Loan Guarantees = Jobs (Without actually spending money!!!)

10 Sep, 2009

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WaxmanA long slow recovery of the economy with job growth tentatively scheduled on the back end has caused our government to spend nearly a trillion dollars on “stimulus.”   Job creation is supposed to be at the heart of this spending and the results are mixed at best.

As much as 50 billion dollars in federal loan guarantees were almost  included in the stimulus package this Spring which could have allowed for the construction of 7 to 10 new nuclear power plants all in different states across the country.   Unfortunately, the loan guarantee amount was reduced by Rep. Waxman (Dem, CA) at the last minute to 18 billion dollars, which would allow the construction of only 3 new plants.

A quick refresher of what a loan guarantee is: essentially, the government co-signs on a construction loan but pays no cash in the process. The reason this is done is to lower the risk of the loan, which lowers the interest rate.   The lowering of the interest rate makes the large investment more manageable for the utility and incentivizes them to start construction sooner.   In this instance it would be economic stimulus without spending. This cash free type of stimulus is a beautiful thing in this poor economy.

So, if EPRI (Electric Power Research Institute) and others say we need more nuclear plants to meet the nation’s energy needs and maintain clean air standards, and the economy is desperate for job creation, then loan guarantees are a no brainer.   The current three loan guarantees are not enough and we need more to add job creation into this economic recovery. Our congress needs a sense of urgency in the right direction on this issue, and currently the urgency is all going to other issues besides job creation.

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DGM

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1 Comment

  1. DocForesight
    September 10, 2009

    Rep. Waxman pretends to care about the “little guy”, but his Cap’n Tax bill will impose heavy burdens on “average” Americans – of which he is not one, of course, being from Beverly Hills and all.

    There seems to be no imagination at all in Congress when it comes to creative ways to generate economic activity without costing the taxpayers a penny. They seem to think that all you can do is throw money at programs or make-work projects and it will result, magically, in peace and harmony.

    Thanks, guys, for the succinct definition of a “loan guarantee” or, as someone recently penned, “finance insurance”.

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