Recovery Act Third Quarterly Report - Supplement
THE ECONOMIC IMPACT OF THE AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009
SUPPLEMENT TO THE THIRD QUARTERLY REPORT
THE ARRA AND THE CLEAN ENERGY TRANSFORMATION
A central piece of the American Recovery and Reinvestment Act of 2009 (ARRA) is more than $90 billion in government investment and tax incentives to lay the foundation for the clean energy economy of the future. As discussed in CEA’s Second Quarterly Report on the impact of the ARRA, this investment will help create a new generation of jobs, reduce dependence on oil, enhance national security, and improve the environment.1 Ultimately, the investments could help transform the United States into a global clean energy leader.
The ARRA clean energy investments are also providing crucial stimulus to the economy. Through programs such as enhanced tax credits for homeowners who make energy-efficient improvements, funding for research into new clean energy technologies, or grants to qualifying businesses, these investments are generating economic activity and creating new employment opportunities. This supplement to the CEA’s Third Quarterly Report updates our estimates of the effect of the ARRA’s clean energy provisions on economic recovery through the first quarter of 2010. We find that the Recovery Act directly created more than 80,000 clean energy jobs in the first quarter of 2010, and that the clean energy investments supported an additional 20,000 jobs throughout the economy.
CEA’s Second Quarterly Report described our classification of 56 projects and activities in the ARRA related to the clean energy transformation. This list includes 45 spending provisions with a total appropriation of $60.7 billion and another 11 tax incentives that will cost $29.5 billion through fiscal year 2019, according to the Office of Tax Analysis, for a total investment of over $90 billion.2 In some cases, a relatively small amount of Federal investment leverages a larger amount of non-Federal support; we count toward the appropriation only the expected subsidy cost of the Federal investment.3
Figure 1 illustrates the distribution of this $90 billion investment across eight categories of clean energy projects, along with a ninth “other” category containing programs that do not fit in elsewhere. The types of programs included in the eight categories are described in Box 1.4 The largest investments are in renewable energy generation, energy efficiency (for example, weatherproofing), and transit (including high-speed rail).
Because most of the clean energy investments occur through grants and contracts that require that proposals be reviewed before funds are expended, not all of the money appropriated for these investments could be spent quickly. Thus, as with the ARRA more generally, only a portion of the appropriation has been spent to date.
2 Throughout this analysis we classify the Section 1603 program as a tax provision even though it is treated as a Treasury Department outlay in the Financial and Activity Reports to the Office of Management and Budget. The 1603 program provides government payments in lieu of tax credits for certain clean energy investments.
3 We make an exception for borrowing authority granted to the Bonneville and Western Area Power Administrations. Because of the public nature of these agencies, we count the projected drawdown of the borrowing authority as the ARRA appropriation.
4See also Council of Economic Advisers (2010a) for a more detailed discussion of the eight categories.
5The totals shown in columns 2 and 3 differ from those in Council of Economic Advisers (2010a). The difference stems from a revision in the timing of outlays for the 1603 credit over the course of the 2010 fiscal year.
6Outlays represent payments made by the government. Those funds represent spending that has already occurred. Obligations represent funds that have been made available but not necessarily outlayed. In many instances, obligations can generate economic activity because recipients may begin spending as soon as they are certain funds are available.
Expenditures are tracked by Treasury Account Financial Symbol (TAFS). In some cases, clean energy and non-clean energy programs are grouped into the same TAFS and no information is available about the composition of obligations and outlays to date. To estimate clean energy expenditures, we allocate obligations and outlays to date using the clean energy share of the total appropriation for the TAFS. This will overstate clean energy spending to date if non-clean energy projects began faster than clean energy projects and will understate clean energy spending if the clean energy projects began faster. For tax provisions, we include the Office of Tax Analysis’s estimate of the total cost through fiscal year 2019 in column 1, and its estimate of the cost to date in columns 2 through 5.
7The 2009:Q4 totals differ from those shown in Council of Economic Advisers (2010a) for the reason described in footnote 5.
8 This number is obtained by dividing the anticipated spending on clean energy programs through the end of 2012 -- about 75 percent of the total appropriation to these programs -- by $92,136, as discussed in Council of Economic Advisers (2009). This may overstate the near-term job creation potential of these programs, as the clean energy programs in the ARRA have slightly slower spendout than the average ARRA spending program; thus a smaller fraction of these jobs occurs in the next few years than for the Act as a whole. When we take account of the actual and projected spendout rates for the clean energy programs using the model developed in the CEA report, we estimate job creation through 2012 about 8 percent below what is indicated in column 5 of Table 3.
In most cases, projected Federal outlays through the end of 2012 include the bulk of expected expenditures. In a few cases, however, programs are scored as having budgetary impacts spread over many years. For example, the Advanced Energy Manufacturing Tax Credit (also known as “48c,” from the relevant section of the Internal Revenue Code) will reduce Federal revenues for several years after 2012 as companies using the credit apply it against their future tax liabilities. For this credit, only about half of the cost (and half of the estimated jobs impact) will be incurred by the end of 2012. Counting all costs through 2019, our calculation yields over 17,000 job-years, 9,500 of which come from spending through the end of 2012.