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Economists raise doubts about alternative-energy spending

By Traci Watson, USA TODAY

WASHINGTON — Prompted by public concern over the economy and energy costs, President-elect Barack Obama and Democrats in control of Congress are touting a two-for-one solution: spending billions of dollars on alternative-energy programs to create jobs and help lift the nation out of recession.

But some economists, such as Vincent Reinhart, a former Federal Reserve Board official now at the American Enterprise Institute, caution that funding energy projects could help the economy less than other forms of spending.

Even Obama's new budget chief, Peter Orszag, has expressed doubts. In his previous job as head of the Congressional Budget Office, Orszag wrote a report in January saying that some forms of alternative-energy spending "are totally impractical" for stimulating the economy and others "could end up making the economic situation worse" by adding to the federal debt.

Obama transition spokesman Nick Shapiro declined to comment on Orszag's report.

House Speaker Nancy Pelosi, D-Calif., said Monday that she hopes to have a stimulus bill ready for Obama's signature when he takes office Jan. 20.

At a meeting Tuesday on energy with business and environment groups, Sen. Majority Leader Harry Reid, D-Nev., said an economic stimulus bill now being crafted could devote up to $100 billion to alternative-energy spending.

Obama's transition team has not said how much of the stimulus package will be devoted to green energy, or which projects will be proposed.

In a radio address last month, Obama promised that in the next two years, he'll "put people back to work" building wind farms, solar panels and energy-efficient cars. An effort to weatherize homes is another option, Carol Browner, a former U.S. Environmental Protection Agency chief and an adviser to the Obama transition team, said Monday.

The specifics of the spending are crucial. Orszag's report said that grants to develop alternative-energy sources — which were one part of a Democratic stimulus package blocked by Republicans this fall — won't help spur the economy. And big public-works projects, such as those to build power plants, take too long to get started to provide a quick economic jolt, Orszag wrote.

Some forms of energy spending create a very limited number of jobs. Research money, for example, "is a transfer (of funds) to Ph.D. students," Reinhart said.

Increases in food stamps and unemployment insurance are "the very best things to do" to see an impact in the next couple months, said Robert Pollin of the University of Massachusetts-Amherst, who has studied so-called green jobs.

All the same, Pollin argues that the side benefits of a green stimulus make it worthwhile.

And alternative-energy projects that would be too slow to be helpful in a short recession could pay off in a deep, prolonged recession. When Orszag wrote his report, most economists thought the downturn would not be as grave as it has become.

Lawmakers will vet proposals "to make sure (they're) a match for the current economic situation," said Rep. George Miller, D-Calif., who conducted an October hearing on the best way to create jobs.

"Unfortunately," Miller added, "this economic downturn looks like it's going to be very persistent and long-lasting."

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