The Obama administration’s controversial green loans program has raked in $810 million in interest repayments, earning praise from left-wing pundits and environmentalists who argued the program is on track to make money for taxpayers.
A closer look at a recent Department of Energy financial report, however, suggests liberals may be sounding the trumpet a little too soon. One prominent economist notes that, if you include government borrowing costs to finance the loans, it puts “taxpayer losses in the hundreds of millions of dollars.”
According to the Energy Department, it is on track to earn more than $5 billion in total interest payments. Already, the DOE says it’s raked in $810 million in interest payments, which now outweigh the $780 million in estimated losses the loan program is expected to incur.
Sounds good, but a tiny footnote in the DOE’s report casts some doubt on the overall profitability of the green loan program, which has so far funneled more than $30 billion to finance renewable energy and alternative vehicle projects.
The DOE did not factor in borrowing costs incurred by the Department of Treasury in financing the green loans. This means taxpayers are likely seeing a loss on government-backed green loans, according to Urban Institute economist Donald Marron.
“In other words, DOE reports gross interest received, not the net interest taxpayers have earned after subtracting Treasury borrowing costs,” writes Marron, who previously served on the President’s Council of Economic Advisers. “But when we account for Treasury borrowing costs, taxpayers are actually well behind.”
“DOE loans are typically made at small, sometimes zero, spreads above Treasury rates,” writes Marron. “So a large portion of DOE’s ‘interest earned’ must have been offset by borrowing costs. That puts taxpayer losses in the hundreds of millions of dollars.”
Marron’s view is in sharp contrast to the way the green loan programs’ reported income were trumpeted by some media outlets. The Washington Post’s Wonkblog ran with the headline, “Remember Solyndra? Those loans are making money”– referring to the solar company that failed after getting $535 million in DOE loan guarantees.
Liberal news watchdog Media Matters exclaimed that “Solyndra Scandal-Mongering Hasn’t Stopped The Energy Dept’s Loan Program From Turning A Profit”– even though the DOE has never claimed its green loans are turning a profit.
“‘Scandalous’ Solyndra Program Actually Earned Taxpayers A $5 Billion Profit,” echoed the liberal blog ThinkProgress.
The DOE’s green loan program has spent more than $30 billion funding green energy projects and alternative vehicle technology. The program only became controversial after the failure of the solar panel maker Solyndra in 2011, despite the company receiving $535 million in federal support.
Solyndra’s failure was followed by other companies, including Abound Solar in 2012, which got a $400 million DOE loan guarantee, and Fisker Automotive, which got a $529 million loan guarantee from the Obama administration.
Republicans have since used Solyndra as an example of why the government should not be funneling money to risky green energy loans. Democrats and left-wing groups, however, have contended that while there have been some losses, the loan program overall has been working well.
The DOE’s latest report on the finances of its green energy loan program have supporters once again contending the program will make a profit for taxpayers.
But even the Energy Department has downplayed claims it’s making a profit in the wake of its positive report, saying its green loan program was not even meant to make a profit.
“Congress established these programs to accelerate the construction of innovative clean energy projects and advanced vehicle manufacturing facilities in the U.S. in order to advance our clean energy future, create economic opportunities, and address the threat of climate change– not to make a profit,” Energy Department spokeswoman Dawn Selak told The Daily Caller News Foundation.
“An important indicator of the program’s success is whether borrowers are repaying loan principal and interest,” Selak said. “Based on those criteria, the report shows that the department is making prudent investments and our portfolio is strong.”
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