Wind credits, part 1: The Obama campaign’s jobs projections

at 06:02 AM ET, 08/09/2012


(Don Bryan/AP)

“By opposing an extension to the wind production tax credit, Mitt Romney has come out against growth of the wind industry to support 100,000 jobs by 2016 and 500,000 jobs by 2030. Meanwhile, he supports $4 billion in oil and gas subsidies for companies that have rarely been more profitable.”

-- E-mail to the media from Obama campaign spokesman Adam Fetcher, July 31, 2012

Mitt Romney’s campaign last week expressed opposition to the federal tax break for wind energy, drawing a stark contrast with President Obama and alienating the Republican candidate from certain members of his party, namely Sen. Chuck Grassley (R-Iowa), who sponsored the original tax credit in 1992 and is pushing for an extension this year.

Romney campaign spokesman Shawn McCoy told the Des Moines Register that Romney would let the tax break expire in order to “create a level playing field on which all sources of energy can compete on their merits.” He added that “wind energy will thrive wherever it is economically competitive, and wherever private sector competitors with far more experience than the president believe the investment will produce results.”

This newly stated position — if it sticks — could affect Romney’s chances in Iowa, where lots of wind-energy jobs have sprouted up in recent years, in part because of tax relief and targeted investments by the government.

Obama campaign spokesman Adam Fetcher quickly seized on Romney’s position, saying the GOP candidate has come out against growth in the wind industry to support hundreds of thousands of jobs by 2030.

We’ll look at a response from the Romney campaign in a separate column, but first let’s examine this assertion from Team Obama. Would the wind credit really support hundreds of thousands of jobs by 2030?

The Facts

First of all, we should clarify that the wind-energy tax break refers to the Production Tax Credit, which dates back two decades to the final year of the George H.W. Bush administration. Each president since then has signed an extension of the policy, including George W. Bush, who made the credit available for additional forms of renewable energy when he approved the Energy Policy Act of 2005.

President Obama extended the wind credit through 2012 when he signed the Recovery and Reinvestment Act of 2009, which allowed wind-energy producers to collect 10 years’ worth of credits up front as a form of stimulus. The White House urged Congress to extend the original credit again in May.

That brings us to Romney’s opposition to the tax credit, which the Obama campaign compared to coming out “against growth of the wind industry to support 100,000 jobs by 2016 and 500,000 jobs by 2030.”

The president’s campaign backed up its jobs numbers by citing estimates from the American Wind Energy Association, a trade organization whose 2012 strategic plan includes lobbying “first and foremost for extension of the [wind-energy credit]” and providing “defense for any important industry policies challenged by Congress.”

This association has an obvious stake in whether the jobs projections look good, so it’s not the right group to consult for objective numbers. Nonetheless, both Democrats and Republicans who champion wind-energy investments have cited estimates from the organization.

Luckily for the Obama campaign, we found a 2008 Department of Energy report that contains the same figures, this time produced by the Energy Department’s National Renewable Energy Laboratory. We should note that the American Wind Energy Association made “major contributions” to this report. (See the acknowledgements on page 2 of the study).

For what it’s worth, the George W. Bush administration requested the analysis after setting a goal to produce 20 percent of U.S. electricity through wind energy by 2030.

The National Renewable Energy Laboratory developed its jobs estimates by determining how many kilowatt hours of wind energy would be needed to produce 20 percent of the nation’s electricity by 2030, then plugging those numbers into a complicated employment-forecasting calculator known as the Jobs and Economic Development Impact (JEDI) model.

The JEDI calculations support Fetcher’s claim, but most of the employment comes in the form of ripple effects outside the wind industry, including “induced impacts,” which are assumptions about the extent to which people will use their new wealth to shop, make car payments, and so on. This type of exercise can easily get out of hand, because there’s really no end to how far you can count ripples.

In terms of direct impacts, the report concluded that racing to 20 percent wind would support less than 100,000 jobs by 2016 and fewer than 200,000 jobs by 2030. That work includes manufacturing, construction and operations, representing perhaps the easiest numbers to predict accurately.

Nearly four years have passed since the Energy Department released its report. Theoretically, we should be able to determine whether the JEDI numbers are accurate — at least for direct jobs. But we can’t do that yet, because neither the Bureau of Labor Statistics nor the Labor Department have the necessary data to make a comparison.

The only evidence of accuracy we could find comes from the American Wind Energy Association, which said in its annual market report that the wind-energy sector supported 75,000 jobs in 2011. Coincidentally or not, this is 5,000 jobs above the JEDI projection. Again, the association is a lobbying group, so the rosy numbers are questionable, even though the organization claims to have come up with its data by surveying companies within the industry.

Beyond any questions about the validity of the jobs projections, the JEDI estimates provide only gross rather than net jobs numbers. As such, they don’t account for any job losses that could occur as wind energy ramps up -- for instance, any layoffs resulting from rising energy costs during the industry’s seminal phases.

Finally, Fetcher took the liberty of assuming that a tax break is necessary for the wind industry to support hundreds of thousands of jobs by 2030. Remember, he said Romney’s opposition to the wind credit amounts to opposing all those projected jobs.

The problem here is that the JEDI model doesn’t factor in tax credits. It just assumes that the wind industry would ramp up to produce 20 percent of U.S. electricity by 2030, regardless of whether the government got involved. In other words, free-market forces could produce the same results as far as the JEDI numbers are concerned.

As for the claim that Romney supports tax breaks for the oil and gas industries, the GOP candidate has made contradictory statements about this. He said at different times during the 2012 election cycle that the government should not raise taxes on anyone, and that he would eliminate some of the “special deals a lot of industries get.”

The campaign declined to clarify for a previous column precisely where the former governor stands on this issue of tax breaks for oil and gas. That doesn’t exactly save Romney, because the former governor has criticized Obama’s 2013 budget plan to eliminate those breaks. We’ll give the president’s campaign some credit for this.

The Pinocchio Test

Fetcher relied on jobs projections from a trade group that lobbies for the very wind credits he’s trying to defend. That’s hardly solid backup.

Nonetheless, we found out that the Energy Department’s National Renewable Energy Laboratory came up with the same estimates. Those calculations may be pie-in-the-sky projections, or they could be perfectly sound. We simply don’t know at the end of the day, because neither the BLS nor the Labor Department have current figures to compare them with.

Beyond any controversy over the numbers, the Obama campaign made an assumption that the wind industry needs a tax credit to support hundreds of thousands of jobs. But the JEDI numbers don’t prove that one way or another.

Still, many Republicans argue that eliminating tax breaks for oil and gas would lead to job losses, so it’s only fair to apply that same principle to the wind industry. Fetcher earns just one Pinocchio, mainly for getting jobs projections from a group that lobbies for the wind credit. Even though the National Renewable Energy Laboratory came up with the same estimates, the methodology hasn’t been proven accurate.

One Pinocchio

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    About the Blogger

    Glenn Kessler has covered foreign policy, economic policy, the White House, Congress, politics, airline safety and Wall Street.

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