Do We Really Mean Green?

The United States doesn’t seem to do much directly anymore. Instead our political policies appear to be more akin to herding cats than accomplishing goals, a habit that infects Democrats and Republicans alike. Direct action smacks of the dreaded word “socialism” that kills political careers – like hiring people directly in times of high unemployment rather than trying to lower taxes and stimulate private job growth in the absence of consumer demand. So when we have a new policy, the government might fund some cutting edge research if there’s no way to “incent the private sector to do so,” but then instead of attempting to move the country directly towards the new policy, it often sets up tax incentives, private sector grants and loans hoping that the capital structures so affected will toe the line.

We tried that by providing “salvation capital” to our largest private financial institutions with a key goal of loosening intolerably tight, economy-killing credit facilities to homeowners and small to medium business. The financial institutions had other ideas when they took our money, and shored up their balance sheets, horded cash and acquired their competitors in a mergers-and- acquisitions frenzy. What didn’t happen was that loosening of credit; it continues to sap the economy and decimate any hope for any foreseeable recovery in the housing market. We even had to try and create fake corporations – Freddie and Fannie – to pretend that we were side-stepping any semblance of “socialism.” There may be fantastic mortgage rates out there, but getting them is difficult and for the bigger homes on the spectrum, close to impossible.

The other nasty habit our government cannot shake is a failure to redirect when the initial policies fail. There’s too much, “well, we just didn’t stimulate enough,” and not enough, “can we try something else?” The problem with direct action is inevitably you step on some private interest’s toes, and since private interests appear to be the mainstay of campaign contributions, we just won’t walk that path. But when we fail to see the elephant in the room… until we have a circus and it is too late… and keep repeating the same behavior and expecting a different results (hmmmm?), well stupid is as stupid does. American homeowners are demoralized that they are paying mortgages in excess of the worth of their homes, even though the fall of the economy was as a direct result of government failures. Without repairing this hole in our economic heart, it does seem that were are treading water between several conflicting and potentially vapid policy directions.

We don’t seem to understand that a lack of consumer confidence and willingness to spend is what is holding up job creation. Not high taxes for the rich. Not tax credits to hire to make stuff no one will buy. Not regulations that might keep workers safe and companies honest. The elephant in the room is consumer demand. The failure in our alternative energy program, one that leaves the United States behind both China and Germany in terms of technology sales, is also one of confidence in the marketplace. You cannot simply incent a nascent industry, even if it is vital to your nation’s economic future, without creating an environment where such an industry has sustainable expectations. And once again, the issue is whether or not there is going to be sufficient buyer demand to justify capital investment, the same issue we have today in our failing jobs-creation efforts.

Christoph H. Stefes, an associate professor of political science at the University of Colorado (Denver) explains how Germany created an environment that actually resulted in green jobs and genuine economic success: “In contrast to the U.S., Germany has for two decades relied on a comprehensive policy instrument to promote renewable energy: feed-in tariffs. This model requires utilities to buy electricity from renewable energy operators at a fixed rate that is guaranteed for 20 years, providing entrepreneurs and banks with a stable investment environment. Since introduction of the first feed-in tariff in 1991, the share of renewables in the electricity sector has increased from less than 5 percent to about 20 percent, with 30 percent envisioned by 2020 and 80 percent by 2050. Renewable energy has thereby become a boom industry, employing around 300,000 workers today, with 500,000 expected by 2020. Utilities have passed on the extra costs to the end consumer. Yet consumers’ electricity bills have increased by less than 5 percent because of these tariffs, and customers have had no major objections.” New York Times, September 20^th. Oh, that solution, well it would never work here because….

I’m Peter Dekom and fear of toxic political labels and the retaliation of special interests can be fatal to implementing long-term effective economic policies.