**Committee on Energy and Natural Resources**

**U.S. Senate**

**[Green Recovery: Investing in Clean and Efficient
Energy]{.underline}**

**[To Create Jobs and Stimulate the Economy]{.underline}**

**Testimony of Bracken Hendricks**

**Senior Fellow, Center for American Progress Action Fund**

**December 10, 2008**

Chairman Bingaman, Senator Domenici, and Members of the Committee, thank
you for the invitation to discuss how investments in clean and efficient
energy and environmental improvements to our nation's infrastructure can
create jobs and economic stimulus during this time of tremendous
challenge for working families.

Today we urgently need immediate stimulus and near term recovery
investments; yet we must also use our resources wisely, not only to get
our economy moving but to get it moving in the right direction. A green
recovery plan will create more jobs, and more good jobs at higher wages,
and it will create new markets for American business while reducing the
overall cost of addressing our climate and energy crises. This is smart
public policy and good government, and I applaud your leadership in
seeking this path forward for the nation.

I am Bracken Hendricks, Senior Fellow at the Center for American
Progress Action Fund, a non-partisan multi-issue think tank focused on
developing innovative policies that build a more broadly shared
prosperity. At CAPAF, we have come to believe, through deep research on
the matter, that smart strategic investments in climate solutions can
help to rebuild the underpinnings of our economy and create significant
numbers of good jobs.

Built on the foundation of efficient and low-carbon energy sources, this
transition can be a source of increased business opportunity and
competitiveness, stronger communities, improved national security, and
increased prosperity. We call this approach "the Energy Opportunity,"
and we believe that it must be at the center of both America's energy
policy and our economic policy as we confront the interrelated
challenges of a sagging economy, rising energy prices, and a growing
climate crisis.

In this testimony, the Center for American Progress Action Fund offers
some thoughts on: 1) the current economic downturn and the urgent need
for an aggressive stimulus package that extends well into the coming
year; 2) why clean energy should be a major centerpiece of any such
recovery plan, possibly constituting from one quarter to one third of a
larger stimulus package; and 3) priority measures that will not only
create jobs and growth in the short term, but help rebuild the
foundation of the U.S. economy over the long term on the platform of
renewable and efficient low-carbon energy.

**[The Need for Stimulus and Recovery]{.underline}**

The U.S. economy is facing the most serious difficulty we have
experienced at any time in a generation. Long-run problems of stagnant
or falling wages and incomes are no longer hidden by artificially
inflated asset values. The effects of the financial crisis have moved
from Wall Street to the daily operations of business and the daily lives
of families.

Consider that:

-   The 0.5 percent decline in gross domestic product in the third
    quarter of 2008 was the biggest since the last recession in 2001.

-   Total job losses in 2008 have hit over 1.9 million, including
    530,000 in November alone.

-   Median household income is lower than it was in 1999.

-   The values of homes fell by 2.5 percent, or \$351 billion, in the
    second quarter of 2008.

-   One in 11 mortgages is delinquent or in foreclosure, and credit card
    defaults rose to 5.5 percent of all credit card debt by the second
    quarter of 2008.

-   Credit-market borrowing financed 35.2 percent of fixed investment by
    non-financial corporate businesses in the second quarter of 2008,
    down from 80.1 percent a year earlier.

In this climate, there is an urgent need for federal policies designed
to provide stabilization, stimulus, recovery, and growth to address
these huge problems. Without action, there is too great a risk of
further collapse and an ever-worsening spiral of job loss and economic
decline. In addition to action aimed at stabilizing the extremely shaky
auto industry and financial and housing markets, Congress should act
quickly to pass measures to stimulate the broad economy and commence the
road to recovery.

Stimulus policies should be designed to offer an immediate boost
throughout the economy by spurring demand. Their purpose is to quickly
stall a downward spiral in the economy and give confidence to businesses
to invest and hire by restoring demand for their products. But the
consequences of the current downturn are not likely to be reversed
quickly by traditional, fast-moving stimulus measures. Also needed is a
recovery program to accelerate the creation of a strong labor market and
restore lost jobs over the next two years.

There is a growing consensus that stimulus and recovery spending should
be on the order of 2 percent to 4 percent of GDP. Nobel Prize-winning
economist Paul Krugman concludes that, "the stimulus package should be
at least 4 percent of GDP, or \$600 billion."[^1] Goldman Sachs calls
for a stimulus of \$500 billion.[^2] CAP Senior Fellow Gene Sperling,
former director of President Bill Clinton's National Economic Council
and Clinton's national economic advisor, says, "The breadth and
potential depth of that demand crisis require us to undertake a bolder
'Powell Doctrine' on stimulus in which \$300 billion to \$400
billion---or at least 2 percent of GDP---should be the starting point
with an understanding that more could be needed and that we will need to
call for a coordinated global stimulus.\"[^3]

Beyond the immediate challenges, the economy has long-standing
fundamental problems that must be addressed by major changes in our
nation's approach to energy, education, infrastructure, scientific
research, innovation, and other areas as described in the Center for
American Progress report "Progressive Growth."[^4] Stimulus and recovery
measures aimed at the immediate crisis should be designed, as a matter
of good governance, to serve double duty by providing a jumpstart in the
investments needed for the country's long-term growth. A green recovery
strategy can meet both of these objectives.

The Center for American Progress has outlined a plan to invest \$350
billion (greater than 2 percent of GDP) in a one-year stimulus and
recovery package that will jump start economic demand and stimulate job
creation while making a significant down payment on meeting these
broader public policy challenges, making efficient use of taxpayer
funds. In broad categories, the \$350 billion package includes
approximately:

-   \$55 billion to spur demand and assist those most in need.

-   \$70 billion aid for state and localities.

-   \$175 billion for infrastructure investments in stimulus and
    recovery.

-   \$50 billion for tax cut stimulus.

Within the infrastructure section, this plan identifies over \$100
billion of clean energy and environmentally beneficial projects and
programs that could help direct new investment rapidly into deploying
energy efficiency and low-carbon technology. This approach will drive
new investment in construction and manufacturing jobs, create new
markets for technology and skilled labor, and help cut consumer energy
costs, all while leaving a legacy of productive infrastructure and
investments.

**[A Green Recovery Means More Good Jobs]{.underline}**

Working in partnership with the University of Massachusetts' Political
Economy Research Institute, the Center for American Progress recently
released a report entitled, "Green Recovery: A Program to Create Good
Jobs and Start Building a Low-Carbon Economy." The report outlines a
program of investment that would rapidly inject \$100 billion into the
domestic economy through near-term spending on energy efficiency and
renewable energy.

This analysis found that a strategy for economic recovery that invests
in new energy alternatives and smart public infrastructure provides
superior improvements in economic performance and job creation when
compared to either rebates or comparable spending on traditional energy
sources. A program of investment in deploying new clean energy
technology and improving building efficiency is good short-term economic
policy. It would drive immediate spending into some of the hardest hit
sectors of the domestic economy in construction and manufacturing. Put
simply, a green recovery package creates more jobs and more good jobs
than any other strategy. It deserves strong consideration at this time.

There are many ways in which government spend­ing can stimulate the
economy and create jobs as part of a recovery program. Public spend­ing
directed toward a green recovery, however, would result in more jobs
than spending in many other areas, including, for example, on rebates
for increasing household con­sumption, which was the primary aim of the
April 2008 \$168 billion stimulus program. Near-term investments in
energy efficiency and renewable energy also have the added benefit of
moving the country toward the low-carbon future that is necessary to
increase our international competitiveness and national security, and
avoid the devastating social, economic, and environmental effects of
global warming over the long term.

A green recovery program is more effective as an engine of job creation
than spending the same amount of money within the oil industry or on
household consump­tion. Increasing spending by \$100 billion on household
consumption along the lines of the April 2008 stimulus program would
create about 1.7 million total jobs, or about 16 percent fewer jobs than
the green recovery program. In addition to creating more jobs, targeting
an economic stimulus program at increasing green investments also
creates more good jobs at higher wages than either a conventional
stimulus or comparable spending in the traditional energy sector. A
green recovery strategy also offers longer-term benefits: reducing home
energy bills to provide consumer savings; stabilizing the price of oil,
natural gas, and other non-renew­able energy sources through reduced
demand and increased energy diversity; and, of course, building over
time a low-carbon economy.

While it is not proposed as an option for economic stimulus, spending on
current fossil fuel-based energy offers a useful comparison to
demonstrate the substantially increased economic benefits of investing
in renewable energy and efficiency. Spending \$100 billion within the
domes­tic oil industry, for example, would create only about 542,000 jobs
in the United States. A green infrastructure investment program would
create 2 million jobs, or nearly four times more jobs than spending the
same amount of money on expanding oil energy resources. And again,
spending on oil offers no benefit in transitioning the U.S. economy
toward a low-carbon future, and it perpetuat­es the economic and national
security vulnerabilities of continuing to rely on oil for the lifeblood
of our economy.

A green recovery strategy will help to improve the overall efficiency of
the U.S. economy, which currently uses nearly twice the energy for every
unit of GDP when compared to many of our European and Asian
competitors.[^5] If the Bush administration had pursued an aggressive
package of energy-efficiency measures across the economy starting in
2001, with implementation beginning in 2002, the cumulative savings to
the economy today would be a remarkable \$206 billion in avoided energy
costs.[^6] These energy cost savings can increase the purchasing power
of American families for more productive purposes. In addition, it will
generate new markets for American manufactured goods and advanced
technology. But for the purposes of a near-term economic stimulus
package, two features of a green recovery are critical: it is relatively
more labor intensive than other investments, and the jobs that it
creates are more concentrated on domestic workers.

**Green jobs are more labor intensive.** Relative to spending within the
oil indus­try, the green investment program utilizes far more of its
overall \$100 billion in spending on hiring people than it does on
purchasing machines and supplies. Renewable energy and energy efficiency
create more jobs per dollar invested than traditional fossil fuel-based
generating technologies by putting money directly into advanced
technology manufacturing, modern infrastructure expansion, and
developing the skills of people. This is money that would have been
previously spent on wasted energy and imported fuel. These investments
substitute dollars spent on pollution and waste and redirect that
investment into the skills of workers and the infrastructure of
communities.

**Green investments have more domestic content.** A green investment
program relies much more on goods and services made within the U.S.
economy and less on imports when compared to spending either within the
oil industry or on household consumption. In general, about 22 percent
of total household expenditures flow toward imported goods. With the
green recovery investment program, only about 9 per­cent purchases
imports.[^7] Another critical benefit of a green economic recovery
program is that infrastructure upgrades, building efficiency retrofits,
renewable energy installations, and other components of green investment
all involve work that cannot easily be outsourced. Moreover, the diffuse
nature of these programs ensures that spending on goods and services is
spread widely across regions of the country and stays in the local
economies where these services are rendered, as compared to large,
centralized energy or infrastructure projects. The economic spillover
and indirect job creation effects of this phenomenon help explain why
green investments create more jobs and more good jobs than the
alternatives.

**Public investment is important to private markets.** In considering
the viability of spending on large-scale public investment projects, one
of the major issues that is often raised is whether such expenditures
absorb the limited amount of total investment funds in the economy, and
thereby "crowd out" private sector investment activities. In fact, the
weight of evidence examining the impact of public investment on the U.S.
economy does not point to a crowding-out effect. It rather finds that,
on balance, higher levels of public investment will promote private
sector productivity and higher rates of return for business. As such,
the evidence suggests that many kinds of public investments in the
United States generally *crowd in* private investment by establishing
the enabling conditions for sustained growth in private sector
investment and business formation. As a result, the crowding-in benefits
of public investments are also associated with higher rates of private
sector employment and job creation. For this reason, it is important to
recognize that while in a green recovery strategy the public is priming
the pump for new economic growth, new private sector activity is the
real engine of jobs and growth.

**[A Green Recovery Policy Agenda]{.underline}**

Green investments are especially effective job and growth creators
because they stimulate new demand by moving the economy to advanced
technology, modern infrastructure, and skilled labor.[^8] Many of the
green investment projects, such as building retrofits and
weatherization, are labor intensive in construction and manufacturing
where unemployment is high. CAP has recommended that one-quarter to
one-third of a larger stimulus package be dedicated to the green
components of a plan. "A Strategy for Green Recovery" from the Center
for American Progress Action Fund describes in greater detail some of
the proposals outlined below. The following energy-related investments
can start stimulating the economy relatively rapidly, driving new
investment directly into communities. Some near-term opportunities for
driving new smart energy investments include:

-   **Transit fare reductions and service expansions:** Provide \$2
    billion in assistance to transit agencies to reduce transit fares
    and expand services.

-   **The Weatherization Assistance Program:** Fully fund the
    Weatherization Assistance Program at \$900 million, the amount
    Congress is authorized to spend on the program in fiscal year 2009,
    and build toward a goal of weatherizing 1 million homes.

-   **The Federal Energy Management Program:** \$1.3 billion to fully
    fund energy- efficiency programs.

-   **Workforce investment in the Green Jobs Act:** Appropriate \$250
    million for the Green Jobs Act, authorized in the Energy
    Independence and Security Act of 2007, to provide job training and
    workforce investment in energy efficiency and renewable-energy
    installations.

-   **Refundable residential energy efficiency tax credits:** Increase
    funding for refundable residential energy efficiency tax credits to
    \$5 billion and raise the maximum credit for household efficiency
    upgrades to \$2,000.

-   **Solar roofs on federal buildings:** Provide \$3.5 billion to
    install 2,000 megawatts of solar power on federal rooftops, and
    amend federal electricity contracting to allow for 30-year power
    purchasing agreements.

-   **New Starts Transit project investments:** \$5 billion to partially
    bridge the anticipated shortfall in federal transit capital funding
    for fixed-guideway projects approved in the Federal Transit
    Administration New Starts pipeline.

-   **Smart grid federal matching funds:** Fund the Smart Grid Title of
    the Energy Independence and Security Act of 2007 to support \$1.3
    billion for infrastructure investment and demonstration projects.

-   **Green jobs restoring the land.** Expand existing programs by \$800
    million to restore parkland, forests, wetlands, wildlife refuges,
    and rural ecosystems.

-   **The Manufacturing Extension Partnership:** Expand the capacity of
    domestic manufacturing modernization efforts by increasing MEP
    funding to \$200 million.

-   **Greening affordable housing:** As proposed by the Center on Budget
    and Policy Priorities, provide \$5 billion for both public housing
    and federally subsidized, privately owned units. This could be
    distributed through public housing agencies and the HOME program,
    and used to increase energy efficiency, reduce energy operating
    costs, and bring empty homes back into use.

-   **Green school construction and renovation:** Immediately support
    state and local school modernization, renovation, and repair at a
    cost of \$7.25 billion.

-   **Water and wastewater infrastructure:** \$10 billion for cities to
    address issues with water and wastewater treatment.

In addition, some slightly less fast-acting, but still near-term,
recovery proposals can drive new investment into our energy
infrastructure within the next year to create needed jobs. A
well-balanced recovery plan will include proposals that are concentrated
in the first few months, as well as a range of structural investments
that will create significant growth over the course of the coming year.
Some of these proposals include:

-   **Building retrofits:** New authorization and funding of \$10
    billion to provide the initial financing for a public revolving loan
    fund---tax exempt, with credit guaranteed by the federal government,
    available for packaging with private capital---to spur the national
    building retrofit effort, with the principal to be repaid at the end
    of a five-year period.

-   **Energy efficiency and conservation block grants:** Appropriate \$5
    billion to fund states, cities, and counties pursuing clean energy
    projects.

-   **"Cash for Clunkers" rebates for older cars:** Initiate a \$2.5
    billion annual program to purchase and scrap older, more polluting
    cars, in exchange for an owner agreement to acquire a more efficient
    vehicle or use alternative transportation.

-   **Clean Renewable Energy Bonds:** Increase CREB funding by \$3
    billion to finance renewable energy projects by electric
    cooperatives, government entities, Indian tribal governments, and
    others.

-   **Advanced coal technology to capture carbon:** Invest \$1.1 billion
    to deploy demonstration carbon capture-and-storage technology at a
    coal-fired power plant.

-   **Electric transmission grid:** New authorization for a \$10 billion
    outlay for a new Federal Trust Fund for transmission and smart-grid
    build out through direct spending and grants to states and
    municipalities.

-   **Manufacturing:** \$15 billion in grants to states to support
    manufacturing plant retooling to produce clean and energy-efficient
    technologies and advanced batteries for electric vehicles.

-   **Advanced technology vehicle manufacturing and retooling:** \$25
    billion in additional loans for automobile manufacturers. The budget
    cost will be \$7.5 billion.

-   **Replacing aging buses and acquire rail cars:** \$4 billion on a
    competitive bid basis for mass transit agencies to replace aging
    buses with efficient, low-emission vehicles, acquire new rail cars
    to meet the surging demand for transit services across the nation,
    and perform needed and backlogged maintenance.

-   **Local transit infrastructure:** \$8 billion to fund 559
    "ready-to-go" public transportation capital projects that could
    begin within months of federal funding being made available. The
    funding would include the oldest and largest rail transit systems
    that face increasing maintenance and upkeep costs.

-   **Capital assistance to states:** \$10 billion to fund and
    dramatically expand the Intercity Passenger Rail Service Program for
    a federal-state partnership to promote intercity passenger rail
    development. This will include helping the states and Amtrak acquire
    new and rehabbed passenger rail rolling stock.

-   **Clean Energy Corps:** \$3 billion for a national CEC, a combined
    service, training, and job-creation effort to combat global warming,
    grow local and regional economies, and demonstrate the equity and
    employment promise of the clean energy economy. The funding could be
    distributed through the Corporation for National and Community
    Service and the Department of Labor to administer CEC-related
    programs.

-   **The Industrial Waste Recovery Program:** \$410 million to provide
    incentives for industrial facilities to generate electricity from
    recovered waste heat, as authorized by the Energy Independence and
    Security Act.

Together these investments can readily drive over \$100 billion into
near-term spending that not only provides benefits for our energy
security, but promotes stimulus by providing assistance to states and
cities, encouraging new investment in housing and the construction
industry, increasing consumer savings, expanding opportunities for
training and national service, providing direct relief to low-income
Americans, and reinvesting in our manufacturing jobs base.

Investing in a green recovery is not a replacement for a more
comprehensive climate strategy, nor does it obviate the need for other
forms of fast acting stimulus that help consumers with health care,
education, child care, unemployment insurance, or other pressing
economic needs. Instead, a green recovery program is a powerful
complement to a larger stimulus effort that is strategically targeted to
steer the economy where we need to go over the long term. Such a plan
represents an opportunity to make a significant down payment on the sort
of economic activity that will be required to fundamentally transition
our economy away from carbon-intensive and imported energy sources, and
to begin the process in earnest of moving toward more efficient,
domestic, and renewable energy as a solution to global warming.

In addition to the recent report on Green Recovery, the Center for
American Progress has outlined a critical path for the long-term
transition to an economy that seriously takes on the challenge of
advancing climate solutions. The CAP report "Capturing the Energy
Opportunity: Creating a Low-Carbon Economy" [^9] identifies 10 steps to
a low-carbon economy that will be critical to moving our country toward
reliance on low-carbon energy. This strategy involves a mix of direct
investment, smart regulation, and administrative solutions. The
near-term investments outlined in the Green Recovery program are wholly
consistent with this longer-term vision for change.

Given the magnitude of coming challenges in building a vibrant,
competitive, and low-carbon economy, it is essential that Congress, as
the guardian of public trust resources, seeks to make any short-term
investments in stimulus with an eye toward coming long-term public
challenges. In addition, our research with the University of
Massachusetts shows that as well as providing long-term benefits, a
Green Recovery is good economic policy because it provides more jobs and
more good jobs for the American people. As such, a green recovery
represents good government by anticipating challenges and investing in
healthier communities, a more robust economy, and a safer world.

Thank you for your leadership on these pressing issues facing the U.S.
economy.

*In addition to Bracken Hendricks, Michael Ettlinger, Will Straw, and
Benjamin Goldstein contributed to this testimony on behalf of the Center
for American Progress Action Fund.*

[^1]: Paul Krugman, "Stimulus math (wonkish)," "The Conscience of a
    Liberal," November 10, 2008, available at
    [http://krugman.blogs.nytimes](http://krugman.blogs.nytimes/).com/2008/11/10/stimulus-math-wonkish/.

[^2]: Brian Faler, "Democrats Set to Take on Stimulus Bill as Price
    Rises," Bloomberg.com, November 4, 2008, available at
    http://www.bloomberg.com/apps/news?pid=20601103&sid=aXUnWNKW7P5I&refer=us.

[^3]: Gene B. Sperling, Testimony before the House Energy and Commerce
    Subcommittee on Health, November 13, 2008, available at:
    http://www.americanprogressaction.org/issues/2008/sperling_testimony.html.

[^4]: [John
    Podesta](http://www.americanprogress.org/experts/PodestaJohn.html),
    [Sarah Rosen
    Wartell](http://www.americanprogress.org/experts/WartellSarahRosen.html),
    and [David
    Madland](http://www.americanprogress.org/experts/MadlandDavid.html),
    "Progressive Growth: Transforming America's Economy through Clean
    Energy, Innovation, and Opportunity." Center for American Progress,
    November 2007. Available at:
    http://www.americanprogress.org/issues/2007/11/progressive_growth.html

[^5]: Center for American Progress and the Worldwatch Institute,
    "American Energy: The Renewable Path to Energy Security" (2006)
    available at
    http://www.americanprogress.org/issues/2006/09/american_energy.html/AmericanEnergy.pdf
    (last accessed October 2007).

[^6]: American Council for an Energy Efficient Economy, data supplied by
    Dr. John Laitner, September 2008.

[^7]: Robert Pollin, Heidi Garrett-Peltier, James Heintz, and Helen
    Scharber, "Green Recovery" (Washington: Center for American
    Progress, 2008), available at
    http://www.americanprogress.org/issues/2008/09/pdf/green_recovery.pdf

[^8]: Bracken Hendricks and Benjamin Goldstein, "A Strategy for Green
    Recovery: Stimulating the Economy Today by Rebuilding for Future
    Prosperity," Center for American Progress Action Fund, November 10,
    2008, available at
    [http://www](http://www/).americanprogressaction.org/issues/2008/pdf/green_recovery_memo.pdf

[^9]: Report available at:
    http://www.americanprogress.org/issues/2007/11/energy_chapter.html