Clean Energy's Cat-and-Mouse Game

A day after the State of the Union address -- in which Barack Obama outlined a massive public investment in clean-energy infrastructure -- the president went on a trip to Wisconsin. He visited a renewable-energy tech manufacturer, an aluminum manufacturer, and a wind-turbine plant: "It's here in Manitowoc that the race for the 21st century will be won," he said in one Wisconsin town.

But just the month before, the state's newly elected Republican governor, Scott Walker, turned down federal money for a high-speed rail line that would have connected Milwaukee to Madison. The money was part of Obama's stimulus plan -- the last time Obama put big money behind programs designed to green the future. Walker said the rail project was an example of excessive government spending: "[It] brought a new cost that we could ill afford at the time; we're going to be crushed in our transportation budget."

Ohio Gov. John Kasich, a Republican who also won in November, turned down federal transportation dollars as well, and other governors, from Texas to Florida, have decried federal government spending and promised to send the money back to Washington. Whether they actually do or not, this highlights a big problem with Obama's spending agenda -- an agenda that was reinforced when his fiscal year 2012 budget proposal was released yesterday. Getting his spending proposals through an obstinate Congress is merely Obama's first challenge. Even if he convinces the House and the Senate to spend the money, he has to convince governors to take it -- and support the agenda with state-level policies. That's most clearly illustrated when it comes to his green-energy agenda, one of the few new spending items in the budget.

The task is even harder when one considers the rhetorical ground Obama has conceded to the right on matters of federal spending. Most of the savings in this budget come from cutting a number of domestic spending programs deeply -- he would cut funding for the Department of Health and the Environmental Protection Agency, for example, and funding for community services and home heating aid for low-income families. Whether this political move puts Obama at an advantage compared to House Republicans who want to make even deeper cuts is up for debate; it certainly posits government spending as an ill that must be reduced.

No matter now many empty gestures the president makes to appease deficit hawks, Republican governors eager to portray Obama as a typical tax-and-spend liberal are likely to continue to turn down federal money -- and renewable-energy initiatives are bound to be the hardest hit. Many states, however reluctantly, were forced to take stimulus money to try to curb deep state-budget deficits, but there is no such pressure when it comes to public investment in green infrastructure. These grants aren't cash assistance to states running in the red but rather, efforts to use the federal government's enormous spending power to fundamentally change the way the country does business.

Some of the proposed spending on green energy would take the form of tax incentives and grants to states. To put advanced-technology vehicles on the road, the budget proposes $200 million in competitive grants meant to help communities make infrastructure changes that support electric vehicles and "remove regulatory barriers." It would also create a $100 million "Race to Green" competition for state and local governments to improve their building codes and standards. Most important, the budget proposes spending $556 billion on rail transportation and other green infrastructure projects. "Too often, transportation dollars are viewed from the perspective of an individual State or locality," the proposal says, and that's true -- states have a lot of say in how their transportation dollars are spent.

Of course, the budget also proposes direct federal spending and federal tax credits for research and innovation, loan guarantees for renewable-energy companies, and efforts to cut oil and coal subsidies. (It would also, because of the Deepwater Horizon explosion and subsequent deluge of oil into the Gulf of Mexico, increase Department of Interior funds to better oversee the energy industry.) That means the national agenda will hew more closely to the president's agenda with those programs. But even then the administration can't ensure that federal spending won't be counteracted by state-level policies -- even if states use federal money to become home to clean-energy research and innovation hubs, like those that would be funded by Department of Energy grants, they can still maintain state-level policies that make them friendly to huge factory farming operations that emit greenhouse gases.

Until now, states have struck out on their own on renewable-energy legislation, largely because the federal government under George W. Bush was so silent on the issue. Thirty-four states have some form of a renewable-energy standard, and most of these require utilities to source a certain percentage of electricity from renewable sources. But most state-level plans have been modest; what's been missing is an aggressive regulatory and financing push from the federal government. The budget reiterated Obama's goal of cutting greenhouse gas emissions to levels that are 83 percent below those in 2005 by the year 2050 but doesn't lay out how, exactly, the standard will be met.

The day after the State of the Union, while Obama was in Wisconsin, I attended a blogger roundtable with Obama's senior adviser, David Axelroad, and Brian Deese, deputy director of the National Economic Council. Both tried to hammer home the point that clean-energy investment isn't just about protecting the environment but about positioning the country to thrive economically as well. I asked about the state issue, and Axelrod said that programs like the Department of Education's "Race to the Top" initiative -- a program that allows states to compete for federal grants by designing their own plans to meet certain initiatives -- would help, and that the administration wants to work with governors. He pointed out that Obama's visit to Manitowoc, Wisconsin, was to a factory that had been abandoned but now employed people again, largely because of tax incentives. "That's not a vision we should turn our backs on. That's a prescription for success in the future. And we have to keep going out there and making the case to the American people. And hopefully, the American people, in their individual states, will make that case to their governors, and we can move them on some of this, those who are resistant."

Obama does this often: He stakes his claim on the side of rational compromise and hopes that the American people will see the opposition as unreasonable. Obama has set this up as a political bet, but given that Republicans see their goal as thwarting the president regardless of what he proposes, it's one he risks losing.

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