) for passenger rail and port infrastructure apportioned to the states under a formula.

$8B to Federal Railroad Administration (“FRA”) with priority for intercity high speed rail.

$6.9 B to Federal Transit Administration (“FTA”)for transit capital assistance grants.

$53.6B stimulus for education, grades K-12 and higher education. There are no specific earmarks for construction or renovation of schools.
Governors make applications for funds and must certify that they will maintain state programs (i.e. this money should be extra spending).

$20M to Office of the Inspector General (“OIG”) to audit state and local agency projects receiving ARRA funding to ferret out fraud and false statements.

Here is an article about off-balance sheet accounting by Greece. Goldman Sachs and others provided $300 Billion in loans secured by future airport revenues and the like. These were booked as currency transactions and the liability was not shown in Greece's budgets as a liability.

That, of course, is straightforward fraud. The victims of the fraud in this case are the EU and the Greek voters.

Anyone know of a report about a similar problem in the U.S. budget?

Roland: You're unlikely to find a strictly similar fraud in the US, because the situation that engendered the Greek / Goldman chicanery happened in a very different monetary and regulatory environment.

Specifically, Greece is subject to the Maastricht criteria since it became a member of the Euro zone. Among other things, these criteria include limits on the public deficit as a fraction of GDP, both to initially gain admission to the Eurozone, and to continue as a member. Apparently that criterion is routinely winked at for ongoing budgets, but the Greek politicians wanted to go even beyond those limits of tolerance. Since they aren't able to just print more money (being part of the Eurozone, they don't have an independent central bank), they and Goldman worked out their little deal to hide part of the deficits under the rug, presumably until the pols had safely retired.

So given that we're not subject to Maastricht and we do have an all-too-active central bank printing press, the incentives for an equivalent fraud are not present. If you want to dig for stinkers of an equivalent comparative magnitude, I'd suggest the following starting places (in chrono order):

- The inflated valuation and negotiability of mortgage backed securities that was enabled by the ratings agencies (S&P, Moody's and Fitch) giving AAA ratings to tranches that have proved to be extremely vulnerable to secular downturns in housing prices.
- The 'bailout' of AIG with taxpayer money, specifically to enable it to settle credit default swap (CDS) contracts at par, rather than the fractional value that would have resulted had AIG failed. This has the effect of bailing out Goldman and several European banks from the counterparty losses they would have been exposed to by (knowingly) concentrating their risk with AIG.
- The lifting of the caps on Federal backing for Freddie and Fannie's securities this last December, exposing the taxpayers to unlimited risk for F&F's previous and ongoing backing of mortgages that are unpayable.
- The ongoing stuffing of the Fed's balance sheet with purchased mortgage backed securities, for which there is no public market - meaning the price paid is set arbitrarily and out of public view.

Back on the original topic, here's a survey of dead windfarms from the last round of subsidies. Much of it is specific to California's programs, which continued after the Federal giveaways lapsed. It's not terribly well organized, so the differences are not always clear. At the end is has a comparison and warning about about the Euro-follies documented in the article linked by J Aguilar in #14.

The concern that deficit spending will lead inflation and other bad things cannot be denied, it seems to me.

Deficit spending does not lead to inflation provided the money is burrowed. If the money is burrowed the amount of money chasing the available goods and services doesn't change and therefore the prices don't change. If the deficit spending is financed by printing money then the value of the money drops (more money chasing the same amount of goods and services) and you get inflation.

This CA Energy Commission Site has much useful information about energy generation in CA. Wind accounts for 2.4 percent of total electricity production. Solar is less than a percent, although much of the push for renewables is in solar so this will soon change.

More than 13,000 wind turbines are in operation today in the three main areas developed in California: Altamont, Tehachapie, and San Gorgonio. Together these produce 5,700 MW. That is hardly abandoned.

This U.S. Department of Energy power point report suggests wind generation accounted for 35% of all new capacity added in 2007, and that the cumulative capacity has steadily increased, and never decreased since 1982. It suggests GE, not foreign suppliers, has dominant market share for turbines.

The CA Energy Commission site reports cost of production of wind power today is 25% of what it was in the early 80's. That stands to reason. Compared to hydro, coal, and gas, this is a very new industry. It suggests that as these become more efficient, they will become more and more cost competitive.

Of course hydro, gas, nuclear, coal and oil electricity generation are all subsidized as well, so it's important to look at this in the big picture. Here is a link looking at how to quantify oil subsidies.

Should we promote wind, solar, biomass, and geothermal as we also continue to support hydro, oil, gas, nuclear, and coal production of energy? I think the answer is "yes" to all of these so that we can reduce our reliance on foreign oil, and so we will not have to purchase wind turbines and other alternative energy technology from abroad when we really need them. Therefore, I think it's smart to support the domestic development of these technologies through our tax dollars.

It was interesting to see David Roe's book "Virgin's and Dyanamos" cited in on the American Thinker page. I can vouch for the fact that David Roe is not a wealthy or frivolous heir as the article implies. He is a great and smart individual who devoted 25 years promoting smart policies. I have his book on my shelf but have not yet read it. Now I will. Thanks.

Of course hydro, gas, nuclear, coal and oil electricity generation are all subsidized as well, so it's important to look at this in the big picture. Here is a link looking at how to quantify oil subsidies.

Let look at the big picture. Oil is a very minor player in the generation of electricity constituting about 1%.

The EIA has analyzed subsidies (pg. 16 of the PDF file).
Chapter 5. Subsidies per Unit of Production

Coal - $0.44
Nuclear - $1.59
Natural Gas - $0.25
Hydroelectric - $0.67
Solar - $24.34
Wind - $23.37

Greg F.

You are choosing to blog anonymously and I don't know your credentials or knowledge about the power industry. My interest in this is as a lay-person.

For the most part, when we blog on this site we discuss topics that most of us are not expert at. We hope to enlighten each other, and to sharpen our own thinking with our collective explorations. When someone does have special knowledge we gladly learn from it.

In light of this, I find your statement, following, not in the spirit of this endeavor.

I find it reprehensible that people who are demonstrably ignorant about energy production want to compel me through the force of government to pay for their hair brain solutions.
Thank you for the link to the EIA site. Here is a statement from page 15 of the .pdf:

The per-unit subsidies are calculated as the subsidies allocated to each fuel type divided by the FY 2007 electricity generated by each fuel type (Table 35). Refined-coal-related generation receives the largest subsidy in absolute terms, at roughly $2 billion, as well as the highest perunit value at $29.81 per megawatthour. Renewable electricity production, in aggregate,received subsidies totaling $1.0 billion, but the per-unit subsidy in aggregate is $2.80 per megawatthour. On a fuel-specific basis, solar and wind subsidies receive the second-and-third highest per unit subsidies. However, the total value of subsidies received by each of these technologies was roughly in proportion to their relative share of net generation. As, a result,their respective per-unit subsidies are nearly equal. In the case of solar, the per-unit subsidy estimate of $24.34 per megawatthour is a function of the relatively high allocation of subsidies received, $14 million, and its low shar of total electricity production. Wind received $724 million in subsidies, valued at $23.37 per megawatthour.
If you add up the subsidies for coal, refined coal, natural gas and petrelum liquids listed in the table you refer to, these add up to $4.5 billion. This compares to subsidy for renewables of ~$1 billion. Yes, the kw/hr subsidy is high for the renewables, but that's what you'd expect when we are trying to support a new industry.

You are correct that oil plays a small factor in the production of electricity, even though it is a back-up fuel in many natural gas plants. But that does not make oil subsidies irrelvant to our discussion becausee oil is the dominant energy source overall.

Greg F.

You are choosing to blog anonymously and I don't know your credentials or knowledge about the power industry. My interest in this is as a lay-person.

For the most part, when we blog on this site we discuss topics that most of us are not expert at. We hope to enlighten each other, and to sharpen our own thinking with our collective explorations. When someone does have special knowledge we gladly learn from it.

In light of this, I find your statement, following, not in the spirit of this endeavor.

I find it reprehensible that people who are demonstrably ignorant about energy production want to compel me through the force of government to pay for their hair brain solutions.

Thank you for the link to the EIA site. Here is a statement from page 15 of the .pdf:

The per-unit subsidies are calculated as the subsidies allocated to each fuel type divided by the FY 2007 electricity generated by each fuel type (Table 35). Refined-coal-related generation receives the largest subsidy in absolute terms, at roughly $2 billion, as well as the highest perunit value at $29.81 per megawatthour. Renewable electricity production, in aggregate,received subsidies totaling $1.0 billion, but the per-unit subsidy in aggregate is $2.80 per megawatthour. On a fuel-specific basis, solar and wind subsidies receive the second-and-third highest per unit subsidies. However, the total value of subsidies received by each of these technologies was roughly in proportion to their relative share of net generation. As, a result,their respective per-unit subsidies are nearly equal. In the case of solar, the per-unit subsidy estimate of $24.34 per megawatthour is a function of the relatively high allocation of subsidies received, $14 million, and its low shar of total electricity production. Wind received $724 million in subsidies, valued at $23.37 per megawatthour.

If you add up the subsidies for coal, refined coal, natural gas and petrelum liquids listed in the table you refer to, these add up to $4.5 billion. This compares to subsidy for renewables of ~$1 billion. Yes, the kw/hr subsidy is high for the renewables, but that's what you'd expect when we are trying to support a new industry.

You are correct that oil plays a small factor in the production of electricity, even though it is a back-up fuel in many natural gas plants. But that does not make oil subsidies irrelvant to our discussion becausee oil is the dominant energy source overall

"If you add up the subsidies for coal, refined coal, natural gas and petrelum liquids listed in the table you refer to, these add up to $4.5 billion. This compares to subsidy for renewables of ~$1 billion."

By that logic we could invest 2 billion in me riding on a stationary bike 8 hours a day, and still only be half of what fossil fuels are subsidized at! Raw numbers are irrelevant, although i do oppose subsidies in general, and in this case certainly.

"Yes, the kw/hr subsidy is high for the renewables, but that's what you'd expect when we are trying to support a new industry."

Like I said, you can make that argument for any new industry you like and any amount of money. Whats the evidence that it will ever turn around? More importantly, are the subsidies actually speeding that day, or just allowing the current companies to muddle along and turn a buck? If solar has a future, it will be cracked by somebody and they will make a fortune. I don't know that the current subsidies are speeding that day at all. Maybe they in fact slow it down by making unprofitable current technologies seem relevant, deterring folks from reaching for the real deal. We aren't talking about a proven technology that happens to have enormous start up costs (like nuclear was). We're talking about an unproven technology that in fact doesn't really exist yet, and may never. Why not save our resources for direct research and scaling up once its figured out? What if some other tech emerges in the meantime and we look like shmucks?

Roland Nikles,

So I blog anonymously. You have an issue with that? The Federalist papers were written anonymously and that doesn't seem to have affected their influence. How would I know the name you use is your real name? I don't. I don't even care. The only thing that matters is the merits of your arguments.

Mark buehner dealt nicely with your attempt to sidestep the unit cost subsidy issue so I will move on to something different.

You previously stated:
bq. Should we promote wind, solar, biomass, and geothermal as we also continue to support hydro, oil, gas, nuclear, and coal production of energy? I think the answer is "yes" to all of these so that we can reduce our reliance on foreign oil …

Your rational was we should promote alternate ways of generating electricity to "reduce our reliance on foreign oil". I point out that nothing we do with electric generation will have any effect on oil consumption and you respond in your follow up post with this:

You are correct that oil plays a small factor in the production of electricity, even though it is a back-up fuel in many natural gas plants. But that does not make oil subsidies irrelvant to our discussion becausee oil is the dominant energy source overall

Classic example of moving the goal posts.

A few more points:
1. Solar and wind are mature technologies (over 30 years old). Turbines are even older.

2. Wind is not scheduable and requires spin reserve. Spin reserve is conventional power plants burning fuel off line.

3. Backup power (spin reserve) for wind generators are stressed more due to the often rapid changing output from wind resulting in higher maintenance costs. This is analogis to jack rabbit starts and stops with your car.

4. Highest electric demand is winter and summer.

5. Wind power generation peaks in the spring and fall.

6. Peak demand happens when temperatures hit their extremes. One aspect of theses extremes is the lack of wind over large geographical areas. The result is the power available from wind generation is insignificant. The falacy that the wind will be blowing somewhere is easily shown to be false by examining the wind maps during one of these extremes.

7. Due to the conditions in point #5 wind power does not reduce the requirement to build conventional power plants to any significant degree.

8. Adding more wind generation becomes progressivly more expensive per unit of energy as the windiest locations will be built first.

In addition to the direct subsidies items 2, 3, and 7 add indirect costs to wind generation. Also, extending the grid to a wind farm is paid for by the utility. Since wind farms are in more remote locations this is another hidden cost of wind.

Here is a chart of petroleum liquids used in electricity consumption. It seems to range from between 50 and 200 million barrels annually. This is not insignificant, but I agree this would not be a main reason to support alternative fuels.

We will need to substantially increase elctricity production over the next 50 years. An article I read recently suggested the required increase in demand worldwide may require the construction of 1GW plant/day. In the U.S. we could meet demand by building all nuclear plants, or all coal fired plants. These have environmental drawbacks. Coal, even "clean coal" causes significant pollution, and nuclear poses risks of accident or sabotage and we haven't yet figured out how to deal with the spent fuel rods.

We can supply significant portions of our energy needs through renewables. Hawaii's "initiative": http://hawaii.gov/dbedt/info/energy/hcei/ is to have 70% of energy supplied through renewable sources. If this can be achieved for economically sustainable costs why is this a bad idea?

The initial post above, raised the question whether we should support such endeavors through tax dollars when some of the benefits may be abroad and not here. Fair point, but this does not really suggest that it's not a good idea to invest in alternative energy sources.

Photovotaic panels on every warehouse rooftop in Southern CA? Why not? Solar plants in the Mojave? Why not? Brightsource Energy is building a 450 MW plant at Ivanpah. They are receiving some loan guarantees, but other than that the project is privately funded.

Every major energy source that has been developed, I believe, has received significant state aid. The government is assisting the construction of two nuclear plants in Georgia This will provide jobs and helps get these projects off the ground in an environment of tight/unavailable credit. Is that an appropriate investment of public resources? Why not?

The Chinese are heavily investing state dollars in the development of renewable energy technology because they see this as a growth sector. That's why those turbines in the Texas windfarm project come from China. By investing in alternative technology domestically, we can help assure that the U.S. will continue to be in the forefront of this industry.

Of course, just because we don't invest tax dollars in developing an industry, doesn't mean we don't pay for it. When oil companies make $4million in profits in a quarter, we pay for that.

As Ian Shoals would say: "Gotta go . . . "

"we haven't yet figured out how to deal with the spent fuel rods."

Sure we have, we just refuse to implement it for reasons best known to Jimmy Carter. Recycle everything but fuel rods I guess.

Keen on alternatives? Knock yourselves out. Best case they won't cover our growth, let alone anything else.

Keen on alternatives? Knock yourselves out. Best case they won't cover our growth, let alone anything else.

Knock out who? If you haven't noticed, Roland isn't talking about investing his own money, he's talking about using our money for his little subsidies and loan guarantees.

Here is a chart of petroleum liquids used in electricity consumption. It seems to range from between 50 and 200 million barrels annually.

Roland I don't think you understand. Actually, I know you don't understand. A barrel of crude oil is a mixture of different hydrocarbons. The process of refining is to separate the different hydrocarbons.

The residual oil used for generating electricity is part of every barrel of oil. Using the residual oil, or not, will have zero affect on the amount of crude oil we purchase.

We can supply significant portions of our energy needs through renewables.

Your asserting facts not in evidence and in ignorance.

Hawaii's initiative is to have 70% of energy supplied through renewable sources.

LMAO. Why stop there? How about an "initiative" to supply all their energy with perpetual motion?

If this can be achieved for economically sustainable costs why is this a bad idea?

You have it backwards. It’s a bad idea because the technology does't exist to achieve it economically. If you want to invest in such a venture go for it. Just don't use the government to employ legalized theft to satisfy your ignorant desires. I want no part of it.

Photovotaic panels on every warehouse rooftop in Southern CA? Why not? Solar plants in the Mojave? Why not?

1. There isn't enough silver.
2. Only works when the sun is shinning.

Where I work we have 190 solar panels. They will never generate enough power to pay for themselves. Never. Being in southern California doesn't make as much difference as you would think either. Silicon has a negative temperature coefficient which means as the temperature increases output decreases. The panels are rated under "standard conditions" which is a cell temperature of 25 degees C. In actual use the, in southern California, the cells will be a lot hotter then that.

Every major energy source that has been developed, I believe, has received significant state aid.

You believe wrong. Electricity generation started up all by itself with private money. Edison was the first in the mid 1880's. The government didn't have any serious involvement until the TVA in the 1930's.

The Chinese are heavily investing state dollars in the development of renewable energy technology because they see this as a growth sector.

They sure are but it isn't wind

At the end of 2007, there was reported to be 145 GWe of hydro capacity, 554 GWe fossil fuel, 9 GWe nuclear and 4 GWe wind, total 713 GWe. In 2008, the country added 20.1 GWe of hydro capacity, 65.8 GWe coal-fired capacity, and 4.7 GWe wind.

These capacity increase figures are all the more remarkable considering the forced retirement of small inefficient coal-fired plants: 26 GWe of these was closed in 2009, making 60 GWe closed since 2006…

The hydro increase was more then 4 time larger then wind and coal more then 10 times larger. The Chinese are much more heavily investing in coal, nuclear, hydro, and natural gas generation then they are in wind. The Chinese have no intention of crippling their economy with expensive wind power.

When oil companies make $4million in profits in a quarter, we pay for that.

Which is less that the govenments take.

Since 1977, governments collected more than $1.34 trillion, after adjusting for inflation, in gasoline tax revenues—more than twice the amount of domestic profits earned by major U.S. oil companies during the same period.