by Bill Clinton
Secretary of the Army John McHugh, a former Republican congressman from New York, and Secretary of the Navy Ray Mabus, a former Democratic governor of Mississippi, have been especially active in the search to save energy and get more of it from renewable resources. McHugh has set up a task force with a mandate to determine how the army can get 25 percent of its energy from renewable sources by 2025, with an investment of more than $7 billion in a clean-energy infrastructure.
There are some real opportunities to save money and enhance security. For example, shipping conventional fuel into high-temperature combat zones just for air-conditioning costs the Pentagon billions of dollars a year in fuel, transportation, security, and medevac expenses. For Afghanistan, fuel is shipped into Karachi, Pakistan, then driven eight hundred miles on terrible roads for more than two weeks through dangerous territory. A lot of U.S. soldiers have been killed in those and other fuel convoys. If our troops had had bases equipped with solar panels to run the air conditioners and keep the lights on, it could have saved money and lives and driven continued price reductions and technology improvements beneficial to the entire economy. Solar cells, a few backup generators with a small amount of fuel to run them, and relatively inexpensive batteries that store solar power for cloudy days could have made a big difference in Afghanistan and Iraq and still can in many less hazardous places where our troops are deployed, including at forts in the United States. In the future, even if we rely more on our special operations forces like those who got Osama bin Laden, we’ll still be called upon to help train security forces in other countries, we’ll still have bases across the world, and we’ll still need the military to develop and test new green technologies that will ultimately lead to similar money-saving, job-creating advances in the civilian economy.
THERE ARE AT LEAST THREE OTHER THINGS we could do in the energy area that would help the economy.
21. Speed up the issuance of new energy efficiency rules for the most common household appliances. President Obama asked the Energy Department to do this in February 2009. In the past, every time we have raised appliance standards, it’s increased employment and cut utility bills. This round is estimated to save consumers $15 billion a year or more on their utility bills for the next three decades.
22. Spend the rest of the rapid-rail money, but spend it where it will do the most good. The Energy Department planned to finance thirteen high-speed-rail corridors with $8 billion. After the voters elected antigovernment governors in Florida, Ohio, and Wisconsin, those states returned the funds. Now other states want the money. Conventional politics would argue for spreading the money around, but I think it would be best to prove the worth of high-speed rail with adequate investments in heavily populated areas where there is a lot of highway and airport congestion. Our fastest train, Amtrak’s Acela, which runs from Washington to New York to Boston and back, travels about 100 mph slower than the fast trains that connect Japan’s most populous cities. If we build competitive, safe networks in crowded areas, passengers tired of traffic delays, plane delays, and commutes to and from airports in heavy traffic would flock to them. That would build support for expanding high-speed rail to other parts of the country and give us a chance to work through any problems with the new systems.
23. Support state and local innovations and encourage their adoption across the country. My foundation is helping Los Angeles to install 140,000 superefficient LED streetlights that will save the city $10 million a year in costs once the bulbs are paid for. Los Angeles is also reducing pollution at its ports with a “clean trucks” program that has increased sales of more modern, efficient trucks, but the city has been taken to court by the American Trucking Associations, which is asserting the right of companies to deliver cargo to the port in older, more polluting trucks. As noted earlier in this section, California passed legislation to allow building retrofits to be paid off through a line item on the owner’s property tax bill for up to twenty years, but Fannie Mae and Freddie Mac are blocking federal legislation on the theory that the payment device is an encumbrance that would impact the value of mortgages it holds. If we put more people to work making houses more energy efficient, their value would increase, and so would the value of Fannie Mae’s mortgage portfolio. Also, there really is no downside risk. Because the annual assessment on the property tax bill is set at a level equal to or less than the home-owner’s savings on utility bills, it won’t be harder to make the mortgage payments, so the risk of default won’t rise.
The founding fathers saw states as laboratories of democracy. Today our cities are, too. Both states and cities are able to innovate in many areas that can ultimately benefit the entire nation. Energy efficiency is the perfect laboratory. It creates jobs, lowers costs, saves energy, and improves the environment. We should be clearing roadblocks to innovation, not erecting them.
24. To speed up the process, we should pick one or two U.S. states or territories and work to make them completely energy independent. The Energy Department could take competitive proposals and select one or two, three at most, for extra help in maximizing their capacity to produce and consume energy. Nevada could do it, with its enormous solar and wind capacity. Making the effort would create jobs and lower its high unemployment and foreclosure rates. Puerto Rico could do it. Electric rates in the Caribbean are the highest in the world, because the base fuel is all imported. That hurts Puerto Rico’s manufacturing sector and undercuts the value of the tax incentives Congress has provided to develop jobs there.
The one area where I disagree with the administration on energy policy is in the provision of large loan guarantees to nuclear power. Eighteen and a half billion dollars’ worth of them have already been granted, and the administration has asked Congress for authority to issue $36 billion more.
I am not instinctively antinuclear. Arkansas has 2 of the 104 reactors that produce about 20 percent of America’s electricity at sixty-five sites. I believe they’re the two oldest continuously operating nuclear plants in the United States and they’ve worked well. I don’t favor a rapid shutdown of the safely operating plants, as Germany and Japan have decided to do. But before we build more, we need to consider the relative economic and energy benefits of other options. We still haven’t resolved the nuclear waste issues, and the Japanese tsunami and earthquake showed that power plants, like all other structures, are vulnerable to nature’s forces. The industry is already heavily subsidized, yet new nuclear plants are basically uninsurable and so expensive to build that the estimated cost of power from them is twenty-five to thirty cents a kilowatt hour, three times today’s rates and twice as high as solar power, which is dropping in price as new capacity comes on line and new technology improves productivity.
Finally, nuclear isn’t much of a job creator compared with other clean fuel sources. A recent study by the Berkeley Renewable and Appropriate Energy Laboratory found that adopting a strategy that combines aggressive efficiency measures with generating 30 percent of our electricity from renewables would create eight times as many jobs as increasing our generating capacity the same amount by raising nuclear generation from 20 to 25 percent of our total, combined with capturing carbon from coal plants that provide 10 percent of our capacity. So I favor going for the options that offer the best combination of energy, environmental, and employment gains.
The economic benefits of clean-energy production and efficiency to ordinary Americans are enormous, both in new jobs and in lower costs. Of the thirty-seven wealthier nations obligated to reach specific reductions in greenhouse-gas emissions by 2012 under the Kyoto Protocol, four—Germany, the United Kingdom, Sweden, and Denmark—have made especially impressive efforts to reduce emissions. What happened? All of them have faster job growth, more rapidly rising incomes, lower unemployment, and less income inequality than the United States. The four countries adopted different economic and energy policies, implemented by both conservative and progressive governments. What they had in common was a serious commitment to change the way they
produce and consume energy. Sweden got almost all of its reductions through greater efficiency, growing its economy more than 50 percent while reducing its carbon emissions 7 percent below 1990 levels. Germany did it by becoming the world’s number-one user of solar cells, putting up a lot of windmills, and increasing efficiency. The U.K. did it by substituting natural gas for coal, developing its offshore wind capacity, and promoting large-scale efficiency projects.
Denmark is an especially interesting case. The Danes generate almost 25 percent of their electricity from wind, have biomass (waste-burning) power plants, and high home efficiency standards, including triple-paned windows, more insulation, heat pumps, and solar panels. Farmers are encouraged to put up their own windmills, which they can pay off in three years with savings from lower electricity costs, then earn a 12 percent profit on energy they sell to utilities. The results? The Danish economy expanded by 75 percent with no increase in fossil fuel use. We can do all of this and more.
THE PRODUCTION AND DEVELOPMENT of clean energy leads us naturally into the final opportunity for job creation in the president’s strategy: doubling exports.
It’s impossible to overstate the importance of doing this if we want to increase shared prosperity and reduce inequality. In early March 2011, two professors at New York University’s Stern School of Business, the Nobel Prize winner Michael Spence and his colleague Sandile Hlatshwayo, released a fascinating study, The Evolving Structure of the American Economy and the Employment Challenge. They found that almost all our job growth over the last several years had come in “non-tradable” areas like government, health care, and other services like real estate and food services, while most of our income growth had come in “tradable” areas like high-end manufacturing, where productivity increased more in the jobs big companies kept in the United States, as they moved more of the less productive jobs offshore. Meanwhile, slower productivity growth in the non-tradable sector, and more competition for available jobs, kept wages and benefits from growing or even keeping up with inflation. The pattern has been reinforced by the recession. In 2010, low-wage jobs increased 3.2 percent, mid-wage jobs increased 1.2 percent, and high-wage jobs decreased 1.2 percent.
The only way to get out of this trap, according to Spence and Hlatshwayo, is to increase the size of the tradable sector of our economy. They don’t argue for building trade barriers. We’re only 4 percent of the world’s population and still earn about a fifth of its annual income. We have to sell something to somebody else. There are more potential customers than ever. In 2009, the combined GDPs of Brazil, India, and China exceeded America’s GDP for the first time.
More important for the subject of this book, Spence and Hlatshwayo also debunk the antigovernment myth that we can get out of this fix with lower taxes on the “job creators” and lower wages for workers. Instead, they say we need a national economic strategy. We have to change the incentives to make companies more willing to invest in making America more productive than in outsourcing more jobs.
To double exports, the U.S. strategy should include: building on our strengths, selling more of what we know people already want to buy; identifying products or services needed in growing markets that we can provide; making sure we have an intense, well-organized effort to promote what we’re trying to sell to people who can buy it; providing adequate capital for U.S. exports and the overseas investments necessary to support them; getting small and medium-sized American businesses into export markets by helping them join together or partner with large U.S. companies to cut the costs and time delays of entering new markets; training men and women to do export-related work; and making sure we’re playing by the same rules as our major competitors.
This is a pretty fair description of the Obama administration’s National Export Initiative. It has already expanded state export-promotion programs, given more resources and authority to the Export-Import Bank, and increased technical assistance and the availability of credit to small businesses that want to export.
To make this strategy work, we need to focus on three points. First, government policy matters a lot. All major exporting countries have aggressive public-private partnerships in which the governments promote the interests of their businesses and workers. If they do a better job than we do, they win. Second, the details matter a lot. The United States should concentrate on the markets, products, and services most likely to bring success. Third, whatever the rules are, they have to mean the same thing for all the major competitors. Reciprocity is important. The playing field is rarely perfectly level, so we have to be as willing as other countries to advance the interests of our own people.
Remember the story I told earlier about the federal government telling Los Angeles that in choosing between two foreign companies that wanted to supply the train cars for its rapid-rail network, the city couldn’t give preference to the company that would make the cars in the United States over the one that would import them? That’s because we’re part of the World Trade Organization’s Government Procurement Agreement, in which the signatories promise not to discriminate against each other’s companies in bidding on government contracts. But what does that mean? Do we seriously think our competitors wouldn’t find a way to distinguish between two U.S. companies competing to sell them the same products when one company was willing to create jobs in their nation and the other one wasn’t?
HERE ARE A FEW SPECIFIC IDEAS that fit within the strategy.
25. Concentrate on high-end manufacturing and getting smaller companies into exports. This is what Germany does. It’s one reason the Germans have penetrated China’s growing market better than we have. The German unemployment rate is about 2 percent lower than ours, and Germany is the number-one exporter in the world. Exports account for more than 40 percent of its GDP, compared with 11 percent for the United States. We’ve got to do a better job. Taking a page from the German playbook, North Carolina has a good comprehensive program to get more small businesses into exporting, and Georgia has had some success in convincing American companies to move good manufacturing jobs back to the United States. We should replicate their successes all over the country.
26. Negotiate long-term contracts to sell food to China, Saudi Arabia, and other nations facing food shortages. Feeding the world’s growing population is a huge challenge and an opportunity. China’s ability to feed itself has been reduced by expanding deserts and dropping water levels. More water and arable land are being lost every year to expanding cities, factories, and roads. The United States is the world’s largest grain exporter, selling about ninety million tons a year. The end of the corn ethanol subsidy will free up more land to plant food for export, principally wheat and soybeans.
In the past few years, China, Saudi Arabia, and other countries with lots of money and limited capacity to feed themselves have bought or leased land in Africa and Asia to produce food, with minimal results for them and for the countries with the land. Foreign owners are far more likely than domestic ones to disrupt traditional farmers and to overutilize land and water, thinking they can always go somewhere else when the land plays out or there’s no more water for irrigation.
A far better course is to build the capacity of developing countries to feed themselves, and increase the incomes of their farmers, with sustainable practices. Some of them will also become exporters but in a way that enhances their self-sufficiency and prosperity.
If we are willing to negotiate longer-term contracts to increase supplies of vital grains to China and Saudi Arabia at prices that would generate a good but not exorbitant income to our farmers, it would hold down big destabilizing spikes in food prices and buy the United States the time we need to reduce our reliance on China to buy our debt securities and on Saudi Arabia to keep imported oil flowing at affordable prices.
27. Pass the pending trade agreements with South Korea, Colombia, and Panama. We don’t have a trade deficit in goods and services with the countries with which we have trade agreements. That’s because the negoti
ations are tough and thorough, designed to meet both sides’ needs, and supported by enforcement mechanisms. Our trade deficit is largely with the countries we buy oil from and the countries we borrow lots of money from, China and Japan.
28. Enforce trade laws. We lost manufacturing jobs in every one of the eight years after I left office. One of the reasons is that enforcement of our trade laws dropped sharply. Contrary to popular belief, the World Trade Organization and our trade agreements do not require unilateral disarmament. They’re designed to increase the volume of two-way trade on terms that are mutually beneficial. My administration negotiated three hundred trade agreements, but we enforced them, too. Enforcement dropped so much in the last decade because we borrowed more and more money from the countries that had big trade surpluses with us, especially China and Japan, to pay for government spending. Since they are now our bankers, it’s hard to be tough on their unfair trading practices. This happened because we abandoned the path of balanced budgets ten years ago, choosing instead large tax cuts especially for higher-income people like me, along with two wars and the senior citizens’ drug benefit. In the history of our republic, it’s the first time we ever cut taxes while going to war.
29. Concentrate on increasing the export potential of cities, not just states. In 2010, the Brookings Institution issued a report, Export Nation, showing that our hundred largest metropolitan areas, already responsible for producing three-quarters of our GDP with two-thirds of our people, are best positioned to lead the drive to increase U.S. exports. In a nation where 11 percent of our GDP is in exports, even medium-sized cities, like Portland, Oregon, Youngstown, Ohio, and Wichita, Kansas, earn 15 percent or more of their income from trade. We need to get even more businesses in these areas involved in trade, by setting up centers that help smaller ones with the legal, financial, and other costs of entry, finding them trading partners in growing economies, and providing current and prospective employees with the necessary training, especially for jobs in manufacturing.