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 Richmans' Trade and Taxes Blog

Obama doubles down on green energy
Howard Richman, 5/14/2012

Until recentily, Spain was the leader in renewable green energy investment. When President Obama got elected, he sought to emulate the Spanish model, as he noted in his remarks to the press after meeting with Spanish President Zapatero on October 13, 2009:

(W)e pledged to work diligently to strengthen [our ties], particularly around key issues like renewable energy and transportation, where Spain has been a worldwide leader and the United States I think has enormous potential to move forward.

So how is Spain doing economically as a result of its huge investment in green energy. Not very well. It currently leads the eurozone with 24.1% unemployment accompanied by $58.1 billion trade deficits  (according to statistics published in the May 5, 2012, issue of The Economist).

Why? A study by Gabriel Calzada Alvarez and his colleagues at Madrid's King Juan Carlos University calculated that Spain lost 2.2 jobs in other industries for every government-subsidized green job that was created. The problem is that renewable energy, being more expensive, wastes government resources while raising the overall cost of energy for local manufacturers. In the concluding section of their study, Alvarez and his colleagues explained:

This case is similar to the one that French economist Frédéric Bastiat denounced in his famous “Petition by the candle-makers,” in which he ridicules the intentions of protectionist entrepreneurs by comparing them to candle-makers clamoring for the state to crowd-out the sun, which was competing with them unfairly when providing light. In their opinion, if the sun was barred from providing light, numerous jobs would be created in the candle manufacturing industry. Obviously, this is not so: precisely by not being able to profit from the sun’s light we would be wasting scarce resources in the production of candles instead of producing other goods and services that would increase our wealth. (p. 30)

Has President Obama learned anything from Spain's failure and his own failure? Apparently not. In a May 8 speech at the State University of New York in Albany, Obama urged Congress to put green energy subsidies on its "to-do list." Specifically:

Second, if Congress fails to act soon, clean energy companies will see their taxes go up and they could be forced to lay off employees. In fact, we're already hearing from folks who produce wind turbines and solar panels and a lot of this green energy that they're getting worried because there's uncertainty out there. Congress hasn't renewed some of the tax breaks that are so important to this industry. And since I know that the other side in Congress have promised they'll never raise taxes as long as they live, this is a good time to keep that promise when it comes to businesses that are putting Americans to work and helping break our dependence on foreign oil. (Applause.) So we should extend these tax credits. That's on the "To-Do" list. That's number two.

President Obama wants to take the United States still further down the job-destroying green subsidies track. He appears to be incapable of learning from his economic mistakes.