The problem, however, is that a recession is the very worst time for the government to push green energy through either of these methods. The spending isn't particularly effective at job creation, and if costs rise for firms and consumers, then even more jobs will be lost.
Good Energy Policy Can Be Poor Stimulus
Here's the problem with having funding for renewable energy initiatives in a stimulus bill: it actually makes for pretty poor stimulus. Wind turbines, solar panels, electric cars, and other new green technologies are very expensive. So the output you're getting for each dollar spent is low relative to what you might get from other industries. And less output for more dollars means relatively fewer jobs than other alternatives.
To make matters worse, the jobs these produce are exactly the wrong kind as far as stimulus is concerned. Many are for high-skilled workers. Some aren't very shovel ready, as sometimes research or development is necessary before production can occur. And some of the most expensive and essential materials necessary for the products -- like rare earth metals -- are produced in China. That creates lower-skilled jobs that create value from natural resources overseas but not in the U.S.
Earlier this month, the Energy Department confirmed this problem. Its $38.6 billion loan guarantee program created only 3,545 new, permanent jobs after being half spent. The Obama administration promised it would create 65,000 jobs. So at this pace, it will barely provide 10% of the jobs projected. That's a cost of potentially $2.7 million per job.*
Increasing Taxes and Regulation Kills Jobs
This point is true no matter what the economic situation: taxes and regulation are bad for jobs. If firms face higher taxes, then their profits will fall. That will leave them less money to expand and create jobs. If regulation rises, then firms' costs rise. Again, this reduces profits which will also force job cuts or slower hiring.
For example, a recent study by the National Economic Research Associates on behalf of the American Coalition for Clean Coal Electricity finds that some of the EPA's new and proposed regulations would be terrible for the already weak economy. It asserts they would lead to "183,000 lost jobs per year and significant increases in the price of electricity and natural gas."
Of course, we can quibble about the study's numbers. Maybe the job losses and additional costs wouldn't be quite as great. But during a time when so much suffering is connected to prolonged unemployment, are policymakers really going to err on the side of the EPA here? There might be times when, on balance, some lost jobs are better for the nation than forgoing additional tax revenue or regulation. But when unemployment is very high or rising, the economy becomes the priority.