Congressional Republican leaders have been fairly silent about President Barack Obama’s American Jobs Act proposal to put people back to work despite the stalled economy. But even more discouraging is that they plan to undermine an existing program that employs thousands of Americans in the auto sector. They propose to slash $1.5 billion from the Advanced Technology Vehicles Manufacturing program—signed into law and first funded under President George W. Bush—to pay for disaster relief. Helping Americans suffering from economic damages caused by extreme weather—the storms, floods, and droughts linked to climate change—should be a top priority. But chopping this program would compound economic harm by hurting American manufacturing plants and eradicating tens of thousands of jobs as companies retool to build more efficient vehicles for the future.
The Energy Independence and Security Act of 2007 included the Advanced Technology Vehicle Manufacturing program to help auto companies and their suppliers convert their domestic plants to produce more fuel-efficient vehicles and to create or maintain auto industry jobs. It provided direct loans to help them retool their facilities or build new ones to make parts or build vehicles that are at least 25 percent more efficient than cars in 2005. They must achieve a fuel economy of 34.4 MPG.
In 2008 Congress passed and President Bush signed into law $7.5 billion of credit subsidies to support $25 billion of loans to promote the production of energy-efficient advanced vehicles and component parts. Since then the Department of Energy has used approximately $5 billion of credit subsidies to provide $9.1 billion in loans to five companies, which created nearly 39,000 direct jobs and another 2,600 construction jobs in 11 states. (see chart below) The projects would reduce gasoline use by more than 311 million gallons annually.
Jonathan Silver, executive director of the Loan Programs Office at the Department of Energy, testified about the Advanced Technology Vehicle Manufacturing program before the Senate Energy Committee this past June. He reminded senators that the program’s loans must be repaid and described the rigorous loan application review process:
We review projects on a competitive basis, and … ensure that the loans we support meet our statutory requirement of having a reasonable prospect of repayment. Every project that receives financing must first go through a rigorous financial, legal and technical review process – similar to … what a private sector lender would conduct – before a single dollar of taxpayer money is put to work.
The programs can efficiently and effectively leverage government resources to spur private-sector investment. The financing provided by the loan programs is ‘additive’ … a relatively small amount of appropriated credit subsidy can support large amounts of new private sector investment.
In addition to improvements in fuel economy, ATVM Loan Program projects promote economic growth and job creation. They create construction and permanent operating jobs in manufacturing communities where job growth has long been stagnant.
A February 2011 Government Accountability Office assessment of the Advanced Technology Vehicle Manufacturing program found that the program is generally working and has appropriate financial oversight mechanisms in place:
In making its first loans, the ATVM program has injected significant funds into the U.S. automotive industry for promoting improved fuel efficiency of conventional vehicles and encouraging the development of vehicles with newer technologies that rely less, or not at all, on petroleum.
According to our calculations, the projects for enhanced conventional vehicles as a whole are expected to achieve fuel economy that exceeds the CAFE [Corporate Average Fuel Economy] targets by, on average, 21 percent.
The Advanced Technology Vehicle Manufacturing program has about one-third of its loan volume remaining. DOE is expected to use another $2.5 billion of credit subsidies to support additional loans by the end of 2011. House Appropriations Committee Ranking Democratic Member Norm Dicks (D-WA) noted that “an additional 18 loan applications in progress that are projected to create 50 – 60,000 jobs.” These loans would create direct jobs in Florida, Illinois, Indiana, Louisiana, Michigan, and Ohio at construction companies and parts suppliers throughout the Southeast and Midwest.
The Congressional Republican leadership, however, has other ideas. They plan to hack $1.5 billion from ATVM to pay for the damages from extreme weather. They would shift these funds from ATVM to the Federal Emergency Management Administration, or FEMA, and other agencies in the temporary continuing resolution for fiscal year 2012 that will keep the government running while Congress and President Obama negotiate final spending bills for the remainder of the year. It makes little sense to help Americans harmed by extreme weather disasters by cutting investments in auto sector manufacturing jobs.
The American economy experienced zero net job growth in August 2011, which makes job creation extremely important across the land. The Advanced Technology Vehicle Manufacturing program has a proven record of loaning money to auto companies to help them retool their factories to build more fuel-efficient vehicles that will reduce oil use, thereby helping our balance of trade. And these investments create tens of thousands of direct jobs. It’s difficult to understand why congressional leaders would slash this employment-generating program—unless they were no longer interested in holding their jobs.
Daniel J. Weiss is a Senior Fellow and Valeri Vasquez is a Special Assistant for Energy at the Center for American Progress. Thanks to Steve Spinner, Senior Fellow at the Center.
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Daniel J. Weiss