Presidential Debate: Romney's $90 Billion Untruth
About the only substantive mention of U.S. energy policy made during last night's Presidential debates was Mitt Romney's description of the Department of Energy's support of renewable energy, in which he charged that the Obama administration had plowed $90 biillion in subsidies into solar and wind energy, and that about half of the companies benefitted had failed.
Romney communications director Ed Gillespie said earlier in the season they're not going to let the campaign be "run by fact checkers," and the candidate's claim last night seems to indicate the campaign meant just that.
Close to the halfway point in the debate, in response to a statement by President Obama that the oil industry gets "$4 billion a year in corporate welfare," Romney said
in one year, you provided $90 billion in breaks to the green energy world. Now, I like green energy as well, but that's about 50 years' worth of what oil and gas receives, and you say Exxon and Mobil -- actually, this $2.8 billion goes largely to small companies, to drilling operators and so forth.... But -- but don't forget, you put $90 billion -- like 50 years worth of breaks -- into solar and wind, to -- to Solyndra and Fisker and Tesla and Ener1.
Later in the debate, Romney expanded on the claim:
You put $90 billion into -- into green jobs. And -- and I -- look, I'm all in favor of green energy. Ninety billion (dollars) -- that -- that would have -- that would have hired 2 million teachers. Ninety billion dollars. And these businesses -- many of them have gone out of business. I think about half of them, of the ones have been invested in, they've gone out of business. A number of them happened to be owned by -- by people who were contributors to your campaigns.
Governor Romney got part of the statement correct: The Department of Energy has indeed allocated $90 billion to spend on energy-related stuff. Not "in one year," though: over the life of the program, wich has been in existence since 2009. And given that the DOE describes that program -- the Recovery Act -- as lay[ing] the foundation for the clean energy economy of the future, we can probably give the candidate a pass on his overall characterization of the program.
The Department's Recovery Act program spends money allocated by the 2009 American Recovery and Reinvestment Act (ARRA), which boosted spending in the embattled DOE 1705 Loan Guarantee Program. That's the program that famously backed a $535 million loan to failed solar company Solyndra, which will probably cost the U.S. government a few hundred million dollars once the bankruptcy proceedings are finished.
The $90 billion figure reflects the total budget for the DOE's Recovery Act program. Only a slim percentage of that money has gone to renewable energy. The majority has funded energy efficiency programs and "environmental cleanup," mostly of nuclear weapons production and storage sites. Upgrades to the country's transmission grid account for more than twice as much money that allocated in the 1705 program: around $4 billion. Research into carbon capture and storage, an integral part of any effort to promote continued burning of coal as "clean," accounted for about $3 billion. Romney is on record as supporting this research.The 1705 program has, to date, offered loan guarantees totaling $16.1 billion to green energy companies, including many industries other than solar and wind. Some of these guarantees will never be accepted, as companies awarded them fail to meet the manufacturing or construction milestones set as conditions on the awards. Most that are awarded will be paid back with interest. The electric car company Tesla, mentioned by Romney as one of the companies that has failed, announced this morning that it's making an early payment on its loan.
Like any loan program, the DOE Recovery Act program has budgeted a certain amount for loans that it assumes might reasonably go unpaid. The Office of Management and Budget assumed that that figure would amount to $2.47 billion, and Congress approved a budget based on that figure. Actual losses in May, after the well-publicized Solyndra and Beacon failures, were about 15% of that according to testimony before the House Committee on Oversight and Government Reform by Gregory H. Kats, President of the green energy consulting firm Capital E:
Review of loan portfolio outstanding suggests total defaults are ultimately likely to be in the range $400 - $800 million dollars, or about one quarter the amount projected and budgeted. Based on a reasonable assessment of outstanding portfolio financial profile and risks, the DOE loan program can therefore rationally only be viewed as a big success.
So it's not $90 billion on solar and wind in one year, but less than two billion on solar, wind, transmission upgrades, electric cars, and other energy innovations over the last three years. It's not true that half of the companies getting those grants have failed: the actual failure rate is less than fifth of what Congress budgeted for. And one of the companies Romney mentioned as having failed, though it isn't as robust as its stockholders would like, is making loan payments early.
What about the figures for subsidies to the fossil fuel industries? Romney cited $2.8 billion, and Obama $4 billion. Who's correct? Neither one, probably. Romney's figure seems to come from dubious figures promoted by the right-wing Tax Foundation: a bill written by Senator Robert Melendez, which failed this year in the Senate, would have axed more than $2.4 billion in annual tax credits received by just five oil companies -- BP, Chevron, ConocoPhillips, ExxonMobil and Shell. Obama's figure of $4 billion comes from a proposal he's backed for the last three years to eliminate that amount of subsidies to oil, gas, and coal companies.
What are the real figures? That depends on what you call subsidies. You might reasonably include a lot more than just direct tax credits for drilling or mining. The U.S. coal industry would die in days without a railroad infrastructure to move coal back and forth: do we include federal support to rail in our calculations? How about the cost of keeping the Strait of Hormuz open to American tankers? How about the amount of money spent reimbursing hospitals for treating asthma patients?
One conservative estimate by the The Organisation for Economic Co-operation and Development (OECD), cited on page 5 of this report, put U.S. direct subsidies to the fossil fuel industry at more than $15 billion in 2010. Other reasonably credible estimates place the total amount of subsidies significantly higher.
So Romney got one thing right: A program of the DOE has budgeted $90 billion to spend on energy-related stuff. Whether he holds to the rest of his statements depends on whether his campaign decides to pay attention to the fact checkers.
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