January 27, 2009
Brian Kennedy (202) 346-8826
Chris Tucker (202) 346-8825

As House Begins Debate on “Green Jobs” Stimulus, IER Lists Top Five Problems With Plan

Washington, DC
– As members of the U.S. House of Representatives take up work this week on a massive, $825 billion stimulus plan premised on the government’s ability to unilaterally create millions of so-called “green jobs” for American workers, the Institute for Energy Research (IER) today identified five critical problems with the proposal, many of which are included in IER’s recent Green Jobs: Fact or Fiction? report:

Problem #1: Curious Accounting

In concluding that a “green jobs”-focused stimulus plan will create millions of new jobs for American workers, President Obama and Democrats in Congress base their analysis on over-optimistic expectations for “job creation,” but refuse to account for “job destruction.”

Often over-looked is that the revenue to create all these new “green jobs” has to come from somewhere. The Obama plan envisions using a cap-and-trade system to secure hundreds of billions of dollars from the private sector via the sale of carbon allowances.

Unfortunately, as IER experts Robert Michaels and Robert Murphy recently discovered, proponents of “green jobs” treat that massive redistribution of resources “as manna from heaven,” never considering “the direct and indirect adverse effects (including job destruction) of imposing higher costs on a wide array of energy-intensive industries and thereby raising prices for consumers.”

Problem #2: Double Counting

A key assumption of the “green jobs”-driven stimulus plan the House is considering is that a limitless pool of idle labor currently exists on stand-by, and is ready, willing and eager to fill the new “green” slots created by government spending.

The problem (and it’s a good problem) is that a good portion of Obama’s future “green employees” may already have a job, albeit in a more conventional, stable field. “Green jobs” proponents make no accommodation for these workers, or acknowledge the impact that displacing and reassigning huge segments of a currently employed workforce might have on the economy – or their assumptions on net job creation.

Problem #3: Confusing Ends with Means

With millions of Americans currently out of work, the new president and Congress have decided that creating up to five million new green jobs “that can’t be outsourced” is their top priority. But in choosing as his main objective the artificial expansion of employment in the “green” energy sector, the president fails to recognize that the “primary objective of the energy sector is to supply cost-effective energy to the broader economy, allowing it to grow and increase the standard of living of its citizens.”

To the extent that objective is blocked or delayed by government efforts to create new job markets out of whole cloth and sustain them with public resources, economic productivity will be driven down, energy and consumer costs will be driven up, and overall net job creation and economic growth will be hampered as a result. The purpose of business is to provide goods or services that people want to buy. Government-led efforts that force businesses to create jobs that cannot deliver on this task ensures these businesses won’t be able to support and sustain these employment opportunities for long.

Problem #4: No Assessment of How “Green Jobs” Might Impact Energy Costs

Any time a government forces its way into markets with an eye on picking winners and losers and propping up politically popular, market-rejected, solutions at the expense of more affordable and reliable alternatives – the result is higher costs and diminished efficiency.

As it relates to “green jobs,” the distortionary impacts government intrusion would have in this area could force businesses to prematurely abandon efficient and market-tested production technologies for more expensive ones – a cost destined to be born by American taxpayers and energy consumers.

Problem #5: Misplaced Optimism in the Omnipotence, Omniscience of Government

Nowhere to be found in any of the “green jobs” proposals currently making the rounds on Capitol Hill is an acknowledgement of government’s inherent limitations in efficiently directing labor and capital markets. Putting aside whether certain social or political goals could be met by using artificial price controls as a means of reducing carbon emissions, the question of whether the federal government has either the authority or expertise to produce an outcome better than what a combination of market wages and consumer choices can deliver is a topic never considered by these proposals.

Additional IER analysis on the externalities of a “green jobs”-driven stimulus plan:

The Institute for Energy Research (IER) is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. IER maintains that freely-functioning energy markets provide the most efficient and effective solutions to today’s global energy and environmental challenges and, as such, are critical to the well-being of individuals and society.


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