Guest essay by Eric Worrall
When is job creation a bad thing? The answer of course is when the new jobs make something more expensive. Economic growth occurs when efficiency improves – when a good or service becomes available at a reduced price. But this simple economic reality seems beyond the grasp of journalists who promote the “Green Job” narrative.
Clinton says the ‘clean energy economy’ will create millions of jobs. Can it?
Job growth is a prime topic in the U.S. presidential race, but Donald Trump and Hillary Clinton have very different takes on the role clean energy could play in creating employment.
Democratic hopeful Hillary Clinton says the U.S. can be the world’s “clean energy superpower.” Her plan, spelled out in detail online, would create millions of jobs and spur billions of dollars in public and private investment, while making infrastructure more resilient and lowering emissions.
Republican candidate Donald Trump says he’s a “great believer in all forms of energy” but that the country’s energy policies are a “disaster.” In a 2015 interview with CNN, Trump said policies to support clean energy and reduce carbon emissions would “imperil jobs” and “the middle class and lower classes.”
Like many critics of the federal government’s efforts to promote clean energy, he points to the failure of Solyndra as a waste of taxpayer money. Solyndra, you may recall, was a solar company that received a partial loan guarantee from the U.S. government but went bankrupt in 2011, defaulting on a US$535 million loan.
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According to an energy.gov report, around 3.64 million Americans work in “traditional” energy industries, while around 600,000 Americans work in low carbon energy.
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With the combination of EEI survey data and existing BLS surveys, the USEER finds that Electric Power Generation and Fuel technologies directly employ 1.6 million workers, almost double the 935,000 covered in the BLS direct industry classifications. Within this traditional energy sector, nearly 63% of employees work with fossil fuel technologies. This approach also identifies an additional 280,000 workers across Transmission, Wholesale Trade and Distribution, and Storage technologies, for a total of more than one million jobs. Retail sales and distribution in this sector—primarily gasoline stations— employ another 990,000 individuals. In total, approximately 3.64 million Americans work in our traditional energy industries, when including the 990,000 working in retail sales and distribution.
Today, 600,000 workers are employed within the Electric Power Generation and Fuels sector in low carbon emission generation technologies, including renewables, nuclear, and advanced/low emission natural gas. Just under 300,000 individuals work, in whole or in part, for solar firms, with over 200,000 of those employees spending the majority of their time on solar. There are an additional 77,000 workers employed at wind firms across the nation.
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Read more (page 8): http://energy.gov/sites/prod/files/2016/03/f30/U.S.%20Energy%20and%20Employment%20Report.pdf
Transforming the US energy system to 100% renewables (assuming this is possible) would create a tremendous number of jobs, to build the infrastructure, followed by an unknown number of jobs to maintain the infrastructure. Probably significantly more jobs than the number of people currently employed in the energy industry, due if nothing else to the need to build and maintain more transmission cables to remote wind farm sites.
But these jobs wouldn’t deliver any value in the short term. Existing infrastructure already supplies all the energy we need – all those new jobs would be replacing infrastructure which doesn’t require replacement. The switchover to renewable infrastructure would not improve anyone’s life – electricity is electricity, regardless of its source. Even if you believe we are on the brink of a climate emergency, the full force of the predicted disasters won’t strike for decades. So in terms of the value those jobs are providing to the economy, at least in the short term, all those extra workers might as well be digging ditches and filling them in again. Or breaking windows and replacing them. Activity without benefit to the people paying for that activity.
The broken window fallacy, as originally described by Frédéric Bastiat in 1850;
Have you ever witnessed the anger of the good shopkeeper, James Goodfellow, when his careless son has happened to break a pane of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation – “It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?”
Now, this form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions.
Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier’s trade – that it encourages that trade to the amount of six francs – I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.
But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, “Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen.”
It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.
Read more: https://en.wikipedia.org/wiki/Parable_of_the_broken_window
As Bastiat explains, there is no benefit from stimulating an activity which does not product a good or service which people want. There would be no short term benefit to the economy from creating green jobs. Everyone would suffer the loss of money spent to pay the salaries of those green workers, cash which could have been spent on stuff which would have improved the lives of the people who earned that money.
If a future climate disaster is averted, then there is a future benefit to investing in green infrastructure. But there is no near term stimulus benefit to the economy from the creation of green jobs.
Of course a future Clinton administration might intend to pay for the plan with borrowed money, to push most of the cost of creating more green jobs into the future. This might force the people who would allegedly benefit from green infrastructure to pay the price of building that infrastructure. But previous wastrel Federal US administrations have already sipped deeply from that poisoned chalice. If US public debt rises much higher, America will shortly begin to experience the very real problems which occur when governments run out of money.
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well, as a politician, 1 job i can boast is worthy, all other are not.
Moreover, the job i can boast is all the more worthy when jobs are destroyed everywhere else, so the more jobs i destroy, the better.
Let’s break this window (Bastiat). And wreck havoc in economy. I don’t know otherwise anyway.
Why doesn’t Hillary buy everyone an exercise bicycle (built in China of course). Then we can work all day peddling to produce enough electricity to power a light bulb.
Does anyone understand what lorcanbonda is trying to say above? It seems like an argument the government needs more money to spend as a way to improve the economy.
And i am not sure Friedman was a “supply sider” like the democrats try to straw man. No one that i know of advocated trickle down economics with respect to as the democrats have explained it.
Also i don’t get this either you be supply side or demand side. From where i am sitting both are important. You can’t have one without the other….they go hand in hand.
No — that is not my argument (not even close.)
My argument is that tax breaks for the wealthy is an inefficient at job creation whereas tax breaks on the middle class are much more effective. Over the past several decades we have reduced taxes on big businesses and increased payroll taxes. This shift is not a minor shift. Corporations used to pay for 40% of government revenue. Now they pay for 8%. Payroll taxes (which are almost exclusively a middle class tax) used to pay 10% of government revenue; now it is 35-40%. (Note: personal income taxes have been ~50-55% through this period, although they have also shifted.)
Supply side economic theory is that cutting taxes will encourage businesses to make more investment in production. Except, this is like pushing on a string. Businesses don’t make more investment due to cash on hand; they make more investment to meet higher demand. The high payroll taxes (and high health care costs) have the effect of driving down demand. These payroll taxes also have the effect of “paying” companies to move jobs overseas.
Friedman was not strictly a supply-sider, but the government used his works to justify supply-side economics.
I have said little about the spending side of the equation. There is very little to be accomplished there without cutting defense (which nobody wants to talk about.) The only way to cut social spending is to create more and better jobs.
So what exactly are you proposing?
I agree with your first point that tax breaks for wealthy are not good for job creation. But they aren’t bad either. This is demand side by the way…reducing individual income taxes is demand whether it be low, middle or high earners. But this statement is not consistent with tax breaks are a drag on the economy…how so? Are you assuming the government spending of this money as that would be more efficient?…yea i don’t think so since they have really no incentive to do so.
And your point about corporate taxes which suggests you want them raised…well these are largely paid by employees from top to bottom in the form of lower compensation. By wanting
Since you mentioned middle class tax cuts are more effective….did you support the bush tax cuts?
“Businesses don’t make more investment due to cash on hand; they make more investment to meet higher demand.”
This isn’t really true. Innovative products are borne by those who think the market would like them. Businesses can’t necessarily sit back and wait til someone comes calling. If businesses only make stuff to meet demand, then why do some fail? That makes no sense.
“The only way to cut social spending is to create more and better jobs.”
This sounds nice but how does it work in reality? How would you go about creating these jobs and who does it?
I feel like you are trying to beat around the bush and think the key to success is tax and spend creating government make work programs. Why not just come out and say this if so? You are simply adhering to the broken window fallacy which above you appear to be against.
It helps to understand your opponents position before disputing it.
Businesses make investments because they expect to make a profit.
If you would actually spend some time in business, you would know that all companies always have a backlog of investments that they would like to make. Some they don’t make because they don’t have the resources at present. Others they don’t make because they won’t make money under the current tax/regulation environment.
Lower taxes, decrease regulations, you give companies the money they have been looking for.
First — yes, I’ve spent my whole life in business. I’m well aware of how it works. Business owners want tax breaks (obviously), but they don’t generally increase jobs as a result. This is why Immelt is a terrible job czar. He knows how to make money which is not the same thing as growing the economy. Yes, of course companies have a backlog in projects — but they will only spend any legitimate money in response to demand. You can give Ford a billion dollars in tax breaks — and they may make a short term hiring binge. But it will not last unless they sell more cars. Without stimulating demand, this is another make-work project.
As far as this article is concerned — make-work spending does not work. Increasing the deficit by increasing spending or by cutting taxes is not the best way for the system to work. We have to pay for our spending and the best source to do so is through taxes on the higher income brackets.
My comment was all in response to Allen M.R. MacRae’s comment “If US public debt rises much higher, America will shortly begin to experience the very real problems which occur when governments run out of money.” (I am agreeing with him except to point out that we already have a very real drag on the economy due to this debt.)
Dinosaur1 writes — “This isn’t really true. Innovative products are borne by those who think the market would like them. Businesses can’t necessarily sit back and wait til someone comes calling. If businesses only make stuff to meet demand, then why do some fail? That makes no sense.” Yes, this is true. True growth is new products, new markets, or productivity improvements. However, tax breaks for corporations don’t drive this type of spending — businesses will make these sorts of investments if there is a financial incentive to do so (which is how the free market is supposed to work).
“And your point about corporate taxes which suggests you want them raised…well these are largely paid by employees from top to bottom in the form of lower compensation.” No, Corporate Income taxes do not affect the employees. They affect the owners. Payroll taxes do affect the employees as they are directly related to their payroll. As far as the Bush tax cuts — bear in mind that the first priority is to reduce the deficit. My preference is to see a reduction in payroll taxes, not income taxes — you shouldn’t tax payroll at higher levels than passive income. I certainly did not support the cut on taxes on dividends and other passive income.
“This sounds nice but how does it work in reality? How would you go about creating these jobs and who does it?” — the only way to create jobs is by increasing demand (hence “demand-side” economics.) This is the only effective way to drive job growth in a free-market system (otherwise, the government is choosing the winners). Demand comes predominantly from the middle class.
“I feel like you are trying to beat around the bush and think the key to success is tax and spend creating government make work programs.” — again, absolutely not. Tax & spend is wrong. I have not referred to spending except to say that the taxes have to cover it. The best way to create demand is the opposite of what we have been doing. We have reduced taxes on corporations (mostly through loopholes) and increased taxes on the middle class (mostly through payroll taxes). In addition, we have balanced this drag by subsidizing short-term growth at the expense of the long-term economic growth through massive government deficits. This is wrong.
lorca, your comment about taxes makes me very doubtful regarding your claim to be in business.
Of course all business taxes hurt employees. That’s the only variable source available to businesses. They can’t dictate what they pay their suppliers, and the market dictates how much they can get from their customers.
PS: It’s a complete lie that we have increased taxes on the middle class.
The top 10% of income tax earners pay about 50% of all income taxes.
The top 30% pay almost 90% of all taxes.
The bottom 50% pay about 0.1% of taxes.
Correlation coefficient for price increases relative to the business tax rate was what back then? Last time I looked it was .82. That’s been a few years back. Consumer paid like 32% of your 40% in all likelihood.
Corporate taxes are paid for by employees indirectly. Companies compete on price and they target a certain after tax margin thus they can’t pass taxes onto consumers for the most part . This means expenses must be lowered and a way to do that is labor costs.
How are you giving the middle class more demand? Can you elaborate on how this would be achieved? You talk about middle class demand but yet don’t appear to like the bush tax cuts which significantly reduced taxes on the middle class. I as a middle class person do not care what bucket a cut came out of if it means more money to me.
I appreciate you clarifying your position it is still confusing. Anyway:
“and increased taxes on the middle class (mostly through payroll taxes).”
How have payroll taxes and other taxes on the middle class been increased? With respect to what? If anything lower to middle is paying drastically lower effective rates then even in the 1980s
Just for the record on solar PV, the industry leaders are working hard on significant labor savings in the construction of large, utility-scale arrays. This follows major savings on the panels themselves. That Balance of System cost component can be cut with multiple panels pre-mounted on tracks at the factory and then installed on site either with far fewer construction workers or with robot loaders on the ends of the long mounting guide tracks in the field. This labor cost savings and headcount reduction will be accomplished over the next two years as part of best practices from the low cost leaders. That means the construction jobs for utility scale will be declining at about the same time that policy pledges would even get started, or better yet forgotten after the coronation of power. Only massive infusion of pubic funds in inefficient rooftop applications will generate unsustainable job increases. Hopefully utility scale and mid-sized community solar can move fast enough to obviate the political science arm wavers with other people’s money.
Resourceguy: Where is there successful Grid Scale/Community Scale PV? I see lots of proposals and history but it seems like most of it has been problematic. Including Spain and Germany. (I am not against PV, I have many around the farm – suitable for small demands.)
Here is one of the issues from a recent and ongoing attempt at Grid/Community Scale PV:
https://www.technologyreview.com/s/534266/hawaiis-solar-push-strains-the-grid/
It looks like they may be getting close, but diesel generation was still required when clouds were drifting over the panels. New batteries were expected to help. But I wonder what the comparable cost of alternatives might be.
Also looks like they have reloaded as their web site now says they are targeting 50% renewables from solar, biomass (wood burning) and hydro by 2023.
http://website.kiuc.coop/
33,000 customers. It may be possible but it is going to be awhile.
It looks like you are set back quite a ways from this admittedly fast moving sector.
Here are links to get part way back up to speed from three perspectives (utility scale developments, large corporate, and community scale). And note that none of the examples linked have anything to do with small scale solar, which is 3 to 10 times more costly per watt of installed capacity.
http://www.firstsolar.com/en/About-Us/Projects
http://www.pv-tech.org/news/apple_partnering_with_first_solar_on_solar_farm_in_california
http://www.solarserver.com/solar-magazine/solar-news/current/2016/kw42/georgia-electric-cooperatives-offer-solar-energy-alternative-without-rooftop-installation.html
Re-quote from the top here:
“But this simple economic reality seems beyond the grasp of journalists who promote the “Green Job” narrative.”
Most things are beyond the grasp of journalists … that’s why they’re journalists.
On the other hand, a number of trolls have tried to convince us that journalists are liberal because they are better educated than the rest of us.
Mostly they are better educated at communicating at a 6th (formerly 8th) grade level to their constituent audiences. Beyond that they usually have little knowledge of what they think they are communicating.
Most aren’t even journalists anymore, just activists in disguise.
As for jobs, there is actually a new market for infrared scans. Rural Development and local mortgage lenders should require an infrared scan of the house that is going to be financed for 30 years. Returning soldiers have the skills and knowledge of infrared applications. This is truly a new market, not just the ‘inspections’ which turned out to be just a way for the realtor to disassemble over the house problems. I believe it would be much more effective than the blower door test.
Another new market is for hempcrete. It doesn’t absorb water but lets the house respire. Both have tremendous application for the housing market. I suspect the delay on hemp applications is specifically for the big corporates to get in on the ground floor. AND no CO2 problems as with concrete and the energy intensive production of cement.
What are we waiting for?
http://www.hempcrete.com.au/index.php?option=com_content&view=article&id=24&Itemid=25
jeez.. if they strained any harder they’d bust a hernia.
https://en.wikipedia.org/wiki/Concrete
http://stonehengemasonry.ca/lime-vs-portland-cement-which-is-better/
lorcanbonda says “Federal government spending has very little fat to cut. Over half of the expenses is in Welfare, Social Security, and Health Care spending. Most of what remains is defense. Welfare and Social Security spending are needed to prevent the mass starvation and homelessness we used to see during economic downturns prior to the Depression Era. The best way to reduce these costs is to improve the economy.”
Can you cite the evidence that they prevent mass starvation and homelessness would occur if those benefits were cut in 2016? We have had great technological improvements which has resulted in a bountiful plenty of food. It isn’t the same now as prior to 1930.
How do you propose improving the economy? And i don’t buy that an improved economy would mean a cut in social spending. In government these things very rarely if ever get cut.
As you pointed out social security is paid by the lower and middle class while the key is lower taxes on middle class….how would an improved economy mean less of these taxes for the middle class? As social security is primarily given to old people who are retired and not working….they aren’t going to suddenly cut the taxes and give out less benefits to these old people who rely on them. They arent a part of the workforce.
Your premise appears to be faulty
I have little doubt that a cut in govt spending would result in mass hunger.
The vast majority of those on welfare have no marketable skills and even less desire to actually work.
For generations we’ve been paying people not to work, and it has taken root.
Beyond that, the idea that government is a charitable organization is so laughable that only someone completely gone to marxist thinking could think it.
“However, the slow recovery from the Great Depression and the Financial Crisis of 2007 are the same. The Government deficit tripled between 1929 and 1935.”
Yes the government deficit tripled in these areas. Tax rates were significantly increased acrossed the board in the 1930s so that suggests the problem was the spending.
The wealthy simply do not make nearly enough money to have a significant impact on the deficit. If you don’t drastically cut spending…the only way to get rid of the deficit is to jack up taxes across the board.
The wealthy are already way over taxed. The top 10% pays about 50% of all income taxes paid. But those who are consumed by greed will never be satisfied, they will always demand that those who have more than they do, need to be taxed more.
lorcanbonda i seem to be getting your argument. You want reduced payroll taxes to help the middle class. Also you don’t like deficits which is currently at 600B+.
The question is where/how would this cut in payroll taxes be off-set such that would also reduce the deficit to zero? You don’t seem to be in favor of cutting SS or welfare at the moment. Any payroll tax would increase the deficit would it not so you would have to offset that plus the 600B or so already. Where does this tax revenue increase come from?
Payroll tax cut would increase the deficit at least in short term*
How do you cut payroll and get rid of the deficit at the same time is what i am asking?
Can’t say I agree with you. The last figures I actually got to see on the US IRS website was from 2010, I believe. According to the figures there, regarding income tax, those that had family incomes over $450,000 paid 33% of the total revenues received by IRS, while those with family incomes of less than $30,000 paid 32%. Those that made over $450,000 grossed a lot more than those that earned less than $30,000, and have a far larger share of total wealth. No, the rich are not taxed at 50%. In fact, the highest rate of taxation, I believe is on the order of 33%. It is one of the great “myths” that the wealthy support the government. Why should they? They own it.
Tom O here is another link
The rich mainly pay the revenues due to our progressive tax code. People less than 30K mainly pay FICA if paying anything to begin with
http://www.pewresearch.org/fact-tank/2016/04/13/high-income-americans-pay-most-income-taxes-but-enough-to-be-fair/
Also tom that pew research shows top 2.7 % paid about 51.6% of the revenue. MarkW DID NOT say they were taxed at effective tax rates of 50%….but rather the top 10% contribute 50% OF THE REVENUES
MarkW is correct…he actually low balled it
Whoops forgot the pew research link
http://www.pewresearch.org/fact-tank/2016/04/13/high-income-americans-pay-most-income-taxes-but-enough-to-be-fair/
http://www.pewresearch.org/fact-tank/2016/04/13/ high-income-americans-pay-most-income-taxes-but-enough-to-be-fair/
For some reason link isn’t posting so omit the space
modest proposal:
tax government! maybe it will discourage them.
Bastiat- the rest of the story:
he died. he ceased to be a vector of stupidity. people inherited his stuff. dead bastiats are good for the economy in every way.
keynesian economics:
because the cost of production of manufactured items decreases as initial costs are amortized and economies of scale are found, the state can devalue the currency by inflation to hide the decline.
then the theft is invisible and the state can simultaneously claim they’ve brought price stability.
nobel prize stuff, there.
economists are witchdoctors whose job it is to provide the apologetic rationale for atilla’s plundering.
TomO the people earning less than 30,000 did not make up 30% of the revenue. They essentially paid a 0 income tax rate or less with a fica of 6.2%. Your numbers are way off.
Note i am not sure what the taxfoundation is but the source of their chart is from the IRS
http://taxfoundation.org/article/summary-latest-federal-income-tax-data-0 in 2012
The top 1% pays 38% of the tax revenue…top 10 is near 70%.
http://www.pewresearch.org/fact-tank/2016/04/13/high-income-americans-pay-most-income-taxes-but-enough-to-be-fair/
I’ve contended for quite some time that “renewables” don’t make any sense since they all require the same rare earth elements to be created. I suppose it is possible that these metal are called “rare earth metals” but really are as plentiful as, say, copper or iron, but I don’t think that’s the case. I suspect that there is a finite amount of them that can be cost effectively mined and refined, and that long before the world can go “solar and wind,” there will be no more of them available this side of recycling. And I am quite sure that there won’t be anywhere enough to even put the “developed nations” into all renewables, much less the undeveloped. the only way that can work out is we dumped about 2/3rds of the population in the middle of the Pacific, and if any of them mad it to shore, dropped them in again.
Clinton logic sees a bonanza – not only new jobs for renewables, but the old jobs working the existing power plants will not get laid off, since renewables can’t replace their plants. Electricity gets more expensive even if the renewables don’t cost anything – of course,solar panesl are made elsewhere, as are most windmills.
Truth:
1. The middle class pays for everything.
2. Command economies fail.
3. Progress depends on individual action.
4. Charity works, governments don’t.
5. You are not as smart as you think. [Nor as good-looking.]
So sayeth Charlie Skeptic
lorcanbonda How do you propose to reduce the deficit by $600B dollars like you want to above?
lorcanbonda….you want to raise corporate taxes…fine by how much? Employees pay corporate (business) taxes as where do you think all this extra revenue would come from. it comes from them receiving less compensation.
Do you think taking 600B out of the economy would be a good idea?
lorcanbonda…..can you explain to me how middle class taxes (mainly payroll) have been increased? If anything they have been decreased. Payroll is a seperate bucket for social security and SSDI….your benefits are based on your income earned at least for now. And wouldn’t middle class taxes raised if true mean a reduced deficit? For some reason you won’t address the elephant in the room that is spending….you want no deficit, refuse to say how to bridge it without substantially increasing social security while simultaneously wanting no spending cuts.
Your premise doesnt make much sense
without substantially increasing taxes across the board.
http://motls.blogspot.com/2010/04/spain-produces-solar-energy-at-night.html
Ah, France’s sole beauty!
Really brilliant column, and I hope it results a new generation having the joy of discovering Bastiat.
“Transforming the US energy system to 100% renewables (assuming this is possible) would create a tremendous number of jobs”
Her: “We’ll create jobs”
Him: “You’ll create jobs”
Oh what the heck:
“Fight of the Century”: Keynes vs. Hayek Rap Battle Round Two
More like ‘we will create bird blender jobs subsidized by tax payers after we have displaced higher paying jobs not paid for at tax payers expense ‘ . Then we will increase the number of poor to be more dependent on food stamps and beholding to government . We will boost the number of $$billionaires by a few who have enjoyed dining on the tax payer dime and to ensure election campaign money keeps rolling in . CNN can even fill it’s day finding out what Toller Bill has been doing on his trap line . You know a real public service reality show .