Part one of a two-part series.
“I promise you if I’m elected president, you’re going to see the single most important thing that changes America. We’re gonna cure cancer.” President Biden, June 2019
In business, decisions are made based on the potential return on investment. Government doesn’t work that way.
While decisions made by U.S. politicians and bureaucrats should be based on what’s best for America, they are more often based on special interests and the need to keep donors donating. There’s a lot of virtue signaling and plenty of corruption (even socialist Senator Bernie Sanders is a multi-millionaire).
As a result, important issues are ignored and the wrong issues receive attention. Most flagrantly, the U.S. Congress and president pay little attention to the national debt, which is approaching $30 trillion, and rising inflation, which most effects low-income Americans.
In fact, the Federal Reserve Board’s zero interest rate policy (ZIRP) and profligate spending by the Biden Administration and Congress may be the main causes of today’s inflation. Pandemic-related supply chain issues are, of course, to blame as well, but they were largely caused by government regulation.
Government spending adds to the national debt and is inflationary, yet the Democratic Party’s focus in recent months has been on passing Build Back Better, which has an estimated cost of $1.63 trillion. Once accounting gimmicks are removed, the real cost is about $4.6 trillion – and that’s the trimmed down version. Raising taxes while paying for more entitlements is supposed to help the economy somehow and control inflation. That’s about as believable as President Biden’s claim that it will cost zero dollars.
Changing the Political Climate
Much of the focus of Build Back Better is on climate change. Build Back Better allocates $555 billion toward “tax credits, grants and other policies aimed at curbing greenhouse gas emissions that are fueling climate change,” according to The Washington Post.
President Biden has made climate change the defining issue of his presidency. After all, everyone cares about the environment. President Biden brought America back into the Paris Accord and he tried (but failed) to pass his climate change plan as a lead-in to the COP 26 climate talks in Glasgow, Scotland.
Having declared climate change an “existential threat,” President Biden is seeking to provide tax breaks, subsidies and other incentives to end reliance on fossil fuels. He is also taking action to curtail production of oil and natural gas. For example, President Biden shut down the Keystone pipeline and sought to halt drilling on federal land.
The Biden Administration also wants the Federal Reserve Board – and the entire financial system – to consider climate change in all of its decisions, given the potential financial risk that climate change poses. In other words, as inflation soars, the Fed is seeking to add the cost of managing climate risk to the financial system.
The $1.9 trillion American Rescue Plan, the recently passed $1 trillion infrastructure legislation and the proposed Build Back Better plan each include environmental initiatives, mostly focusing on climate change.
The National Resource Defense Council noted that the American Rescue Plan included $30 billion for mass transit improvements and $350 billion to support state and local governments, including “protecting air and water quality, enforcing limits on smog and tailpipe emissions, and implementing climate-friendly energy efficiency programs, among other functions,” as well as water and sewer system upgrades.
The new infrastructure deal includes $66 billion to modernize mass transit, more than $65 billion to update the electric grid for clean energy transmission, $55 billion to expand access to clean drinking water, more than $50 billion to help communities protect against the impact of climate change, $21 billion to clean polluted sites, $7.5 billion to build out a national network of electric vehicle (EV) chargers, and more than $5 billion for school districts to purchase low-emission and no-emission buses. It also includes $25 billion for airports and $17 billion for shipping ports “to address repair and maintenance backlogs, reduce congestion and emissions near ports and airports, and drive electrification and other low-carbon technologies.”
Build Back Better would provide consumers with a $12,500 tax credit if they purchase an EV built by union workers (see special interests, above) and an $8,000 credit for a vehicle produced by non-union workers (sorry, Elon). Other rebates and credits include enhancement and expansion of existing home energy and efficiency tax credits and creation of a new “electrification-focused rebate program.” It would cut the cost of installing solar panels by about 30%.
Build Back Better would also advance “environmental justice” through a new Clean Energy and Sustainability Accelerator to invest in projects around the country and a Civilian Climate Corps with over 300,000 members “that look like America. This diverse new workforce will conserve our public lands, bolster community resilience, and address the changing climate, all while putting good-paying union jobs within reach for more Americans.”
Every shade of green is funded, with money for coastal restoration, forest management, soil conservation and more. The Wall Street Journal calls the green expenditures “the greatest corporate welfare program in history.”
Yet President Biden is regularly criticized by progressives in his own party for not doing enough to fight climate change.
Climate Change ROI
Many agree that climate change is an important issue, but what will (or would) the return be on these investments? Not much, we’re guessing.
Keep in mind that one country can do little to prevent climate change. China, India, Africa and scores of developing countries are not about to put aside their development to stop climate change.
The government’s history of green investments should also cause some concern. Most famously, the government’s investment of $571 million in Solyndra with funds from the 2009 American Recovery and Reinvestment Act was a complete bust. But there are plenty of other examples of companies that wasted taxpayer dollars, including Abound Solar ($401 million), Calisolar ($280 million), Fiske Automotive ($193 million), A123 Systems ($132 million) and ABB, Inc. ($12.6 million).
Other green initiatives provide little benefit for the cost.
Bjorn Lomborg, president of the Copenhagen Consensus, noted that President Biden’s initial $2 trillion climate change plan proposed to retrofit millions of homes with green technology for hundreds of billions of dollars, even though “the largest U.S. study of 30,000 retrofitted homes shows that costs are twice as high as benefits.”
Lomborg also called the electric vehicle tax credit “one of the costliest ways to cut emissions.”
Some environmental initiatives may even be harmful to the environment. Recall, for example, that environmentalists virtually killed the U.S. nuclear power industry, even though nuclear power is clean and does not affect the climate.
Environmentalists have also stopped the construction of numerous pipelines, even though pipelines are less likely to cause environmental damage than transporting oil by rail or shipping it from another country.
While the Biden Administration seems intent on having an EV in every American garage, their environmental benefit is questionable. Note that electricity is the primary source of pollution in the U.S.
“If the source of energy to power these cars doesn’t come from solar panels, wind turbines or even nuclear or hydroelectric, their CO2 emissions will be much higher,” You Matter writes of electric cars (ECs). “For instance, if the electricity used to charge cars comes from the burning of fossil fuels, it doesn’t matter if the EC are not polluting while being driven, as this pollution was already released in some distant power plant.”
Another inconvenient truth is that electric cars run on lithium-ion batteries, which harm the environment during mining and manufacturing. And while almost all conventional automobile batteries are recycled, lithium-ion batteries typically are not.
“Just to build each car battery – weighing upwards of 500 kilograms (1,100 pounds) in size for sport-utility vehicles – would emit up to 74% more C02 than producing an efficient conventional car if it’s made in a factory powered by fossil fuels in a place like Germany,” Industry Week reported.