In bland bureaucratise, three top advisers to President Obama briefed him on thorny problems with a major green jobs program in the economic stimulus law, confessing that billions of dollars in money supposed to already be creating jobs was stuck.
Worse, the money that had been spent might be subsidizing projects “that would have happened anyway and thus fail to advance [Obama’s] clean energy agenda.” In other words, taxpayer dollars down the drain.
The Oct. 25 “Briefing Memo” is one of scores put before President Obama on all sorts of issues, typically those which could not be resolved by his underlings.
But, it is one of the only such memos to escape into the wild, quickly spreading via e-mail to hundreds of Hill staffers, lobbyists and trade association heads all vying to shape Obama’s policy pick on the issue.
“All of the sudden, it was everywhere,” said one energy industry lobbyist. “I think I had five people send me this yesterday.”
The memo was reported first by the Wall Street Journal, and reverberated in the world of environmental politics, but has largely gone unnoticed otherwise. It is important in offering a rare glimpse into the inner-workings of the top echelon of Obama’s White House.
Authored by Carol Browner, Obama’s climate change “czar,” Larry Summers, director of the National Economic Council, and Ron Klain, chief of staff to Vice President Joe Biden, the memo was seen by many on Capitol Hill as throwing the renewable loan guarantee program under the bus, suggesting in its tone the money should be “reprogrammed” – diverted – to a rival cash grant program to sweep the money out the door more quickly.
Obama chose another option, to “streamline and accelerate.” Essentially, Obama told the Departments of Energy and Treasury to work harder, avoiding any of the major changes offered to remedy the underlying problems.
“We are taking steps to streamline the 1705 process,” said Obama spokesman Bill Burton, echoing language in one of the memo’s options.
At issue is a government loan guarantee program that eliminates the risk for banks and other large creditors of renewable energy projects on the technological frontier. The program works by paying the cost of the loans with taxpayer funds if a project defaults. It is intended to address a risk-adverse credit market seen to be hampering progress in clean energy.
The 2,600 word White House memo on the program is bewildering in its detail, describing the megawatts in electricity output from projects funded by the program (80), cost in providing back-up electricity for intermittent wind power projects (2-4 cents per kilowatt hour) and number of federal employees working on the program in question (100-200 “FTEs” or full-time or equivalent employees).
“This is a President who really likes to dive into the details,” said one administration official, noting Obama’s famed mental acuity. While the details are all important, the memo seems improbably dense for its genre.
The memo is dismissive of key lawmakers on Capitol Hill. In discussing one option that would cut against the legislative priorities of a top Democrat in the Senate, Chairman of the Energy Committee, Jeff Bingaman of New Mexico, the memo says Bingaman would oppose because he “views [it] as ‘his’ program.”
For Bingaman, who has invested hard work crafting a program he sees as an important catalyst of technological advances that could transform the industry sector, seeing his views cut down to a petty defense of “his” policy fiefdom was obviously jarring.
His spokesman, Bill Wicker, said the senator was not pleased. “They keep taking money out of the pot and not putting it back,” Wicker said, referring of another instance where the Obama White House “reprogrammed” billions of dollars out of the fund. “It has really annoyed Chairman Bingaman.”
The memo shows that despite grand public pronouncements on Obama’s green jobs agenda, the reality of mammoth bureaucracies shoveling $800 billion out the door in two years is decidedly more messy.
“Thanks to the Recovery Act, we are creating the clean energy jobs of the future while positioning the U.S. as a world leader in the production of renewable energy,” said Department of Energy Secretary Steven Chu in an Oct. 8 press release trumpeting the funding of the Shepherds Flat wind farm in Oregon.
Browner, Summers and Klain offer a different take on that project, which will be the largest wind farm in the country when built.
The project is “double dipping” in government subsidies, the memo says, enjoying a federal cash grant, state tax credits, lower federal taxes, a loan guarantee, and higher revenue stemming from a state mandate on renewable energy.
Total taxpayer tab: over $1.2 billion – or $35.4 million for each of the 35 permanent jobs the project will create.
“It makes the loan guarantee program look terrible,” said Guy Martin, a veteran environmental lawyer with stints at top-ranking positions at the Interior Department and on Capitol Hill.
(Supporters of the loan guarantee program, and General Electric, which is providing the wind turbines for the Shepherds Flat project, disagree with how the total subsidy amount is calculated.)
Meanwhile, 631 days after Obama signed the economic stimulus bill into law, the Shepherds Flat project is one of only four projects which have received their loan guarantees. Four other projects are nearly in place.
For a $6 billion chunk of green jobs cash in legislation intended to quickly rev up job creation, the lack of progress is stark. However, the memo warns of only these “near-term risks”: that a statutory sunset will expire before the Energy Department can spend the money, that the Obama White House could face “criticism” for slow implementation, and that the money will be wasted.
Behind the gridlock is bureaucratic warfare between the Energy Department on the one hand and the White House Office of Management (OMB) and Budget and Treasury Department on the other.
OMB and the Treasury Department review the projects after the Energy Department, the latter of which “notes the back and forth consumes a significant amount of staff time, thereby making it challenging to move several transactions forward simultaneously,” according to the memo.
Energy’s solution? Cut OMB and Treasury out. The Energy Department “would prefer to eliminate the deal-by-deal review and instead have OMB and Treasury” simply sign-off on the final product.
Treasury and OMB’s solution? Let us write the rules, making Energy apply OMB and Treasury’s strict numeric criteria to the projects to ensure economic integrity.
Option three, presumably the Browner-Summers-Klain choice: divert the money to cash grants, ensuring the money is shoveled out the door more quickly, but at a great cost to effectiveness of the program. With loan guarantees, the government only pays on projects that default. Otherwise, there’s no real cost to the taxpayer. But with grants the money is spent and gone forever.
Option four: a “middle ground” to “streamline and accelerate.” “Create an expedited review process,” the memo offers.
A top-ranking former Bush administration official scoffed at the choice. “It’s a cop-out,” the source said, arguing it avoids dealing with the underlying problems identified by the memo.
In the end, that’s apparently what Obama decided.
“Our focus…is to continue our commitment to make the DOE loan program work effectively,” said Obama spokesman Burton. “We are taking steps to streamline the 1705 process while still protecting taxpayers who, ultimately, are the ones investing in these projects.”
As the memo notes, Sept. 30, 2011 is midnight at Cinderella’s ball for the money, which faces a deadline in the stimulus law. Time will tell if Obama’s call was adequate.