Arnold Kling  

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What I'm "Dogmatic" About... Exacerbating Problems Always...

The latest announcement about U.S. industrial policy says,


Abengoa SA... was offered a $1.45 billion loan guarantee by the U.S. Department of Energy to build a 250-megawatt solar plant in Arizona, and Abound Solar Manufacturing was offered a $400 million loan guarantee toward two plants where thin-solar panels will be manufactured.

The guarantees through the Recovery Act and other measures are expected by the awardees to create more than 5,000 jobs, according to a statement from the White House.

My guess is that most of the jobs that this policy creates are in Washington, for lawyers to lobby for these sorts of favors.

[UPDATE: Tim Carney points out that this is a bipartisan problem.]


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COMMENTS (9 to date)
Rebecca Burlingame writes:

The latest Time magazine has an article as to how 3.5 billion was spent on lobbyists last year, the "biggest bargain in town". I couldn't figure that one out.

John Scott writes:

I am not fan of FDR, but the Grand Coulee Dam, completed in 1942, generates 7,000 megawatts (28 times as much electricity). At this rate, by 2070, we will provide loan guarantees for the construction of the Baghdad Battery. http://en.wikipedia.org/wiki/Baghdad_Battery

Ted writes:

An interesting question is how you include a cost estimate of a loan guarantee. If this is through the ARRA - how does the CBO calculate costs of possible loan guarantee losses? Does it assume a certain percentage will fail, does it assume all with fail, or is the potential cost just assumed to be zero?

rjs writes:

how much would the electricity generated cost if that $2B were amortized?

and how much coal generated electricity will it take to build the panels, and how much diesel fuel will it take to mine the materials, transport the panels, and build the arrays?

Dan Weber writes:

Whether we like it or not, there is no electricity generation that doesn't have some sort of government support -- price supports, loan guarantees, and guaranteed markets are the usual suspects in this regard.

Tracy W writes:

Dan Weber - that's an excellent reason for cutting subsidises for those other forms of electricity generation, along with the subsidises for the solar generation.

MernaMoose writes:

My guess is that most of the jobs that this policy creates are in Washington, for lawyers to lobby for these sorts of favors.

Well at least somebody gets to make some money, because the technology isn't going to make any sense by any rational measure.

And we all know there's nothing to learn from Europe on this front.

George X writes:

1.45 + .40 = 1.85 billion dollars in guarantees

1.85 G$ / 5,000 jobs = $375,000 in guarantees per job

That's approximately a mortgage guarantee per job. Pricing the guarantees at 10% loss, it's $37,500 per job, which isn't bad. Pricing them at a more-likely 100% loss (this being government, that's probably not the maximum), it's a terrible $375,000 per job. And this doesn't count the jobs destroyed by displacing 1/10 of a conventional power plant.

Frankly, any time anyone talks about the government "creating jobs", the only rational response is to roll your eyes and cover your ears to keep the toxic levels of stupidity out.

Jameson Burt writes:

With the economy in a slump,
Keynes recommended investing not in old
but in new industries.
Here in 2010, with a long term slump at hand,
new industries have time to begin before the slump ends.

Given that investment will be made,
this investment in new industries
improves upon putting funds into repairs.


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