How the recession is good for Barack Obama's green agenda.

Who's winning, who's losing, and why.
Dec. 16 2008 8:22 PM

The Green House

The recession is the best thing that could have happened to Barack Obama.

US president-elect Barack Obama gives a press conference on energy and the environment. Click image to expand.
Joe Biden and Barack Obama

For President-elect Barack Obama, the sagging economy is the gift that keeps on giving. First, it helped get him elected. Now it's giving him a mandate to spend more than he ever could under normal circumstances.

Nowhere is this more apparent than on climate change. When Obama rolled out his "green team" Monday, he made it clear that he doesn't see saving the environment and saving the economy as incompatible. Quite the opposite: He thinks they're complementary.

Take the example of green buildings: "We know that there are buildings—school buildings, in particular, but I think public buildings generally—that need to be retrofitted to make them more energy-efficient," Obama said. "We will get that money back so that not only are we creating jobs, but we're also making those operations more efficient and saving taxpayers money over the long term." In other words, "green-collar jobs"—jobs created when government policy encourages people to install solar panels or research wind power or "weatherize" homes—are a kind of magic puzzle piece. They'll stimulate the economy in the short term (by creating jobs) and save money in the long term (by reducing emissions and making us more energy-efficient).

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That sure sounds good. But there are a few complications. For one thing, you may have heard we're in a recession. If people are cutting back on food, clothing, and gas, are they really going to pay more for pricey doodads like solar panels and wind turbines? Obama's answer is that they won't have to. He says the efforts will be paid for by revenues generated by a new cap-and-trade bill, which will make energy companies pay for their emissions. Never mind that the last cap-and-trade bill to land in the Senate never gained much traction. Obama promises this one will be more aggressive.

Consumers may also avoid paying more for their energy use because the government is covering it. Obama has pledged to commit $150 billion over 10 years for a "clean energy future"—which includes paying for infrastructure, often the costliest part of alternative energy. The idea is that since the government is paying for the new equipment, energy companies won't pass the costs on to the consumer. (At least, not initially.) So, in theory, you won't have to pay more for electricity.

And even if you did, some economists argue that you won't be for long. As the price of bad, dirty energy goes up, the price of good, clean energy will come down, and "those lines will cross because of economies of scale," says Dan Weiss of the Center for American Progress. In other words, the only reason solar panels and such cost so much is because no one makes them en masse. Yet. Not everyone is convinced. "It's not an economy-of-scale problem," says Patrick Michaels of the Cato Institute. "It's a physics problem. … If the sun got hot enough to be an efficient provider to solar energy, we'd burn up."

So can the government really afford to pay for all this? Surely we can't spend and spend without future generations picking up the tab. Ah, but we can, say economists on the left.