Anti-tax group says Obama's stimulus led to jobs in China, not U.S.

Back in the spring, jobs and jobs alone seemed the core issue in the presidential race. Since then, the menu of issues has become longer, but a recent flyer from Americans for Tax Reform, a leading anti-tax group, seeks to put jobs front and center once again.

The flyer appeared in mailboxes in New Hampshire and asks, where did the stimulus money go? A photo of President Barack Obama superimposed above a sprawling map of China in fire engine red provides an answer. Below the fold, an iconic photo of Mao Zedong is set against a newspaper headline "NH has lost more jobs to China than any other state."

Inside, the text reads "The stimulus was intended to create ‘green’ American jobs. But the Obama administration funneled close to $2 billion to overseas firms. A Democratic
Senator said this would create thousands of jobs in China."

There is a lot to unpack here but the gist of it comes down to the assertion that about $2 billion in "green" stimulus money went to foreign companies, with particular benefits for China at the expense of American workers. That’s a claim that we can check.

Foreign wind and solar suppliers

Americans for Tax Reform cites the work of the Investigative Reporting Workshop, a project of American University headed by investigative journalists. In February, 2010, the workshop wrote that it had found that the largest stimulus program to develop alternative energy had handed out $2.1 billion for wind, solar and geothermal power and of that, 79 percent went to companies based overseas.

We dug further and found some reports that Americans for Tax Reform missed but that bolster its claim. A later study from the workshop estimated the amount that had gone to overseas firms had reached nearly $2.4 billion. Later still, about a year after the first report, the lead author again updated his findings. The journalist, Russ Choma, noted that "most of the jobs that were created, in the United States at least, were short-term construction jobs."

"Since the bulk of the companies that received the money were foreign," Choma continued, "and the bulk of the equipment (like wind turbines) were purchased from foreign companies, who mostly do their production overseas, very few of the high-skill, high-pay manufacturing jobs that green energy development can bring ended up in the United States."

A study by the U.S. Department of Energy estimates that the domestic portion on wind projects ranges from 48 percent to 66 percent of the total investment. For large solar projects, the domestic portion falls in the 42 percent to 71 percent range.

A complicated jobs picture

Those wide ranges tell us that connecting taxpayer dollars to American jobs is not simple. Some foreign companies have American subsidiaries. Some American firms import large components.

The people who have tried get a handle on this have looked at the two main programs the government used to build the renewable energy sector. The biggest program, called Section 1603, subsidized energy producers. It paid the project developers 30 percent of the total project cost after an installation was complete. So far, Section 1603 has cost about $14 billion.

The smaller program, Section 48C, also provided a 30 percent subsidy but was focused on manufacturing. It helped companies that built or expanded manufacturing capacity in the U.S.. The final cost for 48C was $2.3 billion.

Teasing out the ways that Section 1603 money worked its way through the economy is tricky. The reporter cited by Americans for Tax Reform spoke about his own uncertainty after months of research into wind power.

"I can't say how many of the turbines built by American manufacturers were overseas," Choma said, "and how many of the turbines built by foreign manufacturers were built here."

The case of the Danish firm Vestas shows the challenge when dealing with foreign-based firms. Vestas supplied over 1,800 turbines in the U.S. between 2009 and 2011, or about 15 percent of the total added in those years. On the power production side, the Section 1603 subsidies for the turbines alone would be worth hundreds of millions of dollars. But Vestas also received nearly $52 million through the government’s program to boost manufacturing.

Those dollars ended up in Colorado for the construction of American subsidiary plants, Vestas Nacelles, Vestas Blades, and Vestas Towers. A declining wind industry has led to layoffs but at last count, the Danish firm employed about 1,700 workers in those plants, with about 5,000 workers statewide tied to the wind industry.

"This is insourcing," said Peter Kelley, spokesman for the American Wind Energy Association, an industry trade group. "It’s important to draw foreign investment that creates jobs here in the U.S."

Tracking the jobs for a domestic company is no easier. GE is the nation’s largest supplier of wind turbines. The Connecticut-based firm is providing the turbines for a wind farm in Alaska. GE might be an American company but the project includes blades made in Brazil and towers from China. On paper, it might look like stimulus money would stay in the country but in fact, not all of it would.

The most detailed estimate of the total number of American jobs created through the 1603 program comes from the National Renewable Energy Laboratory. In a 2012 report, it found that from 2009 to 2011, spending on wind and solar produced some 57,000 to 80,000 jobs each year in construction, manufacturing and ongoing operations. These are the jobs that remain after you subtract the dollars that went overseas.

Importantly, the total earnings of American workers tied to these projects fell in the range of $9.5 billion to $14.3 billion. If these numbers are right, they tell us the low end of that estimate is more than the cost of the 1603 program, about $8.7 billion, during those years. This might be expected since 70 percent of the project costs were covered by private money.

The China factor

The flyer from Americans for Tax Reform casts China as a major beneficiary of stimulus spending. While Chinese firms have certainly received some contracts, they do not seem to have played a major role. Their biggest place in the American renewable energy marketplace is in solar.

China has about half of the American photovoltaic market, according to Recharge News, an online industry magazine. In 2011, that was worth about $2.8 billion to Chinese manufacturers.

Subsidies for the solar industry through the 1603 program amount to about 20 percent of all spending. Wind accounts for about 70 percent of the dollars.

In wind, China is a negligible player. Of over 12,000 turbines installed under the 1603 program by 2011, Chinese firms had a role in six -- five in Texas and one in Iowa. This according to the American Wind Energy Association, an industry trade group.

For the curious, here is the national breakdown for the number of turbines installed in the U.S.from 2009 to 2011, according to the American Wind Energy Association and the Congressional Research Service:

United States - GE, Clipper - 49 percent
Germany - Siemens, RePower, Nordex -15 percent
Denmark - Vestas - 15 percent
Spain - Gamesa - 7 percent
India - Suzlon - 6 percent
Japan - Mitsubishi - 6 percent
All others - 2 percent

Our ruling

The Americans for Tax Reform flyer said the Obama administration funneled about $2 billion in "green" stimulus money to foreign companies, with particular benefits for China.

On the dollars, the claim understates the amount that went to foreign owned companies. It was certainly more than $2 billion, which would bolster the group’s claim.

But the flyer offers a very selective picture of what the stimulus did for American workers..

The distinction between domestic and foreign companies and the impact of that on jobs is unclear. And while the stimulus did help pay for high-skilled jobs overseas, it also leveraged thousands of jobs in the U.S. and produced earnings greater than the amount of money spent by the government. Money did leave the country, but not with the impact the flyer presents.

Regarding China, the flyer exaggerates the benefits for that nation. China stood to gain from spending on solar power, and it is hard to see how it wouldn’t have collected millions of taxpayer dollars. But solar represented about a fifth of the stimulus subsidies. The wind projects accounted for 70 percent and in wind, China played a tiny role. The countries that gained the most overall were European.

The statement has an element of truth but ignores critical facts that would give a different impression. We rate it Mostly False.

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