The Kremlin’s Strange Victory
How Putin Exploits American Dysfunction and Fuels American Decline
U.S. President Barack Obama and the leading Republican candidates for president don't agree on much, particularly when it comes to jobs and energy. But they do appear to share a conviction that a vibrant energy sector is central to solving the U.S. unemployment problem. Obama has put clean energy jobs at the center of his economic message. On the Republican side, both Texas Governor Rick Perry and Mitt Romney, his rival, claim that the oil, gas, and coal industries is where the real future of American job growth lies, contrasting their approach with one that has produced the recent Solyndra debacle. Alas, on the one point on which everyone seemingly agrees, they are all wrong.
There is no doubt the energy sector could employ many more Americans. But exactly how many matters. The Republican candidates have made bold and concrete predictions. Perry is running on his record of job creation in Texas, which included a big boost from the booming oil and gas sector employment. Romney claims that expanded drilling could create 1.2 million energy jobs and that shale gas operations in the Northeast could add another 280,000 and Perry offers similar numbers. This is an exaggeration. The American Petroleum Institute, which is hardly an impartial arbiter (it is the oil industry lobby), projects that opening all U.S. lands to drilling while loosening a range of regulations would create 400,000 new energy-sector jobs and perhaps one million support and spinoff jobs by 2030. The real potential for oil and gas jobs is smaller.
For his part, Obama placed clean-energy jobs at the core of his economic recovery plans, promising five million by 2030 if his energy plans were enacted into law. The Center for American Progress, a liberal-leaning think tank that is inclined to be favorable to the president, estimated that his plans could have actually created about 1.8 million jobs at clean-energy businesses and their suppliers. Either way, Republicans and some Democrats have blocked most of the clean energy policies that the president advocated.
The problem is that even if Obama, Perry, and Romney all had their way and, in fact, created millions of energy sector jobs, these numbers would be incommensurate with the scale of the United States' current employment challenge. In a country where 14 million job seekers are unemployed and an additional 9.3 million are involuntarily working part time, energy jobs will not bridge the gap. And many, if not most, of the promised jobs -- whether in oil drilling or turbine manufacturing -- would take more than a decade to materialize. Setting aside such problems, the full complement of jobs promised by the American Petroleum Institute and the Center for American Progress would tweak unemployment by about one percent. All of this also fails to mention that in the longer term, many if not most of the new jobs would come at the expense of employment in other sectors, pushing those job creation numbers down even further.
The underwhelming numbers should not be surprising. After all, energy production is not a large part of the U.S. economy. The mining sector -- which includes oil, gas, and coal production -- makes up only 1.9 percent of U.S. GDP. The utilities sector, which includes both clean and traditional energy production as well as a wide range of other activities, adds another 1.9 percent. Motor vehicle manufacturing accounts for 0.9 percent more. This is nothing to scoff at -- in real terms it means nearly a trillion dollars per year -- but national prosperity will not come from jobs growth in sectors that collectively make up less than five percent of the economy.
Smart energy policy can help with job creation in other ways. Expensive oil and gas drag down economic growth; greater availability of both would help juice the economy, eventually ameliorating unemployment. But there are limits to this dynamic, too. U.S. oil production has a difficult time making a big dent in world oil prices. U.S. production plays a bigger role in natural gas markets, which are more localized, but economic performance appears to be less sensitive to gas prices than to oil ones. Nor are these spillover effects always positive. A recent paper in the American Economic Review concluded that the economic loss from poor health caused by pollution from coal-fired power is several times larger than the market value of the power itself.
The United States faces a host of challenges in the coming years, from unemployment and economic growth to energy security and climate change. It is tempting to search for a single measure that would solve several of those problems at once. But the real world has not been kind enough to deliver one. Whoever is president in 2013 will have no way of avoiding that, even if they don't want to admit as much on the campaign trail.