An Investor's Business Daily article claimed that nine Department of Energy loan guarantees are going create jobs at a cost of $23 million per job, and the right-wing media have run with that claim. However, this figure assumes that all the loans will default and that the government will have to cover every penny of their cost. Economists have called these types of calculations “bogus” and “bad math.”
IBD: Federal Loan Guarantees Will Cost “Nearly $23 Million Per Job”
IBD: Number Is “A Drop In The Bucket Toward The Five Million Green Jobs President Obama Promised As A Candidate.” From a September 27 Investor's Business Daily article by Sean Higgins:
The Department of Energy is set this week to announce whether nine federal loan guarantees amounting to $6.5 billion for green energy projects will get final approval.
The number of full-time, permanent jobs they would create? According to the DOE's own figures, a grand total of 283. That is nearly $23 million per job.
It's also a drop in the bucket toward the five million green jobs President Obama promised as a candidate in 2008. [Investor's Business Daily, 9/27/11]
IBD “Update” Reports That DOE Approved Two Loan Guarantees At Cost Of “About $20 Million Per Permanent Job.” From the IBD article:
Update: The Energy Department on Wednesday approved federal loan guarantees for two green energy projects totaling more than $1 billion. It approved $337 million for a Mesquite Solar project in Arizona and $737 million for a Solar Reserve project in Nevada. The projects would create a total of 52-55 permanent jobs, according to earlier DOE figures and company statements. That's about $20 million per permanent job. [Investor's Business Daily, 9/27/11]
Right-Wing Media Echo IBD Report
Limbaugh: IBD Article Shows Green Jobs Are A “Slush Fund.” As part of his assertion that federal money to facilitate “this solar energy stuff” is “a series of Democrat party slush funds,” Rush Limbaugh noted that “Investors.com, the old Investor's Business Daily, has their own version of the story: 'Department of Energy mulls green energy loans at $23 million per job.' ” [Premiere Radio Networks, The Rush Limbaugh Show, 9/29/11]
Hot Air Uses Article To Call For Ending “All Subsidies And Favors For Energy Production.” Hot Air blogger Ed Morrissey linked to the IBD article, commenting, “We should end all subsidies and favors for energy production -- and many of the barriers to it as well -- and let the market and investors demonstrate what technologies work best to provide the energy security our economy requires.” [Hot Air, 9/28/11]
Fox Nation Links To IBD Report. Fox Nation linked to the IBD report under the headline "$23 Million Per 'Green Job.' " [Fox Nation, 9/28/11]
NRO Cites IBD Article To Claim Obama Jobs Act Is A “Bargain” By Comparison. A post by Mark Stiles at National Review Online's blog The Corner claimed that President Obama's American Jobs Act “works out to a little more than $1.6 million for every job 'kept or added.' ” Linking to the IBD article, Stiles added, “On the plus side, that's a bargain compared to the $23 million-per-job the Department of Energy has 'invested' as part of the loans program that helped finance Solyndra.” [National Review Online, The Corner, 9/28/11]
JunkScience.com: “What Is The Word For 'Fiasco Times 4'?” JunkScience.com linked to the IBD article, adding, “We called Obama's $5 million jobs a 'fiasco.' What is the word for 'fiasco times 4'?” [JunkScience.com, 9/28/11]
IBD's “Bad Math” Baselessly Assumes All Loan Guarantees Will Default
Government Responsible For Loan If Borrower Defaults. Investopedia defines a guaranteed loan this way: “A loan guaranteed by a third party in the event that the borrower defaults. The loan is quite often guaranteed by a government agency which will purchase the debt from the lending financial institution and take on responsibility for the loan.” [Investopedia.com, accessed 9/29/11]
National Journal: Congress Set Aside $2.4 Billion To Cover Bad Loans. National Journal reported: “Under the Recovery Act that Obama signed in February 2009, Congress appropriated $6 billion for the Energy Department to provide insurance in case a renewable-energy company receiving a loan guarantee failed. The figure was later reduced to $2.4 billion.” [National Journal, 9/21/11]
Economist Jared Bernstein: Dividing Loan Guarantee Amounts By Job Numbers Is “Bad Math.” From a blog post by former White House economist Jared Bernstein, which discussed a Washington Post article that similarly promoted a cost-per-job number that came from dividing loan guarantee amounts by promised jobs:
The WaPo features a critical piece today on the job creation associated with the "$38.6 billion loan guarantee program" that was part of the Recovery Act.
On the front page of their website, thepiece was summarized thusly:
“U.S. government says a loan guarantee program that has created 3,545 new permanent jobs is on track to save or create 60,000 jobs. If goal is reached, it would work out to about $640,000 in loan guarantees for each job.”
OK, that's bad math. The piece is justly critical in other ways, but that part's way off. They've divided the full loan volume -- the sum of all loan amounts -- by the number of jobs. The correct numerator is the “credit subsidy” -- the amount for which tax payers will be on the hook if the loans fail.
That's likely to be well under $5 billion, which gets you into a much more reasonable neighborhood re bang-for-buck.
The article does point this out: “If the companies do well, they won't need to draw on the guarantees and won't cost the government anything.” But their emphasis on this $640K/job number assumes every loan defaults, which is implausible (the piece is partly motivated by the bankruptcy of Solyndra, a solar panel producer that received a $535 million loan from the program). [JaredBernsteinBlog.com 9/15/11]
Right-Wing Media Regularly Promote Misleading Cost-Per-Job Numbers
Wash. Post: DOE Would Spend "$640,000 In Loan Guarantees For Every Job Created Or Saved." The Post wrote that the Department of Energy's "$38.6 billion loan guarantee program" has directly created “3,545 new, permanent jobs after giving out almost half the allocated amount.” The article went on to state that if DOE's target of 60,000 jobs “is reached, it would work out to about $640,000 in loan guarantees for every job created or saved.” [The Washington Post, 9/14/11]
Conservative Media Touted Wash. Post's Misleading Number. Among those touting the Post's misleading number were Fox News' Stuart Varney and right-wing blogger Jim Hoft. [Media Matters, 9/15/11]
Fox Pushes Misleading Cost-Per-Jobs Math To Attack Jobs Bill. Fox & Friends pushed the claim that the jobs created by President Obama's jobs bill would cost $200,000 per job, with co-host Brian Kilmeade asking, “Is it worth it to get a job that's going to cost the government $200,000?” [Fox News, Fox & Friends, 9/27/11, via Media Matters]
Economist Christina Romer: Cost-Per-Job Calculation Is “Attention-Getting, But It's Misleading.” In a September 24 New York Times op-ed, Christina Romer, former chair of Obama's Council of Economic Advisers and economics professor at the University of California, Berkeley, called the claim that the jobs bill would cost $200,000 per job “attention-getting” but “misleading” because, in part, “the program wouldn't just create jobs. Consider the proposed $140 billion for roads, bridges, school repair and teachers. Jobs are, in a sense, a side benefit. What we're really getting is better infrastructure and more education for our children.” [The New York Times, 9/24/11]
Similar Claims That Stimulus Jobs Cost At Least $200,000 Have Been Called “Bogus,” “False”
Doocy Pushes “Bogus” Cost-Per-Job Math To Attack Stimulus. Fox News' Steve Doocy has repeatedly recycled the right-wing attack that the stimulus cost taxpayers between $200,000 and $278,000 per job. [Media Matters, 8/5/11]
PolitiFact Texas: Claim That “Stimulus Cost $278K Per Job” Is “False.” In a July 20 post, PolitiFact Texas rated the claim that “Obama's own economists say the stimulus cost $278K per job 'created' ” as “False.” [PolitiFact.com, 7/20/11]
Krugman Called Claim That Stimulus Would Cost $275,000 Per Job “Bogus.” In a January 25, 2009, New York Times column, Nobel Prize-winning economist Paul Krugman called the claim that the stimulus would cost $275,000 per job “bogus”:
There's the bogus talking point that the Obama plan will cost $275,000 per job created. Why is it bogus? Because it involves taking the cost of a plan that will extend over several years, creating millions of jobs each year, and dividing it by the jobs created in just one of those years. [The New York Times, 1/25/09]