A $38.6 billion loan guarantee program that the Obama administration promised would create or save 65,000 jobs has created just a few thousand jobs two years after it began, government records show.
The program — designed to jump-start the nation's clean technology industry by giving energy companies access to low-cost, government-backed loans — has directly created 3,545 new, permanent jobs after giving out almost half the allocated amount, according to Energy Department tallies.
President Obama has made "green jobs" a showcase of his recovery plan, vowing to foster new jobs, new technologies and more competitive American industries. But the loan guarantee program came under scrutiny Wednesday from Republicans and Democrats at a House oversight committee hearing about the collapse of Solyndra, a solar-panel maker whose closure could leave taxpayers on the hook for as much as $527 million.
The GOP lawmakers accused the administration of rushing approval of a guarantee of the firm's project and failing to adequately vet it. "My goodness. We should be reviewing every one of these loan guarantee" projects, said Rep. Marsha Blackburn (R-Tenn.).
Obama's efforts to create green jobs are lagging behind expectations at a time of persistently high unemployment. Many economists say that because alternative-energy projects are so expensive and slow to ramp up, they are not the most efficient way to stimulate the economy.
"There are good reasons to create green jobs, but they have more to do with green than with jobs," Princeton University economics professor and former Federal Reserve vice chairman Alan Blinder has said.
The loan guarantee program can also be unwieldy. It works like this: Companies negotiate with the Energy Department for a government loan guarantee, which means taxpayers will pay off bank loans if the project fails. Then the Office of Management and Budget must sign off on the guarantees, often changing terms.
The Energy Department says that the green-jobs program is still on track to meet its employment goals. It claims credit for saving 33,000 jobs at Ford Motor Co. — about half of the Detroit automaker's entire hourly and salaried U.S. workforce. The department says the biggest of its loan guarantees, for $5.9 billion, protected the jobs at Ford by enabling the automaker to upgrade plants in five states to build more energy-efficient vehicles. The Energy Department said the loan would "convert" the Ford jobs to "green manufacturing jobs."
Several economists said they doubt the loan program saved 33,000 jobs at Ford.
"I always take these job estimates with a big grain of salt," Josh Lerner, a Harvard Business School professor who has written about failed government efforts to stimulate targeted industries, said in an e-mail. "There tends to be a lot of fuzzy math when it comes to calculating these benefits (regardless of the party taking credit for the program)."
A Ford spokeswoman said the loans helped "transform what were primarily truck/SUV plants into flexible manufacturing plants capable of building more fuel-efficient vehicles." That flexibility is key to "helping retain the 33,000 jobs by ensuring our employees can build the fuel-efficient cars people want to drive," said Meghan Keck, who handles government relations for Ford.
Energy Department officials had vowed earlier this year to create or save more than 65,000 American jobs once its 42 projects were financed and complete. They say the program is now "on pace" to create or save roughly 60,000 jobs. (It shaved roughly 5,000 from the target after two companies turned down the department's offer of help.) The department adds that its projects have helped generate 7,391 temporary construction jobs.
"This does not include tens of thousands of indirect jobs these projects create up and down the supply chain, or the countless additional jobs that depend on America staying competitive with countries like China in the clean-energy race," department spokesman Damien LaVera said.
Renewable-energy firms say many other workers and companies have prospered by being part of the supply chain. BrightSource Energy, for example, a developer of utility-scale solar-power projects, is the recipient of a $1.6 billion loan guarantee, the second-biggest awarded so far; it says it has purchased goods in 17 states.
Still, agency projections indicate that creating jobs is a laborious process. If the 20 companies that have won loans so far deliver all the new jobs they have promised, they will hire a total of 8,050 new workers for permanent positions. Half of those 20 companies have neither created nor saved any permanent jobs yet; several won their loans only recently. Even the BrightSource project, which employs 700 construction workers now, will employ only 86 people on a permanent basis.
Obama administration officials say the jobs are high-quality and will improve the economy's productivity. In addition to the loan guarantee program, the Obama administration has targeted "green jobs" through cash grants for wind farms and weatherization grants to state agencies.
Muro said administration-supported projects "that may have been honorable investments in technology were sold as short-term job creators for political reasons," he said. "Exaggerated expectations about jobs were set."
The eventual cost of the loan guarantee program for taxpayers remains unclear. If the revised 60,000 target is reached, it would work out to about $640,000 in loan guarantees for every job created or saved. These financing guarantees were approved by Congress as part of the American Recovery and Reinvestment Act.
If the companies do well, they won't need to draw on the guarantees and won't cost the government anything. But if the companies go bankrupt, as Solyndra did, taxpayers will be on the hook. Moreover, the Treasury Department's Federal Financing Bank has been directly lending — at extremely low, subsidized rates — to companies that win Energy Department guarantees. Congress and the administration assumed a failure rate of 5 to 10 percent for the program. Solyndra represents about 3 percent of the loan guarantees made so far.
Solyndra received the Energy Department's backing and also a federal bank loan — at rates as low as 1.025 percent. It's unclear how much, if anything, the government can recover in bankruptcy proceedings, but it can pursue claims as a creditor.
Solyndra's closure prompted concerns about whether the administration made good bets in the rest of its portfolio of clean-tech projects it had helped subsidize with taxpayer-guaranteed loans. The primary investors in Solyndra were funds tied to a major Obama fundraising bundler, Tulsa oilman George Kaiser.
Although the financing of renewable-energy projects was never an ideal way to create jobs, the 2009 stimulus package gave Obama a way to get Congress to appropriate more money for renewable energy than it would have provided otherwise.
In addition to guaranteeing loans for renewable-energy projects, the Energy Department has been meting out grants from a separate, less-controversial $33.7 billion appropriation it received as part of the 2009 economic stimulus bill. So far, the department has given out $18.1 billion from that fund, ranging from $44,295 to a Swarthmore College science program to about $1.5 billion to clean up waste at the government's Savannah River nuclear site. Hundreds of millions have gone to companies trying to figure out cheaper ways to capture carbon dioxide from coal plants, a priority for coal-state lawmakers.