The President showed up unscheduled at a White House briefing today to excoriate House Republicans for fouling up a Senate deal on a stopgap measure to extend the payroll tax cut, unemployment benefits and a doctor’s reimbursement fix. He said that “This is not poker, this is not a game for the millions of Americans who will take a hit because the economy grows more slowly,” and urged that the House take up the Senate package right away. Similarly, Republican Senator Scott Brown ripped his House colleagues today for “playing politics” with the bill.
There’s no question that taking money out of the economy at this time, especially on unemployment benefits, which have a high multiplier because they immediately get spent, is extremely unwise. The economy is growing slowly now, and a failure to extend these measures will slow that growth even further. Combined with the threats from Europe, you could imagine a recession next year as a result. (In fact, you could argue that Republicans are banking on it.)
But there are a number of other measures that also will not get extended into next year, which in their own way will also have a detrimental impact on the economy. Because Congress is so hung up on the payroll tax, UI and the doc fix, the other expiring measures haven’t garnered much attention. But Brad Plumer points out a few, including the production tax credit for wind energy:
The production tax credit for wind power. This credit pays wind-turbine owners 2.2 cents for every kilowatt-hour of electricity that they produce in their first 10 years of operation. It’s a boost that the wind industry says it badly needs to compete with coal, which gets to fob off its pollution costs on a breathing public. Thanks in part to the credit, wind power has grown 37 percent per year since 2009. (Technically, the wind credit doesn’t wind down until the end of 2012, but given that siting, permitting and construction for the projects take about a year, companies have effectively run out of time to qualify.)
How bad will this hurt the wind industry? One clue: Congress has let this credit lapse three times since 1999, and every time it does, new wind generation tends to plunge roughly 70 percent. A study released this week by Navigant Consulting found that, without the credit, investment in wind power would sink from $15.6 billion in 2012 to $5.5 billion in 2013 — though, fair warning, this study was commissioned by the wind industry itself.
In addition, a solar energy grand program, which makes it easier for the solar industry to qualify for tax credits, and a tax benefit for commuters who use public transportation are on the chopping block. And there are a host of other “tax extenders” that will go by the boards.
Some of the more naked corporate tax breaks frankly need to go. But losing the production tax credit for wind energy, in particular, would be a tragedy, causing the loss of up to 37,000 jobs, according to the industry’s trade group. So even if Congress miraculously passes the big-ticket items in a year-end package, fiscal policy as 2012 begins will look a bit worse than fiscal policy in 2011. And if the deal on the payroll tax and UI does, in fact, collapse, that gulf widens significantly.