[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
______
THE GREEN ROAD TO ECONOMIC RECOVERY
=======================================================================
HEARING
before the
SELECT COMMITTEE ON
ENERGY INDEPENDENCE
AND GLOBAL WARMING
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 18, 2008
__________
Serial No. 110-49
Printed for the use of the Select Committee on
Energy Independence and Global Warming
globalwarming.house.gov
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SELECT COMMITTEE ON ENERGY INDEPENDENCE
AND GLOBAL WARMING
EDWARD J. MARKEY, Massachusetts, Chairman
EARL BLUMENAUER, Oregon F. JAMES SENSENBRENNER, Jr.,
JAY INSLEE, Washington Wisconsin, Ranking Member
JOHN B. LARSON, Connecticut JOHN B. SHADEGG, Arizona
HILDA L. SOLIS, California GREG WALDEN, Oregon
STEPHANIE HERSETH SANDLIN, CANDICE S. MILLER, Michigan
South Dakota JOHN SULLIVAN, Oklahoma
EMANUEL CLEAVER, Missouri MARSHA BLACKBURN, Tennessee
JOHN J. HALL, New York
JERRY McNERNEY, California
------
Professional Staff
Gerard J. Waldron Staff Director
Aliya Brodsky, Chief Clerk
Thomas Weimer, Minority Staff Director
C O N T E N T S
----------
Page
Hon. Edward J. Markey, a Representative in Congress from the
Commonwealth of Massachusetts, opening statement............... 1
Prepared statement........................................... 3
Hon. F. James Sensenbrenner, Jr., a Representative in Congress
from the State of Wisconsin, opening statement................. 5
Hon. Jay Inslee, a Representative in Congress from the State of
Washington, opening statement.................................. 6
Hon. Greg Walden, a Representative in Congress from the State of
Oregon, opening statement...................................... 7
Hon. Hilda Solis, a Representative in Congress from the State of
California, opening statement.................................. 7
Hon. Emanuel Cleaver, II, a Representative in Congress from the
State of Missouri, opening statement........................... 8
Prepared statement........................................... 9
Hon. Jerry McNerney, a Representative in Congress from the State
of California, opening statement............................... 10
Hon. Marsha Blackburn, a Representative in Congress from the
State of Tennessee, prepared statement......................... 11
Witnesses
Mr. Bracken Hendricks, Senior Fellow, Center for American
Progress....................................................... 13
Prepared Statement........................................... 17
Robert Pollin, Ph.D., Professor of Economics and Co-Director,
Political Economy Research Institute, University of
Massachusetts Amherst.......................................... 32
Prepared statement........................................... 35
Answers to submitted questions............................... 123
Fred Redmond, International Vice President, United Steelworkers.. 45
Prepared statement........................................... 47
Byron Kennard, Executive Director, The Center for Small Business
and the Environment............................................ 50
Prepared statement........................................... 52
Answers to submitted questions............................... 128
Margo Thorning, Ph.D., Senior Vice President and Chief Economist,
American Council for Capital Formation......................... 61
Prepared statement........................................... 99
Submitted for the Record: Analysis of the Lieberman-Warner
Climate Security Act (S. 2191) Using The National Energy
Modeling System (NEMS/ACCF/NAM), a report by the American
Council for Capital Formation and the National Association
of Manufacturers and analysis conducted by Science
Applications International Corporation (SAIC).............. 63
Submitted Material
Robert Pollin article entitled How to End the Recession in The
Nation on November 24, 2008.................................... 134
Robert Pollin and Heidi Garret-Peltier article from the
University of Massachusetts, Amherst entitled The U.S.
Employment Effects of Military and Domestic Spending Priorities
on October 2007................................................ 137
THE GREEN ROAD TO ECONOMIC RECOVERY
THURSDAY, SEPTEMBER 18, 2008
House of Representatives,
Select Committee on Energy Independence
and Global Warming,
Washington, DC.
The committee met, pursuant to call, at 1:33 p.m., in Room
2175, Rayburn, Hon. Edward J. Markey [chairman of the
committee] presiding.
Present: Representatives Markey, Blumenauer, Inslee, Solis,
Herseth Sandlin, Cleaver, Hall, McNerney, Sensenbrenner,
Walden, and Miller.
The Chairman. This hearing is called to order.
The United States is in an economic tailspin. Earlier this
week, Alan Greenspan characterized the situation as a once-in-
a-century crisis and predicted that we are on the verge of
recession. The markets are reeling. The Wall Street titans are
collapsing, and home values have plummeted. Worst of all for
American families, unemployment has soared to its highest level
in 5 years with 84,000 jobs lost in August and 605,000 jobs
lost since the beginning of this year.
To set the economy right, we will have to take bold action
on many fronts. We must restore oversight, transparency and
prudence in the financial markets. We must strengthen the
dollar and reform our trade policy. And we must forge a new
energy strategy, one that will finally release us from big
oil's strangle hold and ignite an energy technology revolution
and put America back to work. ``Change, baby, change'' must be
our mantra if we are going to successfully work to restore
America to strength and prosperity.
Speedy adoption of a green stimulus package is a crucial
first step. A recent study from the Center for American
Progress and the Political Economy Research Institute shows
that by investing $100 billion in greening our buildings,
expanding our mass transit, building a smart electrical grid
and supporting wind and solar power and advanced biofuels, we
can create 2 million new jobs. The green investment package
they propose creates more jobs, better paying jobs than they
would at the same level of spending on consumer rebates. It
creates four times as many jobs as the same level of investment
in the oil and gas industry. At the same time, it will save
American consumers billions in energy costs and slash global
warming pollution.
In States all across the country, from California, from
Michigan to Ohio, the clean energy industry is already among
the leaders in job creation. In my home State of Massachusetts,
cleantech is already the 10th largest industry, and it is
projected to grow to third in the next 10 years.
Energy technology or ET, as Thomas Friedman has called it,
is all we need with the right policies to strike the spark. We
have begun to make this change a reality by passing the Energy
Independence and Security Act last December and the
Comprehensive Energy Security and Consumer Protection Act
earlier this week. The legislation passed in the House this
week establishes a comprehensive energy policy that includes,
among other things, tax credits for wind and solar power, a
national renewable electricity standard, aggressive building
efficiency standards and increased funding for mass transit,
green buildings and home energy assistance for low-income
households. Extending the renewable energy tax credits alone
will save 116,000 American jobs and $19 billion in investment.
We must now take the next step with a targeted set of
investments that will put Americans back to work, retrofitting
our buildings to save energy, greening the grid, training
workers for green jobs and building the fuel-efficient cars of
the future right here in America. These measures are a down
payment on building America's energy economy, the future first
steps toward economic recovery. These are those critical first
steps.
The greatest long-term challenges, however, are also going
to be dealt with at the same time--America's economy and
national security--that is, freeing us from dependence on
foreign energy sources and combatting global warming.
We have an excellent panel of witnesses who will be able to
discuss all of these issues for us. We look forward to their
testimony, and I will turn to recognize the ranking member of
the committee, the gentleman from Wisconsin, Mr. Sensenbrenner.
[The prepared statement of Mr. Markey follows:]
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[GRAPHIC] [TIFF OMITTED] T1959A.002
Mr. Sensenbrenner. Thank you very much, Mr. Chairman.
Not often do I cite the words of Democratic politicians,
but much of the testimony submitted for today's hearing reminds
me of the words of former President Harry Truman, who once
said, quote, ``give me a one-handed economist; all my others
say, `on one hand and on the other.' ''
There is a lot of speculation on how so-called green jobs
will boost the U.S. economy, which, given the recent news is
clearly struggling. Any new jobs are good for the economy,
green or not. Jobs that can transform our energy economy are
especially good jobs.
The question isn't whether green jobs are good or not. The
question is whether a program to promote green jobs is the
tonic our ailing economy needs. I agree with the testimony of
one of our witnesses who says that any government efforts to
shore up the economy have to start with stabilizing housing
prices and strengthening the financial system.
Margo Thorning, who is the senior vice president and chief
economist for the American Council of Capital Formation advises
Congress to allow time for recent actions by the Federal
Reserve Board and the U.S. Treasury to take effect before
putting more taxpayer dollars at risk. I agree, and I am
especially concerned about Congress putting more taxpayer
dollars on the line. As Ms. Thorning points out, one proposal
supported by some here today requires $100 billion from the
Federal Government to help create those so-called green jobs. I
share her skepticism about this report, particularly since this
proposal relies on higher taxes or deficit spending as a means
to pay for these government-supported job programs. Taken from
either hand, that is a bad idea.
Some of the witnesses today will say this perpetual revenue
stream will come from the legislative proposal called ``cap and
trade.'' But I call it ``cap and tax'' because I call them like
I see them. Cap and tax failed miserably in the Senate earlier
this year, primarily because it was clear that it would raise
both energy prices and taxes. Higher taxes won't pull us out of
the economic malaise that we are in. In fact, it will stall the
economy even more.
A recent report from Ms. Thorning's group, the American
Council for Capital Foundation, shows exactly what we can
expect from cap and tax: as many as 1.8 million jobs lost by
the year 2020; up to $1.46 a gallon rise in gas prices; and
potentially more than 100 percent jump in electricity and
natural gas prices. All, at the same time, while there are no
such price increases in economic competitors like China, India
and Brazil.
This does not sound like a formula for economic recovery in
America. Unfortunately, the House Democratic leadership missed
its chance this week to help lower energy prices, and that
would have been a big help to our ailing economy. But instead
of opening the vital new energy resources our economy needs,
the House leadership passed a sham energy bill that keeps most
of our energy resources under lock and key. By keeping the 50-
mile ban on offshore drilling, the bill keeps 88 percent of
offshore oil and gas reserves off the table forever. By leaving
out nuclear and clean coal technology, the bill doesn't advance
key low-emission energy technologies which are vital if we are
to confront climate change without damaging the economy.
However, it would be unfair to say this legislation won't
help create new jobs. By keeping lawsuit reform out of the
bill, there will be plenty of opportunity for the trial lawyers
to sue any company that tries to find new domestic energy
resources. If that is a green job, I think that this sham of an
energy bill will produce plenty of them. But I don't believe it
is going to help the economy at all.
As we hear today, economists will have many different ideas
of what will and won't improve the economy. As the Irish
playwright George Bernard Shaw once said, ``if all the
economists were laid end to end, they still would not reach a
conclusion.'' That said, it doesn't take an economist for me to
conclude that higher taxes and more regulation are not the
answer for our ailing economy.
And I thank the chairman and yield back the balance of my
time.
The Chairman. I thank the gentleman. Mr. Sensenbrenner and
I are both lawyers if any economists want to retaliate.
Mr. Sensenbrenner. Will the gentleman yield?
The Chairman. I will be glad to.
Mr. Sensenbrenner. Only half the lawyers lose their case.
The Chairman. We are keeping this in the jocular vein.
The Chair recognizes the gentleman from Washington State,
Mr. Inslee.
Mr. Inslee. Thank you.
I am really looking forward to the panel.
I do want to welcome Bracken Hendricks, who is a friend.
And I just want to comment, just to set the stage for the
discussion, Bracken co-authored a book about a year ago, and he
talked about three companies that were in just kind of early
stages of development. And I want to comment about something
that happened in the last couple of months.
One, he wrote about General Motors thinking about building
a plug-in hybrid car and thought that this gave America great
job-creating potential to create the new nongasoline powered
car. Yesterday, General Motors, a day before Bracken shows up,
rolled out their version of their plug-in hybrid, the GM Volt.
That is a prediction that seems to be coming to pass.
A year ago, in Bracken's book, he wrote about the Ausra
company that was developing a solar thermal technology that
could use thermal energy to heat a liquid and basically create
steam-based electricity. I note that, last month, the Ausra
company opened up the first solar thermal manufacturing plant
in Nevada, hiring hundreds of workers in Nevada. That
prediction is coming to pass.
He wrote about a company called MagnaDrive that was in the
early stages of building this transmission system that makes an
electrical motor 70 percent more energy efficient. I went and
visited their new headquarters in Washington where they are
hiring at least dozens of people, and they are shipping their
products to China. That prediction is coming to pass.
And I think those who have said for some time that this is
a great economic opportunity are now seeing those predictions
come to pass, and I look forward to the wisdom from this panel
about how we can accelerate that.
Thank you.
The Chairman. The gentleman's time has expired.
The Chair recognizes the gentleman from Oregon.
Mr. Walden. Thank you very much, Mr. Chairman.
And coming from a region that is home to extraordinary
opportunities for renewable energy, I welcome the panel and
look forward to hearing more about not only what can be done to
develop green jobs and green energy, but what can be done
through the marketplace to do that so we can minimize the
taxpayer support to get some of these industries up and
running. Because it is no secret that this government is under
great strain and stress, as are many of--anybody out there in
the capital side trying to find credit right now. And, you
know, the window is going to close, and these subsidies can't
go on forever.
As much as we want to transition off of the hydrocarbon
fuels, we also need to access them in the meantime. So I would
like to see us have a little different strategy where we use
the revenue generated from the sale of domestic oil and gas,
to, A, create jobs and, B, invest in this transition period
rather than end up with higher taxes and all of that, because I
think consumers are taking it in the wallet now; they can't
afford to take it anymore. The government is in debt up to its
ears and beyond. And these industries can't be subsidized
forever.
So I am willing to do it, to invest in research and get
things going, but it can't be permanent.
Mr. Chairman, I will yield back the balance of my time
because I know we have other members who want to speak. And I
will yield back, Mr. Chairman.
The Chairman. The gentleman's time has expired.
The Chair recognizes the gentlelady from California.
Ms. Solis. Thank you, Chairman Markey.
And I want to thank the witnesses for being here.
I will be very brief. When it comes to green car jobs, I
get so excited because I realize how our economic situation
over the last few years has suffered so greatly. We lost so
many manufacturing jobs to trade deals, to different things
that have gone on in the U.S. for the last few years. And I am
excited that we know that we can create these jobs, viable jobs
that could sustain a family, allow them to have a part of that
American dream, but keep those jobs here. I mean, that is
something that we are not talking up enough. The reality is
most of those manufacturing jobs left Mexico, and they went
farther into Indonesia, China and everywhere else and India.
Now we have to come back and be a competitive force.
So I just want to say this is an exciting opportunity to
start a green revolution that will hopefully bring everybody,
stakeholders, all of them to the table. And I am also talking
about those people who have traditionally been left out of
environmental topics and issues. And those are people of color,
hardworking-class folks, blue-collar people who now may have a
chance to get retooled, reeducated and hopefully brought into
an arena where they can also see a career ladder and hopefully
at the end of the day be able to sustain their lifestyles, the
American lifestyles that we all want to achieve here for the
next few years and decade.
So with that, I yield back the balance of my time.
The Chairman. The gentlelady's time has expired.
The Chair recognizes the gentleman from Missouri, Mr.
Cleaver.
Mr. Cleaver. Thank you, Mr. Chairman.
Dan Quayle is--I like him. It may surprise some, primarily
because his grandfather was a renowned Methodist Bishop. There
are churches and buildings on college campuses all over
Oklahoma and Kansas named Quayle. Quayle United Methodist
churches all over. And his grandfather was profound.
Now, the Vice President didn't quite get the profundities
that his grandfather had. And so, in a speech, as he was trying
to quote the model of the United Negro College Fund, which is
``a mind is a terrible thing to waste,'' the Vice President
said, ``it is a terrible thing when a man loses his mind.'' I
actually agree with Vice President Quayle.
And I would like to take a twist on that. I would say, a
crisis is a terrible thing to waste. We are in the biggest
crisis probably in our lifetimes. And it would be tragic indeed
if we allowed this crisis to pass without getting something out
of it, without coming out on the other side better than we were
when we entered.
And that brings us to this whole question of trying to
revamp the U.S. economy. The Center for American Progress says
that there is a possibility of creating as many as 2 million
jobs and within 2 years if the United States would put forth
the resources into replacing the conventional fossil fuels,
coal and so forth, and with new sources of energy. And it
should be, I think, a great opportunity for us to handle a
crisis in a manner that we are better than when we entered. I
actually had some more Quayle quotes, but we don't have the
time for me to use them to dramatize my commitment to this
issue.
I yield back.
[The prepared statement of Mr. Cleaver follows:]
[GRAPHIC] [TIFF OMITTED] T1959A.003
The Chairman. I thank the gentleman.
The gentleman from California, Mr. McNerney.
There are approximately 3 minutes to go on the roll call on
the House floor. I am going to leave it to the gentleman to
recess this hearing until after the four roll calls on the
House floor. We are going to have to go over and make the roll
calls and then come back and reconvene the hearing.
I yield to the gentleman.
Mr. McNerney [presiding]. Thank you, Mr. Chairman. I am
glad you didn't say 3 seconds.
I don't have much. I am very excited about the opportunity.
I spent my career developing wind energy technology. I know it
is fun. I know it is exciting. I know it creates jobs. It is
clean and good for our economy. And for every dollar we invest
in it, we get three to five times as many jobs as we get if we
invest in oil or fossil fuels. So this is the way of the
future. This is the way we have to go, and I hope that we can
make this happen.
With your intellectual capital, with your force of
personality, help us make this happen.
And with that, I adjourn this until after the votes--
recess. Excuse me, I recess this until after the vote.
[Recess.]
Mr. Inslee [presiding]. We will gavel our hearing back.
Sorry about the delay. We appreciate your patience, and I am
looking forward to my colleagues returning in a little bit as
they return from the floor.
[The prepared statement of Ms. Blackburn follows:]
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Mr. Inslee. We have a great panel today. I would like to
introduce them, starting with my friend Bracken Hendricks, who
is currently senior fellow at the Center for American Progress.
Bracken specializes in energy and climate issues, and he was
founding executive director of the Apollo Alliance and co-
author of the book, ``Apollo's Fire: Igniting America's Clean
Energy Economy,'' which was an incredible feat to co-author
considering that he had to drag the other co-author constantly.
So that was amazing.
Mr. Hendricks previously served, among other things, as
special assistant to the Office of Vice President Al Gore.
And, Bracken, thank you for your leadership for years on
these subjects.
Dr. Robert Pollin is our second witness. He is professor of
economics and co-director of the Political Economy and Research
Institute at the University of Massachusetts in Amherst. Dr.
Pollin's research centers on macroeconomics, conditions for low
wage workers in the U.S. and globally and analysis of financial
markets, certainly timely. He is co-author of the recent
report, ``Green Recovery: A Program to Create Good Jobs and
Start Building a Low-Carbon Economy,'' which addresses exactly
the subject of today's hearing.
We thank you, Dr. Pollin.
We want you to know that not all the members of this panel
share disdain for economists. I happen to have a degree in
that. So thank you for being here.
Mr. Fred Redmond is the international vice president for
human affairs for the United Steelworkers. As a founding member
of the Blue Green Alliance and the Green Jobs for American
campaign, the steelworkers have taken a true leading role in
the labor movement in advocating for environmental protection
and green job creation. He was named to the executive council
of the AFL-CIO earlier this year.
And please convey our thanks for your president's
leadership on this in multiple occasions as well.
Byron Kennard is the executive director of the Center For
Small Business and the Environment, which he co-founded in
1998. He is a longtime environmental advocate. He was awarded
the leadership medal of the United Nations environmental
program for his work in building the environmental movement. He
is the author of, ``Nothing Can Be Done, Everything is
Possible,'' a book of essays on social change. And he is a
guest columnist for GreenBiz.com, FortuneSmallBusiness.com,
BusinessWeek.com and other outlets.
And we appreciate you being here. We need a little social
change.
Dr. Margo Thorning is executive vice president and chief
economist for the American Council for Capital Formation. Dr.
Thorning's work focuses on tax, environmental and competitive
issues. She is the author of several books on these issues and
has testified frequently to quite a number of congressional
committees.
Dr. Thorning, thank you for being here today.
With that, we should start with Bracken Hendricks.
STATEMENT OF BRACKEN HENDRICKS
Mr. Hendricks. Thank you very much, Congressman Inslee. I
understand you are an author as well.
I want to especially thank Chairman Markey and Ranking
Member Sensenbrenner and all the members of the committee and
the staff, who are an incredibly competent staff, as well.
It is an honor to be here today to talk about a number of
issues that are coming together and finding solutions that
actually can start to address a number of interrelated issues.
August saw the unemployment rate jump to 6.1 percent; 9.4
million people are out of work. Clearly there is a significant
financial crisis brewing. Housing values are declining, but
there is a whole other sets issues that are also affecting the
economy right now: Rising energy prices, coal prices for
Appalachian coal have jumped 200 percent in a very short while;
$600 billion flows out of the economy for imported oil; and of
course, there is a brewing climate crisis which with inaction
presents significant costs and significant long-term burdens to
the economy.
I am Bracken Hendricks. I am a senior fellow at the Center
for American Progress and the Center for American Progress
Action Fund. And we were honored to work with the University of
Massachusetts Political Economy Research Institute and Dr.
Robert Pollin, who is here, in producing a report called,
``Green Recovery, a Program to Create Good Jobs and Start
Building a Low-Carbon Economy.'' What we found as we looked at
a package of investment in climate solutions, including
renewable energy and energy efficiency, was that investing
wisely in public infrastructure and in creating these markets,
it is possible to build new industry, improve American
competitiveness and create good jobs. This is not a substitute
for global warming policy, but it is not cap and trade itself.
What we are looking at here is the investment side of the
equation. How do we invest in building these markets and
creating these new industries? We looked at six strategies,
three for energy efficiency, three for renewables, and we found
that they create very significant jobs and economic
opportunity. They create more jobs and they create more jobs at
higher wages when compared either to a traditional program of
economic stimulus, and so if we are to consider a package of
stimulus, we may want to consider these sorts of investments
that produce these other long-term benefits as they jump-start
the economy and move us on to a path of recovery.
We also compared those investments to investments in the
oil industry and traditional energy sector. And I want to just
focus in here with the bulk of my comments on why renewable
energy and energy efficiency actually are a very, very
strategic point of investment for rebuilding the economy and
for creating new opportunities. Investing in energy efficiency
and renewable energy should be central to any near-term
economic package. They create new investment. This is a
situation where public investment, strategically employed, can
create, can crowd in, if you will, new private sector
investment, helping to create markets, helping to create demand
and helping to change the cost structure of businesses to
create new opportunities.
It also creates access to credit. If you look at financing
mechanisms to invest in building retrofits. We are talking
about creating new demand through these public investments for
small businesses. And I am very pleased to share the stage
today with a representative of small business. It is the
lighting contractors, the insulators. These are the people who
will be employed in a clean-energy economy. They will do the
hard work. We call them green jobs, but these are really
familiar jobs in professions that we know and that are at the
bedrock of the American economy.
And lastly, it is specifically focused on construction and
manufacturing. These are very, very significant opportunities.
They create good jobs, career ladders, and pathways into middle
class professions.
So there is a couple of structural reasons why focusing on
energy efficiency and renewable energy makes good economic
sense. They are relatively more labor-intensive than either
consumption or investment in traditional energy systems. You
are taking a dollar that you would otherwise spend on wasted
energy and instead you are sinking it--and it would result in
pollution--instead you are sinking that into skilled crafts
people to retrofit buildings or advanced manufactured goods
that operate at a higher level of efficiency. That is a smart
investment. It is not just mindless spending. It is strategic
spending. So turning this waste into skills is a very
significant piece.
Additionally, the domestic content is greater. If we
compared the same investment in a consumption-based stimulus,
just simply giving reacts to folks and 22 percent of average
household expenditures under those circumstances would flow to
imported goods. In a domestic green economic package, we are
talking about something closer to 9 percent that would flow out
of the economy. The bulk of the money stays in local
communities. It reduces costs for business, very, very
significantly. We have two times the energy intensity of our
gross domestic product of the rest of--when compared with other
industrial countries. It also creates more jobs overall, and
they are very broad-based. So this is an opportunity to create
career ladders and pathways into good jobs with appropriate
training.
I want to commend Representative Solis on her green jobs
package that was in the recent energy bill. Linking this to
training and workforce investment is a great opportunity bring
people into good jobs.
And lastly, it lowers the cost of action on climate
eventually by bringing new products to market. By bringing
these new technologies, like renewable energy, up the cost
curve so they are in greater mass production it is going to
drive down the cost of these new technologies in the long term.
And let us see. I want to just also mention that public
infrastructure is fundamentally community-based. These are
local investments. They are very difficult to outsource. And so
this is money that tends to stay within communities.
The other point that I want to make is that there is a
great deal of policy that we can act on very easily. There is a
range of policies that are in my written testimony. I would
encourage the members and the staff to look at the policies
that we cite.
I just want to very quickly touch on the story of the
Weatherization Assistance Program as I close my remarks. The
Weatherization Assistance Program has a cost-benefit ratio of
$2.69 for every dollar invested because it produces savings for
ratepayers, savings for small businesses, and it helps low-
income folks. It also creates 52 jobs for every million dollars
invested. And but over the life of the program, there have been
5.6 million homes that have been retrofit through this program,
but there are 34 million homes that qualify for weatherization
assistance. The authorization has been upwards of $700 million,
but the appropriation has been about 2 and a quarter million
dollars. So we are dramatically under-investing in something
that clearly yields a positive cost benefit. It creates more
jobs than many other forms of investment, and it saves low-
income ratepayers and some businesses money to reinvest in the
community. This is a smart, strategic investment for the
American economy. It is a good way to be growing our economy at
a time of tremendous difficulty in driving new investment into
construction and manufacturing jobs.
Thank you very much for the time, and I appreciate your
attention.
[The statement of Mr. Hendricks follows:]
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Mr. Inslee. Thank you, Bracken.
Dr. Pollin.
STATEMENT OF ROBERT POLLIN, Ph.D.
Mr. Pollin. Thank you very much for having me.
Thanks to Mr. Markey for inviting me, and Mr.
Sensenbrenner, and the whole committee.
I am Robert Pollin. I am professor of economics and co-
director of the Political Economy Research Institute at the
University of Massachusetts at Amherst. I am also the co-author
of this study that came out last week called ``Green Recovery''
that was done in conjunction with my friends at the Center for
American Progress. And I want to acknowledge the outstanding
work done by my friends, especially Bracken and Kit Batten in
helping us produce this piece of work.
I am going to actually go down the questions that Chairman
Markey posed to me in the written invitation:
Number one, do economic conditions justify such a program?
I think we can--don't have to spend too much time on the
economic conditions. We all know that unemployment has risen to
6.1 percent. A year ago, it was 4.7 percent. People are also
working fewer hours, taking pay cuts. They are discouraged.
Those don't get reflected fully in the unemployment statistics.
We know obviously what is going on in financial markets.
Though this is not explicitly a financial market program--thank
you for acknowledging my work on financial markets--it
certainly can be integrated into a solution to conditions in
financial markets because, number one, it is establishing a
floor for overall demand in the economy, which is one of the
main things we need, and number two, it is providing
opportunities for a new, productive investment outlets. This is
the key.
I mean, the long-term problem with financial markets is
excessive attention to speculative profit opportunities and not
enough attention to long-term productive investments. So this
is integrated into that solution.
Okay. Why a green stimulus program? This is a $100 billion
program over 2 years. And according to the modeling that we
have done, it would create roughly 2 million jobs. There are
six investment initiatives, three in the areas of energy
efficiency and three renewables. The energy efficiency are
building retrofits, which is in fact the most important single
piece in terms of where we think money should be spent now;
public transportation and freight rail; and smart grid
electrical transmission system. Those are the energy efficiency
areas. And the renewables are wind power, solar power, and
biofuels.
I want to emphasize that the way we have proposed this, the
way we have modelled it, 70 percent of all of the spending is
for efficiency. So that is certainly the bulk.
What are the benefits of the program? Well, as Bracken
said, the job creation is very widespread. I mean, we have that
in the report. We go over in detail the types of jobs. People
think that green jobs some how suggests something esoteric.
They have never heard of it. Well, these are jobs for roofers,
welders, electricians, machinists, accountants, secretaries,
and, yes, research scientists. So it is across the board. It is
a jobs program. We don't even have to call it green jobs. We
just have to call it jobs. There are good jobs; there is a wide
range of jobs.
The 2 million job creation would--in the current job
market, as we know, there are 9.4 million people unemployed
now. That would drop the unemployment level to 7.4 million. If
we consider that in today's economy, that would mean a fall in
unemployment from 6.1 to 4.8 percent. And as Bracken said, it
is particularly focused on construction and manufacturing. We
know how hard construction has been hit. That is the other side
of the financial crisis and the housing crisis, is the
construction industry is flat. You have over half a million
jobs having been lost over 2 years. This program would bring
them back.
It is very efficient as a jobs program. As we said, as
Bracken said, this combination of investment focused primarily
on energy efficiency would create 2 million jobs for the $100
billion in expenditure. That is higher than what we got from
the April 2008 stimulus, which would create about 1.7 million
jobs. And it is dramatically higher; it is four times higher
than what we would get through a similar expenditure in the oil
industry.
And as Bracken said, what are the two drivers here? It is
not really that difficult to figure out. And you can be a two-
handed economist on this. It is domestic content and labor
intensity, right? It means more jobs are created within the
U.S. economy because they are focused there, and you have a
higher proportion of employment relative to expenditures on
non-employment, such as on materials, energy, shipping oil from
Saudi Arabia to the United States.
For the energy efficiency area, the domestic content is
about 95 to 96 percent. That makes sense. When you think about
retrofitting this building, it is not going to take a lot of
imports to do that.
Now, what about benefits in terms of energy savings, which
is what Mr. Markey also asked me about? Very substantial. We
think about a building like this, public building retrofits.
The U.S. Council on Green Energy Building estimates that we
have about 21 billion square feet of public building that could
be retrofit on average at a $1.40 per square foot. So that is
to retrofit and make energy efficient every single public
building in this country would be roughly $30 billion or
something less program. It would lower energy costs 20 to 30
percent. If we then think about the same model for households,
private individual homes, you can get the same 30 percent
return over a matter of 3 years. So energy bills go down while
you are creating jobs.
Now, what about the funding in the short term, median term?
We outline three different types of investment funds: $50
billion in tax credits for business; $4 billion in loan
guarantees, which then, of course, underwrite a much larger
number of actual loans themselves; and $46 billion in direct
spending. So notice that the majority of spending is going to
promote private business.
In the immediate term, we are talking about a fiscal
stimulus, a deficit spending. Over the longer term, it would
paid through by cap-and-trade revenue. The fiscal deficit is a
problem. It is not the overriding problem. The fiscal deficit
now as a proportion of GDP is well within range, certainly, of
what we have had historically under these kinds of conditions.
Now, finally, the broader benefits. Reduced demand for oil,
it is going to exert downward pressure on oil. It is going to
improve the trade balance, which will then improve our current
account balance, too. The job creation will generate more tax
revenues. It is going to channel funds to productive private
investors, and finally, it will fight global warming.
Thank you very much.
[The statement of Dr. Pollin follows:]
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Mr. Inslee. Thank you, Dr. Pollin.
Mr. Redmond.
STATEMENT OF FRED REDMOND
Mr. Redmond. Thank you, Congressman.
First of all, Congressman, I want to thank you for being a
consistent advocate of working families, not only working
families in the great state of Washington but throughout this
country. We thank you for your service.
Mr. Chairman, my name is Fred Redmond. I am the
International Vice President of Human Affairs for the United
Steelworkers.
Steelworkers is the largest industrial union in North
America. We have 850,000 active members and 250,000 retirees
that we are privileged to represent. We are also the dominant
union in every energy-intensive and energy-producing industry
throughout this country.
Our union has long held the belief that good jobs and a
clean environment go hand in hand. Steelworkers are here today
because we endorse the ``Green Recovery'' report released by
the Center for American Progress. And we applaud the Center for
highlighting the economic and employment opportunities that can
exist when significant investments are made in the green
economy.
The report highlights that an investment of $100 billion
can mean 2 million jobs in the United States economy over a 2-
year period. They estimate that over 900,000 jobs in the
construction industry and over 580,000 jobs in the industries
that supply goods for wind turbines and building retrofits
would be created with this investment. They also estimate that
500,000 jobs would be created in the resell and wholesale
industries as a result of increased capital from increased
employment.
And during this time, as our Nation continues to experience
an economic downturn with falling financial markets and the
highest unemployment in 4 years, policies that spur investment
in the emerging green economy are more critical than ever. Our
union and our members have experienced devastating job losses.
Over the last 10 years, over 3.2 million manufacturing jobs
have been lost as a result of unfair trade policies,
outsourcing, and exporting of jobs instead of products. Many of
the jobs have been lost from communities like Cleveland, Ohio;
Buffalo, New York; Detroit, Michigan; and Baltimore, Maryland;
and have gone to countries, like China and India, that have
terrible, environmental and labor standards.
Our union strongly believes that today's environmental
challenges are tomorrow's economic opportunities. Evidence of
this fact already surrounds us. In Germany, for example, 1.4
million people are already employed in green sectors with about
40,000 people employed solely in the wind energy industry.
Increasingly more steel is consumed in Germany by the wind
energy industry than any other except automotive.
The green economy offers an opportunity to place the United
States on a path toward energy independence. It also offers
unique opportunities to revitalize our domestic manufacturing
and construction industries. Some of those 2 million jobs in
the Center for American Progress report will be for our
Nation's steelworkers machinists, electricians, roofer, drivers
and carpenters. And we have already seen this happen in States
like Pennsylvania where, in 2004, the State adopted an 18
percent renewable portfolio standard, and as a result, Gamesa,
a Spanish-owned wind turbine company, decided to build its
first North American plant in Pennsylvania. And because of the
demand created by the RPS, today almost 1,000 steelworkers are
employed in Gamesa plants outside of Philadelphia, building
wind turbines on the site that was abandoned by a U.S. steel
mill. State RPS drove Gamesa to invest in Philadelphia and, as
a result, has helped to revitalize a community that was
devastated by job loss.
The green job change did not just stop at Gamesa. As a
result of the demand by the wind industry for steel plate in
2007, Arcelor Mittal Steel recalled 250 steelworkers back to
work at its Burns Harbor, Indiana, plate mill to meet the
demand. While these jobs are not specifically green jobs in
nature, they serve a green purpose because the products that
these men and women are making in this steel mill will be used
in wind turbines. Likewise, component parts manufacturing,
installation of turbines, maintenance and construction of knew
transmission lines also serve a green purpose.
This is what we mean when we talk about green jobs and
overall greening of the United States economy. It is not just
creating new jobs but also spurring growth in existing
industries. So Steelworkers is ready to work to reverse the
downward trend in manufacturing by creating clean-energy jobs
while we fight to save the manufacturing jobs we have left.
We believe that we are at a critical point in achieving
these goals, and several opportunities exist right now. There
are opportunities for American business to lead the world in
clean energy and services. There are opportunities for American
workers to thrive in a new generation of well-paid green-collar
jobs. There are opportunities for American cities to become
cleaner, healthier and more efficient places to live and work.
And there are opportunities to stimulate the flow of private
and public capital and a clean energy and energy efficiency
initiative that create good-paying jobs across a wide spectrum
of our economy.
So the Steelworkers Union, we have worked with other labor
unions, business, environmental, community groups on both the
State and Federal level to develop and support clean energy
policies that will encourage job creation with investment and
domestic green technologies, energy efficiency, education,
training, and we hope to continue to work with Congress on
these vital issues through our national economy.
Thank you, Mr. Chairman.
[The statement of Mr. Redmond follows:]
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Mr. Inslee. Thank you, Mr. Redmond.
And congratulations to those folks getting back to work.
Mr. Kennard.
STATEMENT OF BYRON KENNARD
Mr. Kennard. Thank you, sir.
Historically, small businesses have created 60 to 80
percent of all net new jobs. This prowess continues even in the
current economic downturn. In July of this year, for example,
small firms added 50,000 new jobs to the private sector, which
offset the 41,000 jobs dropped by larger companies. From this,
we argue that if new green jobs are to be created, small
business must be called on it create them.
Moreover, two-thirds of all innovations are produced by
entrepreneurial small businesses. According to SBA, small firms
produce 13 times more patents than large firms. From this, we
are argue that if green technology innovations are to be
created, then small businesses must create them. In fact, that
is the case. Something like 80 percent of all clean-tech
companies are small firms.
Small businesses are also the means used to deploy
technology, deploy innovations throughout society. For example,
thousands of small businesses distribute, sell and install and
service air conditioning, heating, insulation, ventilation and
lighting systems, now all available in energy-efficient forms.
Thus, making America more energy-efficient and self-reliant
creates enormous economic opportunity for small business.
This is why the small business provisions in the Energy
Independence and Security Act of 2007 were endorsed by the Air
Conditioning Contractors of America, the Independent Electrical
Contractors, the National Roofing Contractors Association, and
the Plumbing-Heating-Cooling Contractors Association. These are
not ordinarily people you find lined up at anti-growth rallies.
An added plus is that these jobs can't be outsourced
overseas because the work is all local. Thousands of small
firms are now becoming more energy-efficient in order to cut
costs. This is a big deal. Small business is half of the
economy. It consumes half of all energy use for commercial and
industrial purposes in this country, much of which is wasted.
According to EPA's ENERGY STAR Small Business Program,
small enterprises can save 30 percent on their energy bills
through energy-efficiency upgrades. Many good models exist for
making this happen; they are up and running successfully. These
can and should be widely replicated. I will mention two.
One is the Energy Stewardship Initiative of the National
Automobile Dealers Association, NADA. Almost 750 auto dealers
are now voluntarily greening their operations as part of this
initiative. If all 19,700 members reduced their energy
consumption by just 10 percent, that is the association's goal,
they would save approximately $193 million in energy costs and
eliminate more than 1 million tons of greenhouse gas emissions
each year.
Another device is called On-Bill-Financing, which makes
small business energy efficiency as easy as falling off a log.
Under On-Bill-Financing, an electrical utility offers upgrades
to its small business customers and loans to pay for the
upgrades. The energy savings are used to pay back the loan. So
the monthly utility bill is no higher than it was before. And
when the loan is paid off, the small business owners' utility
bill is permanently lower. The big news here is that
California's Public Utility Commission, in October of last
year, ordered the State's utilities to begin offering On-Bill-
Financing to their small business and institutional customers
beginning in 2009.
Here is the icing on the cake. The small business half of
the economy can be made energy efficient virtually overnight.
All the technology needed is now available. Basically, these
upgrades involve doing the same thing over and over in millions
of workplaces. Examples: Installing improved lighting, better
thermostats and occupancy sensors in bathrooms, offices and
storerooms. Small stuff, but it adds up. Doing such things will
save small business owners money at a time when they are being
hit hard by soaring energy costs and struggling to cope. In
this setting, the most important thing to do is to get the word
out to small business owners that they possess practical,
affordable options which can be exercised right now, not years
from now.
Here is where the Federal Government can help. In summary,
I offer two suggestions. The ENERGY STAR Small Business Program
and EPA provides small business owners all the information and
technical assistance they need to exercise these options. But
it is greatly underfunded. EPA is not very interested in small
business on this front. Less than 1 percent of the ENERGY STAR
budget is devoted to outreach to small business. It should be
given the resources needed to perform the job and to make the
small business half of the economy energy-efficient.
Secondly, thanks to the House Small Business Committee and
the Senate Small Business Committee, very good provisions about
small business energy use were included in the Energy Policy
Act of 2005 and the Energy Independence and Security Act of
2007. Sadly, none of these have been implemented or funded, and
we hope the select committee will help their colleagues on
Appropriations understand the importance of actually funding
these programs. They have laid the basis already for making
half of the economy energy-efficient quickly.
Thank you.
[The statement of Mr. Kennard follows:]
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Mr. Inslee. Thank you.
Dr. Thorning.
STATEMENT OF MARGO THORNING, Ph.D.
Ms. Thorning. Thank you very much for the opportunity to
appear before this committee.
My name is Margo Thorning. I am chief economist for the
American Council for Capital Formation, and I ask that my
testimony be submitted for the record.
I commend this committee for its focus on, what do we need
to do further to stimulate the U.S. economy? Clearly we face
serious challenges, GDP, real GDP has grown really at only 1
percent over the year for the past four quarters, and
employment was 6.1 percent last month. And prices have been
rising, most recently at a rate of 5.4 percent. Some pundits
fear that we are entering a period of stagflation with sluggish
growth and rising prices. So I think it is important to focus
on what the fundamental problems are with the U.S. economy and
try to address those.
Many people think that the housing crisis, the fall of
housing prices, is what has caused most of the recent distress,
unemployment and sluggish growth. Right now, 10 million people
are under water in the sense that they owe more on their house
than the house is worth. If housing prices fall another 15
percent, we can expect to see 20 million homeowners under
water. So one of the first challenges I think we need to do is
keep an eye on the housing market and see whether we are going
to need to intervene any more than we already have there.
Martin Feldstein of Harvard has put forth a plan for a mortgage
replacement proposal, which is detailed in my testimony, which
could help put a floor under housing prices and keep them from
falling further.
The second thing that we need to do and that we have begun
to do is try to stabilize financial markets. I think the
actions of the Fed and the Treasury so far have shown resolve
and shown that we are not going to let happen to the U.S.
economy what happened to the Japanese economy in the 1990s.
Japan failed to intervene, failed to act quickly after their
real estate and housing bubble and financial markets collapsed.
I think our regulators have learned from that.
So I think we have already taken significant steps to try
to bring stability to the financial markets, and if we keep an
eye on what is going on in the housing situation, I think we
have time now to wait. I think it is premature to enact further
economic stimulus packages comparable to the one that was
passed in February of this year. I think we need to wait and
see what happens in terms of stability and see if the housing
issue, which is our central problem, begins to resolve itself.
Let me turn to brief comments on the CAP proposal to spend
$100 billion over 2 years on various forms of green jobs.
First, I think the cap analysis has got serious flaws. They
used an input/output model rather than a traditional
macroeconomic model or general equilibrium model. The model
they used can't take account of changes in prices as they flow
through the economy. It is an incomplete snapshot. It is a
static analysis rather than a dynamic analysis.
They propose to pay for the increased spending on
renewables and other initiatives through a cap-and-trade system
which would raise $75 billion to $200 billion a year. The ACCF
did an analysis of the Lieberman-Warner bill in conjunction
with the National Association of Manufacturers earlier this
year. In that study, we found that, by 2014, the cost of the
cap and trade bill would be about $78 billion a year, which is
close to the number that CAP proposes to spend. And we found
that the higher energy prices caused by, on unconventional
fuel, caused by the cap and trade, actually reduced job growth
compared to the baseline forecast by between 850,000 and almost
2 million jobs. So we lost jobs, even though our study did pick
up new green jobs because people were being encouraged to make
use of nonconventional fuels. We did pick up green jobs, but on
net, we lost jobs because of the higher energy prices that
flowed through the economy exerted a drag on productivity and
so forth. GDP was less as well.
So I would like to ask that this study be submitted for the
record.
[The information follows:]
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Ms. Thorning. Renewables already get the lion's share of
Federal subsidies. That is detailed in Figure 2 and Table 2 of
my testimony. I think it is probably not a good use of taxpayer
money to accelerate the spending that we are already doing on
renewables. Renewable energy is more expensive than
conventional fuels. I have a table in my testimony that shows
that solar, for example, solar electricity was, according to
testimony by a GE representative, about 36 cents a kilowatt
hour compared to about 7 cents for gas and 4 and a half cents
for coal.
Furthermore, if you take a look at states that make great
use of renewables and have high renewable portfolios, like
California and Texas, they have the highest electricity costs
in the U.S. So I think more focus on pushing renewables right
now is not appropriate because high energy costs are already
exerting a significant drag on the U.S. economy.
I do think there are ways we can encourage energy
efficiency more than we do in a cost-effective way. One is to
increase cost-recovery allowances so that we can depreciate
more quickly energy-efficient investments. And we have a study
on our Web site detailing how disadvantaged U.S. firms are in
terms of cost recovery.
When we need to accelerate research on carbon capture and
storage, so that we can use the 400 years supply of coal we
have here and hopefully reduce greenhouse gas emissions and
develop plug-in vehicles that we will be able to plug in to
coal-fired plants, thereby decreasing our dependence on foreign
oil.
We need to promote domestic energy sources by increasing
access to onshore and offshore areas.
And finally, to conclude, I think the U.S. economy does not
need the one-two punch of high-cost renewables and a cap-and-
trade system.
Thank you.
[The statement of Ms. Thorning follows:]
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Mr. Inslee. Thank you all.
I will start, if I can. Maybe I can start with Dr. Pollin,
and then anyone else who wants to join in.
I wanted to ask, you, Dr. Pollin, how do you decide how to
allocate the strategy between tax credits, loan guarantees,
grant programs in the proposal?
Maybe Bracken can address this, too. But what is the
rationale for that particular allocation?
Mr. Pollin. Well, the first rationale is I think there is
actually universal agreement that we would like this over time
to be primarily focused around the private sector. So the fact
that we have the program--the main funding allocation is for
tax credit. So that does lower the cost of capital for private
business, small business included.
Similarly, the loan guarantee program, the loan guarantee
program offers a lot of opportunity for probably relatively low
burden on the public fisc because of course the public fisc
only pays when loans go into default.
So, then, why do we even have any? We have $46 billion
allocated to the public spending. Well, first and foremost,
that is the fastest way to generate this recovery program.
Right now, if a measure were to pass, we could get public
building retrofits going right now. Number two. And as I said,
if we take those estimates of the American Council on Green
Buildings, to do all the public buildings in the country would
be in the range of $26 billion to $29 billion. We could start
that right now in a big way.
Secondly, the public transportation. It is often said,
well, if Americans love their cars so much they will never take
public transportation. Well, actually, public transportation
use has gone up by 5 percent over the past year, obviously
correlated with the rise in oil prices. So another measure that
we propose is public spending to increase availability of
public transportation, lower fares and increase maintenance. So
that is the basic mix.
Mr. Inslee [presiding.] Bracken, did you want to add
something to that or not?
Mr. Hendricks. I wanted to actually, if I may, just speak
briefly to the question of renewable energy and the subsidy
that it has received.
There are a number of subsidies that the fossil fuel
industry has received consistently over time that are actually
not contained in the analysis that Dr. Thorning was referring
to. The exclusion of public power, inappropriate treatment of
highway funding, exclusion of liability caps, the value of
underwriting the risk associated with nuclear power, a range of
costs associated to the investments in the Strategic Petroleum
Reserve and dealing with fuel cycle costs to nuclear power.
In a whole host of ways there are a number of very
substantial investments that have been made in the traditional
fossil fuel and existing mature energy industries over time,
and these costs I think need to be given full consideration.
I also would like to just point to the fact that renewable
energy, when it is brought on line, it provides much greater
predictability and stability in energy prices; and that
essentially what we are doing is enabling a situation where
capital investments can be made now in new technology that will
lock in energy costs and prevent some of the spikes that have
been going on. We are at a moment where we have just seen 200
percent increases in Appalachian coal when we are sending over
half a trillion dollars in oil imports.
We had an opportunity to invest in the creation of new
industries, drive these technologies down the cost curve. It is
creating new manufacturing opportunities, new small business
opportunities. And these are investments that stay within the
domestic economy; and this a fundamental difference with the
dollars that are spent on clean, renewable energy than those
that are spent on energy imports.
I also would just like to take a very brief moment to
comment on the role of energy efficiency. Energy efficiency,
which is the bulk of this package, this is 70 percent focused
on energy efficiency which drives down the cost for businesses
for consumers.
There is an analysis by the American Council for an Energy
Efficient Economy, which looked at just a basic suite of energy
efficiency programs. And if, in 2001 when the Bush
administration came in, they had implemented a full and
consistent commitment to achieving energy efficiency across the
American economy, today we would have realized $206 billion of
energy cost savings as a result of moving these existing
technologies into the market. Those are very real cost savings.
So if we are looking at the impacts of costs on the
economy, I would put to you that the combination of saved
energy costs through energy efficiency and improved stability
and reduced volatility of energy prices from renewables are a
significant contribution to the American economy. And I just
wanted to underscore those points.
Thank you for your attention.
Mr. Inslee. Thank you. If I can, while I still have the
chair, at least in part, I want to ask Mr. Redmond, how does
your membership look at these public investments? If I was
going to ask them what is a more valuable public investment,
$85 billion, loaning it to AIG or putting it into the steel
going into everything we want to build.
How would your members look at that issue?
Mr. Redmond. Well, our members, one of the things that we--
or task that we took on as a union was to really educate our
members, the workers throughout the AFL-CIO, on the future of
the manufacturing sector and how the opportunity to revive the
manufacturing economy in this country has come through the
establishment of creating a green economy.
I think that workers throughout this country, not just in
my union, but workers generally in manufacturing, understand
that the need to--that the possibility not only to do a
fundamental, humane--we have a fundamental, humane
responsibility to leave a clean planet for our children.
Also, with these new technologies, it is going to
revitalize the manufacturing base in this country. If you were
to pose the question of investing in AIG in terms of investing
toward a green economy, then I think the majority of workers in
this country would choose investment, particularly in
manufacturing, toward a green economy, because these are jobs
that can't be outsourced, these are the type of jobs that can't
be lost to insufficient trade agreements and these are jobs
that provide a very, very critical responsibility that we have
to our children and to our planet. And I think that more and
more American workers are becoming aware of that fact.
And it is not just directly related, as the example that I
gave you with steel companies, it is not directly related
toward a green economy. But it is the aspects that go into the
green economy and the amount of products that are going to be
needed in order to make that become a reality.
Mr. Inslee. I thank you.
And of course the good news is, a couple days ago we passed
a bill that will move many of the things forward that this
report talks about, and we have got some more work to come.
Thank you very much.
The Chairman [presiding]. The Chair recognizes the
gentleman from Missouri, Mr. Cleaver.
Mr. Cleaver. Thank you, Mr. Chairman.
Dr. Pollin, I was very interested in your comments and in
your submitted report with regard to the economy and the
subject matter today. I was not--I was ambivalent on the
stimulus package that we approved for a variety of reasons. In
my real life, I am a United Methodist pastor, and I knew what
was going to happen when people received those checks. They
were not going to go buy new big screen televisions or
refrigerators, all the things I heard here in Washington. I
knew what they were going to do. They were going to put the
extra money on their MasterCard payment, make a house payment,
and that money was not going to turn over in the economy.
Because I deal with real people, I asked Mr. Bernanke--I am
on the Financial Services Committee. I asked Mr. Bernanke
whether we needed another stimulus package when he appeared
before our committee about 6 weeks ago; and he said that it
remains a question that there may be a need for what I had said
to him, ``stimulus 2.''
Do you believe that if we had a stimulus package--I mean,
you were saying you didn't think we needed one. But let us
assume that all the smart people conclude that we do need a
stimulus package--you know, the people who tell us what we
ought to do because they are smarter, who appear before the
Financial Services Committee--and we decide to do it. Would it
be a good idea if we used that money to get a jump start, as a
launching pad for creating the 2 million green jobs that I
think we all--at least the panel and the two members of this
committee remaining--believe that we will be able to create?
I mean, let us take, for example, natural gas. If we
created central fueling places in cities where natural gas
could be used or--there are cities who are in need of
infrastructure projects. If we can create green source systems,
as we think we are going to do in my community in Missouri, in
Kansas City, Missouri, and really begin to do this now instead
of its being some futuristic goal; that if we have a stimulus
package, could we not do two things at once--stimulate the
economy and give a jump start to the creation of a green
economy?
Ms. Thorning. A very thoughtful question. And of course I
have the highest respect for Ben Bernanke's analysis. And in
fact I would tend to agree that we might need a stimulus
package, but I think it is premature. And I think if we do need
one there would be better ways to deploy $100 billion than
trying to force it into alternative energies like solar, wind,
photovoltaic, that are very expensive, that we have been
funding.
I was at the Department of Energy almost 30 years ago. I
know I look too young for that.
Mr. Cleaver. You do, you actually do.
Ms. Thorning. But I was there 30 years ago, almost 30 years
ago, and we were funding these projects very heavily back 30
years ago. So these types of energy we hope some day may be
commercially viable, but I think they are not there yet.
Solar, for example, we can't store it; it is only practical
in certain situations. Wind has to be backed up by conventional
fossil fuel, so the cost of wind is really double the cost in
my testimony.
So if I had limited taxpayer money, I would try to focus it
on the most--where you get the most bang for the buck. And I
think--as I say in my testimony, I think it is premature to
decide whether we need to spend even more taxpayer money to
stimulate the economy.
I think we ought to wait and see what may happen to
financial markets, and then if the housing market doesn't begin
to rebound, if I were going to spend some money, I would spend
it on a plan like Martin Feldstein has put forth to try to keep
people in their homes. People who are fighting to stay in their
homes aren't going to be interested in insulating their house
and that sort of thing, they are going to be trying hard to
make the payments they need to stay there.
So I would keep an eye on the economy--and your committee,
I know you are doing that--and I would wait to see if by the
next 2 or 3 months things aren't improving. But then I would
take a look at how to help housing, because that is our central
problem and that is the reason we have had so much turmoil in
U.S. financial markets, which unfortunately now has spread to
many of our trading partners.
Mr. Cleaver. But--it is not a but; I agree, and I guess
most of the experts agree that to solve the housing problem is
to at least begin the healing of the economy.
And I agree, we had 300--I think 300,000 first steps toward
additional foreclosures last month. I can't remember the exact
figures, 320,000, which means that this crisis is far from
over. And there is no reason to believe that we are--that, as
many are saying, let's keep the free market, it will correct
itself, leave everything alone, anybody who invested in
products that were not sound will pay for it and they won't do
it again and everything is glorious, and we all sing Kumbaya.
The truth of the matter is, I don't know if we can get a
hand around the housing market. We have reinvigorated FHA. We
beefed them up. FHA only had about 3 percent of the market, and
now it is going to become a viable option for people buying
homes.
We increased--we are now allowing jumbo loans, some
$600,000. I think we are doing things that we think are going
to help. We thought Fannie Mae--in fact, we thought that was
going to be a help as well, Fannie Mae and Freddie Mac.
But maybe if we are talking about homes in the poor
sections of towns, of cities, people might be better able to
keep their homes if their homes were better insulated. I mean,
if you look in the colder regions of the country, people are
heating up their front yards and back yards and little areas
over the roof because of how energy inefficient homes are.
I am not Pollyanna, but I really wonder about losing this
opportunity where perhaps there is a convergence of two things,
the need to get the economy rolling again and the need to do, I
think, a first step toward a green economy.
Ms. Thorning. Well, if I could just say one more thing, of
course we all want to see more energy efficiency as new houses
are built. It is a question in my mind of what is the most best
way to use taxpayer money, because this is our taxpayer money
we are talking about. And if you try to accelerate what is
already going on, which is considerable work on renewables and
new initiatives in that direction, the Federal Government
spending lots of money, as are States; and of course the
renewable portfolio standards also accelerate that kind of
transition.
But one of the earlier witnesses mentioned the German
economy with 1.4 million workers employed in green energy and
44,000 in the wind energy business. I think we ought to take a
look at how the German economy has performed. In recent years,
since 2003, the German economy has grown on average at 1.2
percent a year, and their unemployment rate has averaged 9.6
percent a year.
I think one reason the German economy is struggling and so
sluggish is that they have very stringent environmental
requirements, including trying to meet the Kyoto Protocol
targets to reduce their greenhouse gas emissions; and they have
directed a lot of their taxpayer money into very costly
renewable energy. So it may be that the 44,000 German workers
who are making windmills are doing fine, but 9.6 percent of
their population is out of work and their economy is really in
the doldrums.
So I think, as an economist, I want the most bang for the
buck. I want to achieve the best we can for all of our people.
And if 10 million people are under water on their mortgages
right now and if 20 million more home owners--if 20 million
would go under water if housing prices fall another 15 percent,
that is the most serious challenge we will face since the Great
Depression. People who are owing more on their house than it is
worth simply have very little incentive to stay in it.
We will never break this downward spiral if we don't focus
on stabilizing housing prices. So I believe while many of the
goals are quite worthy in the CAP report, I think their
analysis is fundamentally flawed because they used an
inappropriate model. And I don't think we would see a net gain
of 2 million jobs; I think we would see loss of jobs in other
sectors as prices rose.
And, of course--so, on balance, I think we need to hold
back and wait and see how the economy is going to do; and then,
if it isn't improving, put the resources into our fundamental
problem, which is falling housing prices.
Mr. Cleaver. Thank you.
The Chairman. The gentleman's time has expired.
Let us just have a brief discussion if we could about
efficiency. Let us leave aside renewables for a second. Let us
just focus on efficiency.
Is it worth it to invest in efficiency? Do we get a big
payback from moving that way? Is the short-term investment
almost inevitably rewarded by a longer-term benefit to the
individual, to the company, to the country?
Dr. Pollin, could you deal with that question?
Mr. Pollin. Well, the short answer is ``yes.'' The
efficiency gains, as I documented and discussed, are very
straightforward. We are using known technologies. We aren't
thinking about futuristic technologies.
We know that we can deploy workers because a lot of it is
construction jobs. We know that 600,000 or so construction jobs
have been lost over the last year. We know we can start these
things immediately. We don't have to engage in land purchases,
designing projects for infrastructure and so forth.
So the answer is a very straightforward ``yes.''
The Chairman. Okay.
Dr. Thorning, what do you have to say to Mr. Pollin?
Ms. Thorning. I think energy efficiencies ultimately are
very desirable. The question is how fast do we get it and who
pays for it.
The U.S. economy, if you look at the DOE data, is getting
more energy efficient by about 1.7 percent every year. Each
dollar of GDP is generated with less energy every year. So we
are making good strides in that direction.
The question is, what is the best way to accelerate it. And
as I mentioned, if we could take a look at the U.S. Federal Tax
Code--and, for example, smart meters, which communicate between
the electricity company and the customer, are depreciated real
slowly here in the U.S.
The Chairman. Good. That is what I am saying. Let's agree
on that. Let's agree that we are going to work on it.
We will put together a package that you, Dr. Thorning--it
is called the Pollin-Thorning plan to invest in energy
efficiency all across the country. And we could do that, don't
you think?
Ms. Thorning. But the question is, how much taxpayer money
goes into this?
The Chairman. How much does the taxpayer save as a
consumer? If you think of the taxpayer as a consumer then, you
know, I see Mr. Hendricks; he looks at this $9 billion tax
break that the oil and gas industry gets each year. Well,
obviously, the same consumer is actually subsidizing the oil
and gas industry as they are getting tipped upside down at the
pumps.
So they are one and the same, right, the consumer and the
taxpayer, when it comes to this whole energy sector?
So could you deal with that, Mr. Hendricks, in terms of the
relationship that exists between the incentives that are given
for one, as opposed to the other, that is efficiency?
Mr. Hendricks. Well, that is an excellent point. It is
something that we document in the report.
I mentioned earlier the difference in household
expenditures. When a traditional stimulus is spent just to
encourage consumption, 23 percent of that money flows out of
the economy. If you invest in energy cost savings in an
infrastructure, only 9 percent flows out of the economy. So
that basically is money that stays within local communities.
In addition to the sort of investments that we are talking
about on improved transit spending. Dr. Thorning mentioned the
smart grid. The economic benefits of improving our grid
infrastructure are very, very substantial, and they cascade
throughout the economy because they make the economy, as a
whole, function more efficiently.
I believe the Pacific Northwest Laboratories estimated the
benefit at about $80 billion over 20 years of moving to a smart
grid that has these kind of real-time pricing and abilities to
manage and optimize proficiency. RAND Corporation estimates
that at about $100 billion. That is very, very substantial new
investment.
If you look at how transit spending cascades throughout a
community, you are making job access easier for working
families, you are saving money that consumers would otherwise
be spending on oil imports, and you are improving quality of
life overall. So you are creating opportunities for new
economic development that are very substantial.
And the efficiency of our economy, we use about twice as
much energy for every unit of GDP as our closest direct
economic competitor. That, in itself, is a competitive
disadvantage that we need to address. This is a chance to do it
in a way that is also going to create benefits and growth.
The Chairman. I agree with you 100 percent, Mr. Hendricks.
That is the model that we have to go to.
Mr. Redmond, let me go over to renewables here for a
second. Somebody told me that it takes 26 tons of steel to
build one wind turbine, 26 tons of steel.
Now, that seems like a lot of jobs here in the United
States, that seems like a lot of new opportunities for our
country. And Dr. Thorning doesn't think that wind is yet
efficient enough as a competing source of electricity, but the
cost is certainly plummeting almost the same way that the cost
of what we did when we got the policy--we had the policy wrong
on cell phones. Going into 1993 we had analog, and we only had
two companies doing it; and it was 50 cents a minute, and very
few people had cell phones.
But then, in 1994, the committee that Mr. Inslee and I
served on, the Energy and Commerce Committee--I was the
chairman of Telecommunications--we moved over 200 megahertz of
spectrum and didn't let the first two companies bid on it. The
third, fourth and fifth company that bid in each market then
went digital and they lowered the price down to under 10 cents
a minute, and now there are more cell phones than there are
Americans, because you just changed the model.
So if you predict the future by looking at today, you are
going to have a very real problem. You have to have some
confidence that this technology is going to come down and there
will be a transition period.
Talk to us a little bit about that and how it impacts the
steelworkers and other blue collar workers across the country.
Mr. Redmond. You are right, the number that we got is more
like 20, 28 million pounds of steel.
The Chairman. Twenty-eight tons of steel?
Mr. Redmond. Twenty-eight tons of steel could go into the
building of--construction of one windmill. And the two largest
domestic steel companies in the United States, which are U.S.
Steel and Mittal Steel, have been actively pursuing that
market. But the markets do not exist here in the United States.
We have had relationships with--I spoke in my report about
Gamesa, which is a Spanish company, which this week is over in
Canada because the Canadian Government is very, very interested
in this sort of technology.
But the two largest steel producers here in the United
States are tuned up. They are ready to go. The building trades
throughout the United States are investing within their
training centers in order to teach workers, and they have been
doing educational courses to train dislocated workers in this
sort of technology. So the infrastructure is there with the
steel companies in the American workforce to capitalize and
take advantage of this.
The Chairman. So if we had a national renewable electricity
standard, if we mandated that 15 percent of all electricity by
2020 had to come from renewables, what would that mean for the
steelworkers? What would that mean for other workers across the
country?
Mr. Redmond. Well, it would be huge, not just for
steelworkers. But with that sort of renewable standard, I mean,
it would also have a boom in the construction industry. It
would employ and generate the need and the capacity to train
and employ thousands of electricians and people within the
building trades.
And the capability is there. The irony of this is that
competing markets are coming to realize the necessity for us to
go in this direction. And the disappointment to working
families and to the American labor movement is that the U.S.
Government and the corporations of the United States and--the
investment is not just there. We haven't totally grasped upon
this model where, if we don't feel we are going to grasp behind
it soon, we are going to be left behind in this sort of
technology.
The Chairman. Thank you, Mr. Redmond.
Dr. Pollin, Dr. Thorning points to the Lieberman-Warner
climate change bill as a good example of why legislation in
this area of controlling global warming is way too costly and
will kill the economy.
How do you respond to that?
Mr. Pollin. Thanks very much. And thanks for the
opportunity to address this point, because Dr. Thorning has
made a couple references to the inappropriateness of the model
we used to estimate the employment.
Our model is a very simple model; I acknowledge that, and
in fact I endorse it, obviously. Whatever we do within any
modeling, you have to assume things, you have to build in
assumptions; and my model has an absolute minimum number of
assumptions. And the basic findings that fall out of it are
that you are going to get a lot of jobs because of the
increased labor intensity and the domestic content. That won't
go away no matter how much we complicate the model.
Now, by contrast, the model that Dr. Thorning has referred
to is full of hidden assumptions that she makes no reference
to. And in fact I have the full paper here. It is very unclear
what the references are, and I won't go through all of them;
but I want to get to the punch line, the conclusion of their
model where Dr. Thorning says that this is going to have
serious negative consequences with Lieberman-Warner, and they
know that because of the general equilibrium model that they
have built.
Well, if you turn to page 12 of her testimony that shows
the model and the results--and I am only going to refer to the
high-cost case. So we see the GDP estimate of 2,014 is 16,100--
I mean, 16.1 trillion and so forth.
I want to break that down just so we understand what is
really in this model. It is very important to understand this.
They begin with the 2005 level of national income, which is
12.4 trillion; and then they have a baseline case without
Lieberman-Warner. Without Lieberman-Warner, you come out with
16.4 trillion. With Lieberman-Warner, high cost case, you come
out with 16.1 trillion. It is the difference between a growth
of 32 percent versus 30 percent, almost indiscernible. And I
want to break this down further so it is clear, put it in terms
that are real for people.
Per capita income in 2005 is $41,300. And if we move their
model--I am not even going to get into my criticism of the
hidden assumptions; I am saying let's go with their conclusion.
This is their conclusion that she was just referring to.
Under the baseline situation--so we start at 2005 at
$41,300. Their baseline estimate for 2014, without Lieberman-
Warner, is $50,930; with Lieberman-Warner, it is $49,900.
Again, almost indiscernible from their own model, from her
testimony, okay? And that takes no account of these factors
that I was referring to, the increase in labor intensity, the
increase in domestic content, the reduction in fossil fuel
expenditure and a solution to global warming.
The Chairman. Dr. Pollin, thank you for that answer. And I
might note how proud we are in Massachusetts. You are
University of Massachusetts. Thank you so much for being here.
Mr. Pollin. I love UMass. Thank you.
The Chairman. And I love UMass, and I love the fact that
you are from UMass. And by the way, I also love the Boston
Celtics; I love them with every bone in my body.
But I would like to note that we are honored to have your
mother and father in the audience, the owners of the Washington
Wizards, Abe and Irene Pollin, sitting right over here in the
front row. And we are very proud to have them here with us
today as well.
And I can understand your split allegiance on that.
Mr. Pollin. No, not split.
The Chairman. No, I mean, you like UMass, but not the
Celtics. I know there is no love for the Celtics in your entire
being. That I know.
And let me go to you, Mr. Kennard, in terms of the small
business aspect of this and the benefits that flow from the
construction and efficiency industry investments. Could you
deal with that question for a second?
Mr. Kennard. On energy efficiency, I would like to point
out that there are 27 million small businesses; they are half
of the economy, and getting them made energy efficient doesn't
require anything in the way of taxpayer support.
If these businesses become energy efficient, they save
money, they cut their energy bills. The hang-up is getting the
information to them about the availability of practical,
affordable operations for new lighting or whatever. And the
difficulty has been getting their attention, because small
business owners have many responsibilities and haven't focused
much on energy costs. They have assumed they can't do anything
about it. That is changing now because soaring energy prices
are compelling small business owners to pay attention.
There have been recent polls. Energy costs have displaced
health care costs as a priority concern for small business
owners. So they are really now taking it seriously. So the
point is to get them the information and say, hey, you can do
this now; you don't have to wait on government or the utilities
or anybody else, you have got options now that will save you
money.
The Chairman. Thank you, Mr. Kennard. My time is expired.
The Chair recognizes the gentleman from Washington State,
Mr. Inslee.
Mr. Inslee. Thank you. I think I have one question.
Dr. Thorning, in your assessment did you factor in the
damage to the economy that would be occasioned by global
warming if it is not restrained?
Ms. Thorning. That is an excellent question.
Our study did not try to measure the harm that might ensue
if global emissions don't fall. None of the other studies by
EPA or EIA do that either. However, EPA released a study right
after our study was released, looking at Lieberman-Warner, and
they also analyzed the impact that would occur if the U.S. met
the Lieberman-Warner targets to reduce emissions by 40 percent
by 2030 and by 60 percent or so by 2050.
EPA's analysis showed that unless China and India and other
developing countries also got on a sharp path to reduce
emissions that, by 2050--by 2100, global concentrations of
CO2 would be only 2 to 3 percent less. They would
drop from about 730 parts per million to 727 parts per million.
So EPA concluded that Lieberman-Warner would have no
beneficial impact on the global greenhouse gas situation unless
other countries participate. So that is something that needs to
be kept in mind as we try to see how to cost effectively reduce
greenhouse gas emissions.
I would also like to address the points that Dr. Pollin
made when he stated that the ACCF/NAM study was full of obscure
assumptions. I would like to direct your attention to page 6 of
the study where all the assumptions are laid out. And our study
was one of the first to really spell out what assumptions were
used when SAIC ran the NAM's model, the Department of Energy's
own model.
So we didn't hide a thing. And when you use realistic
assumptions about how quickly nuclear power generation can come
on line and how quickly carbon capture and storage can occur
and what the construction costs for new generation are, you get
results similar to us. EPA's scenario number 7 came up with the
same results as ours did. They constrain nuclear constrained
carbon capture.
So I think it is inescapable that near-term targets and
timetables to reduce carbon emissions, to switch away from
fossil fuel to other types of energy would have a drag on the
economy. And with respect to the question about the economic
consequences of a bill like Lieberman-Warner, I do direct you
to page 12 of the testimony where we show the absolute change
compared to the baseline in household income, which is very
substantial over the three time periods we looked at, as well
as the employment impact. And that impact happens because
energy prices have to rise sharply to meet these targets.
Mr. Inslee. Dr. Thorning, excuse me, you have answered six
questions so far I haven't asked. We do have some time
constraints.
I just have to say that it is always interesting to me when
those who want to prevent America from solving global warming
come to talk to us, they always ignore the fact that we will
have economic costs associated with inaction. And they come and
they urge us to do nothing and forget the fact that doing
nothing will cost the U.S. economy millions of jobs and
billions of dollars with the reduction of our agricultural
output, our mitigation costs, changes in our infrastructure and
health costs associated with a rising potential of infectious
diseases.
And it is amazing to me that economists will come to us and
just totally ignore the costs of inaction. That is one point I
want to make.
Second, it is also amazing to me that people come,
economists will come and say that if we do investments in new
technologies that are not incumbent industries with millions of
lobbyists running around Washington, DC, those costs are going
to ruin the U.S. economy; but we can go ahead and do the costs
for the incumbent industries that do have millions of dollars
of lobbyists running around Washington, DC, like the coal and
the nuclear industry. Those costs are just hunky-dory. I find
that very interesting and shocking, but that is life.
Mr. Inslee [presiding]. And with that, I would like to
adjourn this committee hearing. And I want to thank all the
witnesses for joining us in this important discussion. We look
forward to great progress. Thank you very much.
[Whereupon, at 4:24 p.m., the committee was adjourned.]
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