STIMULUS: Failures of 2009 recovery act not restraining president’s green ambitions now
WASHINGTON — In September 2009, then-vice President Joe Biden traveled to a defunct General Motors plant near his hometown, Wilmington, Del., to announce a $528.7 million government loan for Fisker Automotive to make hybrid and electric vehicles.
The funding for Fisker, a small luxury automaker, came out of the American Recovery and Reinvestment Act, a $787 billion economic stimulus plan secured by President Barack Obama to lift the nation out of the Great Recession, in part by creating “green jobs” with $90 billion for wind and solar energy, a “smart” power grid, weatherized homes and the electric vehicle industry.
Fisker went bankrupt in 2013 before the Wilmington factory produced a single car. Biden also personally announced a $535 million loan guarantee for Solyndra, a California solar panel company that then went bankrupt, leaving taxpayers on the hook. An advanced battery-maker called A123 Systems, which Obama extolled as part of a vanguard
of a new U.S. electric car industry, received a $249 million stimulus grant, then filed for bankruptcy in 2012, the vanguard that wasn’t.
Now, 12 years later, President Biden is preparing the details of a new, vastly larger, economic stimulus plan that again would use government spending to unite the goals of fighting climate change and restoring the economy. While clean energy spending was just a fraction of the Obama stimulus, Biden wants to make it the centerpiece of his proposal for trillions of dollars, not billions, in government grants, loans and tax incentives to spark renewable power, energy efficiency and electric car production.
But the failures of the Obama stimulus, and Biden’s role in them — he oversaw recovery act spending — could haunt the plan as it makes its way through Congress. The risk to taxpayers could be orders of magnitude more this time around, and Republicans for years have proved adept at citing Solyndra to criticize federal intervention in industrial planning.
Biden’s advisers, many of whom worked on the Obama stimulus, say the situation is very different. The market demand for electric vehicles is much higher, and the cost of the cars is much lower than in 2009, the year after Tesla Motors produced its first roadster. Solar power is more economically competitive. Wind is entrenched and expanding rapidly.
Energy Secretary Jennifer Granholm will oversee the same clean energy loan program that backed Fisker and Solyndra. Granholm knows the program well: As governor of Michigan during the Obama years, she helped her state secure money from it to help auto battery manufacturers — including
some that failed.
“You have to step up to the plate and take a swing in order to hit the ball, and sometimes you swing and you miss,” she said of those failures. “But if you never swing, you will never hit the ball, and you’ll never get a run. So the overall benefits of the Obama-era clean energy investments were overwhelmingly a net positive.”
Still, she said her team was studying the lessons of 2009: “When you invest in innovation, sometimes it works and sometimes it doesn’t. But you learn from the losses more often than you do from the wins, just like any human, right?” She said the clean energy loan program will be “retooled” and “invigorated” for its second round.
Other advisers to Obama concede they fell short, especially on electric cars. The recovery act was supposed to put 1 million plugin
hybrids on the road by 2015 but mustered fewer than 200,000. Even today, fewer than 1 percent of vehicles on the road are electric.
“There was high ambition, but getting some of those projects off the drawing board and onto the ground was an area where it certainly proved to be a challenge,” said Heather Zichal, who served as Obama’s top clean energy and climate change adviser in his first term.
Republicans are already weaponizing the losses of the Obama green stimulus in their political attacks against the Biden plan.
“When President Biden was vice president, the Obama administration promised thousands of green energy jobs,” said Sen. John Barrasso of Wyoming, the ranking Republican on the Senate Energy Committee. “These jobs never materialized. Millions
of taxpayer dollars were wasted on green energy companies that went belly up. Now, the ‘Solyndra Syndrome’ has returned.”
Most economists say that, on balance, the Obama green stimulus spending did lift the economy and had a long-lasting effect. Clean energy spending created nearly 1 million jobs between 2013 and 2017, according to a 2020 paper published by the National Bureau of Economic Research. It also made money for taxpayers: Despite the losses from companies such as Fisker, the Energy Department’s loan guarantee program ultimately made $2 billion more in returns than it paid out.
Wind power more than tripled in the past decade and now generates nearly 8 percent of the nation’s electricity. Solar power, which generated less than 1 percent of the nation’s electricity in 2010, now generates
about 2 percent and is growing fast. Economists generally agree that the Obama stimulus, which pumped about $40 billion in loans and tax incentives to those industries, deserves partial credit.
The recovery act “was a success at creating jobs, but it did not meet emissionscutting goals,” said David Popp, a professor of public administration at Syracuse University and the lead author of the National Bureau of Economics study on the green stimulus money. “And this new stimulus, on its own, will not be enough to reduce emissions.
“Unless they can pair it with a policy that forces people to reduce emissions, a big spending bill doesn’t have a big impact,” Popp said.
But, he added, “spending money is politically easier than passing policies to cut emissions.” If that “sets up the energy economy in a way that it’s eventually cheaper to reduce emissions, it could create more political support for doing that down the road” by making legislation or regulations less painful, he said.
Biden has a long way to go on that front. Wind and solar power remain more expensive than fossil fuels in most parts of the country. While the recovery act gave a jolt to electric vehicle manufacturing, including a successful loan guarantee to Tesla, those cars still have higher price tags than the ones with old-fashioned internal combustion engines.
That is why Democrats say one of the biggest lessons from the Obama stimulus is to go bigger — much bigger.
The short-term tax credits for renewable energy and advanced battery plants “weren’t big enough. They weren’t long enough,” said Sen. Ron Wyden of Oregon, chairman of the Senate Finance Committee, which will play a key role in shaping Biden’s bill in Congress.
“If you were somebody who was very much committed in the area of clean manufacturing and energy, you didn’t have an idea of what was coming next,” he said.
One element of climate change spending in Biden’s bill that was not in the Obama plan could draw bipartisan support: At a news conference last week, Biden spoke explicitly of the need to adapt the nation’s roads and bridges to a changing climate, which will bring stronger storms, higher floods and more intense heat and drought.
“We can’t build back to what they used to be,” he said of the nation’s creaking infrastructure. “The roads that used to be above the water level, didn’t have to worry about where the drainage ditch was. Now you got to rebuild them 3 feet higher. Because it’s not going to go back to what it was before; it will only get worse, unless we stop it.”