|"Forget the Rest" blog|
February 2, 2009
Senate version of proposed economic stimulus (S336, the “American Recovery and Reinvestment Plan”)
Dear colleagues –
I am writing to express my serious concerns regarding just three elements of this proposed legislation. I have made no attempt to understand the bill in its entirety.
1. The first item is the proposed $1.00 B to be added to NNSA infrastructure accounts.
The Committee provides $1,000,000,000, of which $900,000,000 is to be applied to address maintenance and general plant project backlogs, other construction activities, and various energy projects throughout the weapons complex. The remaining $100,000,000 is for advanced computer research and development.
These funds are to be expended by the end of fiscal year (FY) 2010, twenty months from now. One billion dollars is 16% of the FY2008 Weapons Activities appropriation. On an annualized basis this would increase Weapons Activities spending by roughly 10% overall.
As we shall see in a moment, nine-tenths of this amount is completely fungible throughout the large “Readiness in Technical Base and Facilities” (RTBF) budget line and in fact throughout most of Weapons Activities as a whole. These funds can and would be used to help construct new weapons production facilities and pay for cost overruns on badly-managed projects, some of which may not even be built.
The other 10% is directed toward a program (the Advanced Simulation and Computing Campaign, ASCC) which involves significant redundancy, an uncertain purpose, and poor execution specifically at Los Alamos National Laboratory (LANL).
ASCC was budgeted at $575 M in FY2008, so on an annualized basis this amount represents roughly a 10% increase in that account.
Overall and in essence, this proposed appropriation is a very large earmark, benefitting just eight facilities run by one or a combination of the same few contractors. It is not at all clear that adding what amounts to a massive increase in funding to the U.S. nuclear warhead program has any broader net benefits, whether in national security, economic stimulation, or in any other dimension.
There will be political, diplomatic, and arms control costs for increasing the U.S. nuclear weapons budget so dramatically, especially at the beginning of this administration, which is being watched by so many eyes around the world. If the intent of the Senate were to impede diplomatic efforts to prevent the spread of nuclear weapons, if would be hard to imagine a simpler means compatible with today’s domestic political climate. Has the Senate forgotten that the U.S., among other nuclear weapons states, is legally and politically bound to a course leading to full nuclear disarmament? Would certain diplomatic failure and uncontrollable nuclear proliferation be preferable?
Not only is this an earmark benefitting 8 sites (and 8 “mix-and-match” contractors), it is also an earmark predominately benefiting the three NNSA sites in one state, New Mexico, where 43% of Weapons Activities spending now occurs.
Ninety percent of this proposed appropriation appears to be directed toward maintenance shortfalls, but appearances deceive. Yes, NNSA has neglected maintenance at some facilities in recent years. One such case is the Kansas City Plant (KCP), which NNSA hopes to abandon for a new leased facility at greater government expense. Inadequate attention has been placed on safe operations at other facilities, such as LANL’s plutonium facilities.
NNSA maintenance expenses are for the most part handled through the RTBF budget line, which includes
…facility operating costs (e.g., utilities, equipment, facility personnel, training, and salaries); facility and equipment maintenance costs (e.g., staff, tools, and replacement parts); and environmental, safety, and health (ES&H) costs; and [funds to] plan, prioritize, and construct state-of-the- art facilities, infrastructure, and scientific tools that are not directly attributable to Directed Stockpile Work (DSW) or a Campaign, within approved baseline costs and schedule.”
The FY2008 appropriation for RTBF was $1.637 B.
By vaguely describing the proposed stimulus appropriation as “maintenance and general plant project backlogs, other construction activities, and various energy projects throughout the weapons complex,” its purposes appear constrained. Yet maintenance funding at NNSA facilities is fully fungible with operational expenses, capital equipment purchases, facility administration, utility expenses, environment, safety and health expenses including authorization basis activities, and with “other project costs” on new and planned construction projects. These can be quite large and include everything from internal project development to environmental impact statements and public relations.
In NNSA’s words,
“…funds are appropriated for Operations and Maintenance, which includes operating expenses, capital equipment and general plant projects. The program no longer budgets separately for capital equipment and general plant projects.”
“Operations of Facilities include costs for – Facilities Management, Maintenance, Utilities, ES&H, Capital Equipment, General Plant Projects (GPP), and Expense funded projects.”
“Operations of Facilities also funds general infrastructure support activities such as Other Project Costs for Line Items, General Plant Projects, and Authorization Basis (AB) activities.”
In other words, there is no separate maintenance budget for NNSA sites. What does not need to be spent on one aspect of RTBF, due to this supplemental funding, can be spent on another. This proposed spending is thus directly or indirectly fully fungible throughout the RTBF budget line.
Congress has been somewhat remiss in addressing this problem. NNSA maintenance funds are blended with (among many other things) new construction, which sets up an internal management conflict and decreases the effectiveness of external oversight.
There is still more flexibility built into this system. The distinct “RTBF” character of these proposed new funds will not survive the move from the Capitol to the NNSA facilities where the costs are incurred. At the sites, various overhead functions combine portions of accounts (e.g. in Laboratory-Directed Research and Development, LDRD, “taxes”) or shift funding between them (e.g. internal facility “rents,” where Program A “rents” space in a building from Program B, which is funded from a different account). Another way funds can be shifted is management can choose to take some expenses in one account (say, a facility account) rather than another (say, a program or campaign account). More than a little of the distinctions between various NNSA accounts is arbitrary – and illusory.
For these reasons and others “maintenance” funds are fully fungible not only with facility operations and with current and planned construction projects but throughout the nuclear weapons program as a whole.
This fungibility applies not just to these particular proposed funds but to future appropriations as well. If NNSA can use the proposed cash infusion to take care of the maintenance backlog it has allowed to grow, the agency will be all the more free to pursue other goals, such as the grandiose “transformation” goals that are the very reason maintenance accounts are lean.
So far I have only mentioned the RTBF budget line, since Senate Appropriations prominently mentions General Plant Projects in its Report on S336. NNSA could also spend some of these proposed funds in its Facilities and Infrastructure Recapitalization Program (FIRP), which was a $180.0 M program in FY2008. This which would provide even more flexibility – if for some reason the inherent fungibility among RTBF accounts, were not sufficient (especially when combined with intra-site management and accounting decisions) to launder away the “maintenance” color of these funds.
In the short run, Congress cannot fully constrain how such funds would be used. No matter what is written into any final version of the stimulus bill, this supplemental Weapons Activities spending, if not wasted entirely, will address Weapons Activities missions in a highly flexible manner. Like it or not, Congress simply does not have control over where this money goes.
If Congress believes Weapons Activities spending is too low to support the proposed nuclear stockpile – whatever that may turn out to be – Congress should simply and straightforwardly increase nuclear weapons spending, not pretend it is doing an extra billion dollars in “maintenance.”
Make no mistake: what is proposed here is a very specific policy decision to raise nuclear weapons spending. It has nothing to with maintenance, as adequate funds have been and are available for that purpose. If these funds are provided it will be a decision that happens to benefit a very few contractors – and to a substantial degree, a single state’s nuclear facilities.
There is nothing positive to say about the “stimulus” qualities of this proposed spending. Defense spending produces roughly 80% as many jobs as payroll tax cuts and less than half as many jobs as spending on education or mass transit. Worse, salaries at NNSA facilities, even including what can be large numbers of subcontractors, are significantly higher at NNSA facilities than the defense industry average and will deliver correspondingly even fewer jobs – both fewer direct jobs and fewer secondary jobs per dollar of employee spending.
Assuming that stimulus spending, plus whatever interest has accrued on the debt necessary to finance it, will someday be repaid as taxes, it is appropriate to question a) whether this spending creates more jobs than would refraining from collecting that amount of taxes in the first place, and also b) whether the particular spending in question truly has the character of a productive investment.
It is hard to construe a billion additional dollars added to the nuclear weapons enterprise as a productive investment. What product is being produced, what security achieved, that could not be produced by simply, cheaper means – namely, by curtailing some of those activities in which NNSA itself has apparently lost interest?
I believe it very likely that most of this proposed spending, if enacted, would come to be seen in hindsight by most parties as a waste of public money that benefitted a few well-connected actors in the absence of any genuine public purpose.
2. The second item is the proposed $6.4 B supplemental increase in DOE cleanup accounts ($0.483 B in non-defense environmental cleanup, $0.390 B in uranium enrichment decontamination and decommissioning, plus $5.527 in defense environmental cleanup).
The Senate Appropriations press release described this proposed spending as follows:
$6.4 billion is directed towards environmental cleanup of former weapon production and energy research sites. These projects will be of limited duration aimed at decreasing the overall site footprint and reducing recurring annual costs. This work will move toward decreasing the footprint at some sites by up to 90%. The footprint reduction will free up these lands for other economic purposes. This funding will not only spur the economy through job creation now, but it will save the tax-payers money in the future by resulting in over $8 billion in life-cycle cost savings. Significantly, the majority of the funding will go out through existing contracts at sites across the country assuring the timely impact of the funding.
The competing House bill offers only $500 M for defense environmental cleanup.
According to the most recent issue of the Weapons Complex Monitor,
The cleanup funds in the Senate proposal…hew closely to the level called for in a plan developed by the DOE Office of Environmental Management [EM] to significantly accelerate cleanup at a number of sites. Under that plan, an investment of approximately $6 billion over four years could result in approximately 10,000 new jobs being created and allow DOE to shrink the overall footprint of the cleanup program by 90 percent by 2015 through increased facility D&D, soil and groundwater remediation and solid waste disposition (WC Monitor, Vol. 2 No. 1).
I have not seen this plan but must question exactly how defense environmental cleanup in particular can wisely spend an additional $5.5 B in 20 months (the time limit provided in S336), suddenly increasing the annualized rate of spending in the program by roughly 62%. Spending these funds over the “four years” cited from the DOE EM plan would make more sense, especially if there was something of a gradual ramp-up.
Neither do I understand how “the overall footprint” of the cleanup program could be shrunk by “90 percent by 2015” by application of these funds, quoting now from the Senate press release. This is a laudable goal but it appears to be too much progress to be achieved in so short a short time span and therefore raises serious questions about the nature of the cleanup involved. It is not too many years since the ill-fated “accelerated cleanup program” attempted to make short shrift of site cleanup obligations.
The Weapons Complex Monitor article continues:
The plan also proposes using remediated land at various cleanup sites for “energy parks” to site energy production facilities.
What kind of “energy parks” would these be? This might not be a bad idea in some cases, but the devil is very much in the details.
I find this proposed huge injection of money altogether fishy and urge responsible parties to consider it carefully, trimming its size, hedging its uncertainties, and/or lengthening the time in which the money could be spent. I too want increases in the cleanup program, especially at some sites, but I would like funding increases to be longer-term than 20 months, with a realistic run-up and community transition at the end, and I am sure we all would very much like to know just what the country and local communities would be buying. Transparency, local input, robust peer review, and general concurrence are essential.
In sum, how this much money could be wisely spent in so short a time is a mystery. Just throwing money at cleanup is not in anybody’s interest, except the same few contractors who would spend it.
3. The third item appears to be a hidden $50 B nuclear power loan guarantee.
The applicable section of the Senate Report is underlined:
TITLE 17—INNOVATIVE TECHNOLOGY LOAN GUARANTEE PROGRAM: The Committee provides an additional $9,500,000,000, to remain available until expended for loan guarantees to standard renewable projects such as wind or solar projects and for electricity transmission projects. From within the available funds, up to $15,000,000 may be used to cover administrative expenses in carrying out the guaranteed loan program. A General Provision permits the Secretary to temporarily make loans for renewable and transmission projects that are based on commercially available technology, a category of projects not included in the original statute. The Committee also recommends an additional $50,000,000,000 to support the deployment of eligible technologies under the Section 1702(b)(2) of EPACT 2005 that will contribute to transforming the energy sector. This funding will add to the existing loan guarantee authority provided in other appropriations bills to support self-financed loan guarantees. The Committee is aware of the strong interest in the program and the large number of pending applications. (emphasis added).
This is a huge loan guarantee. The “strong interest” and “large number of pending applications” are mostly applications for taxpayer-guaranteed loans to build nuclear power plants.
The U.S. Department of Energy (DOE) today announced it has received 19 Part I applications from 17 electric power companies for federal loan guarantees to support the construction of 14 nuclear power plants in response to its June 30, 2008 solicitation. The applications reflect the intentions of those companies to build 21 new reactors, with some applications covering two reactors at the same site. …the industry is…asking the Department to provide loan guarantees in the amount of $122 billion, which significantly exceeds the $18.5 billion in loan guarantees available under the June 30, 2008 Nuclear Power Facilities solicitation. The aggregate estimated construction cost of these 14 projects is $188 billion.
The attempt to hide these proposed massive loan guarantees must be condemned in the strongest possible language, quite independent of the policy involved.
I would strongly support nuclear power, the massive subsidies this industry has received to date, and would support this huge “preemptive bailout” as well – if only nuclear power were a cost-effective, safe, clean, and proliferation-resistant way to generate electricity, one which could be scaled up rapidly enough to make at least some difference in energy security and climate protection, and I would support it even more if it could efficiently create good jobs.
Construction of new nuclear power plants is a policy that is, and can do, none of these things.
Those multiple failures are why nuclear power must be subsidized so extravagantly, why these subsidies are such bad public policy, and why they have been so shamefully hidden in this bill.
One recent expert study estimated the actual (not “overnight”) capital cost for new nuclear power plants at 17-22 cents/kWh, with generation costs (including fuel, operations, and maintenance) at 25-30 cents/kWh. There are other very low carbon electricity generation technologies which can generate or store baseload electricity much better than this while producing few or no toxic wastes, no proliferation problem, plenty of good, accessible jobs, and which can be scaled up much faster than nuclear power.
Congress must ask why it is that nuclear technology, from which so much is promised, is in fact so financially risky that it simply cannot proceed without federal subsidies and massive loan guarantees.
A recent Stanford study found that the climate and health opportunity costs of new nuclear power were very high in comparison to readily-available alternatives. This is also the common-sense conclusion anyone can draw from the industry’s long lead times, high costs, and dangerous waste products.
This is not the place to debate merits of alternative energy technologies, but it is the place to advise against secretly privileging a technology which cannot flourish in the marketplace, either the financial one or intellectual one. Wall Street does not support new nuclear power plants. Congress should make a greater effort to understand why.
 Weapons Activities supports fewer than 3% of the jobs in New Mexico. As far as can be discerned from all the data available, this spending does not benefit the state as a whole. New Mexico declined in prosperity significantly relative to other states during Senator Domenici’s long tenure, over which laboratory appropriations in New Mexico more than tripled in constant dollars. This decline spanned several gubernatorial administrations led by representatives of both major political parties. See Los Alamos Study Group, Does Los Alamos National Lab Help or Hurt the New Mexico Economy? (pdf), July 2006, at http://www.lasg.org/LANLecon_impact.pdf.
 Department of Energy (DOE) Congressional Budget Request (CBR) for fiscal year (FY) 2009, Vol. 1 (pdf), p. 211, at http://www.cfo.doe.gov/budget/09budget/Content/Volumes/Volume1a.pdf.
 Ibid, pp. 115, 218, and 219 respectively.
 FIRP, like RTBF, is a very broadly-construed program: “The Facilities and Infrastructure Recapitalization Program (FIRP) mission is to restore, rebuild and revitalize the physical infrastructure of the nuclear weapons complex.” Ibid, p. 339.
 Pollin, Robert and Garrett-Peltier, Heidi, “The Employment Effects of Downsizing the U.S. Military (pdf),” Working Paper 152, 11/7/07, Political Economy Research Institute, University of Massachusetts, at http://www.peri.umass.edu/fileadmin/pdf/working_papers/working_papers_151-200/WP152.pdf.
 Average annual defense compensation per worker in 2005, according to the study of Pollin and Garrett-Peltier cited above, was $66,000. In 2007 the average worker at a representative NNSA production plant, KCP, received $95,000 in salary and benefits, according to NNSA. At LANL, the average compensation of LANL's 9,347 employees was $105,499 in 2007, while the average compensation LANL's total workforce of 14,510 staff and contractors was $79,628, according to LANL. Even correcting for inflation between 2005 and 2007 these averages are more than average defense industry compensation. Regarding secondary job creation, there is an inverse relationship between income and the fraction of that income which is spent, which creates secondary jobs.
 FY2008 spending for defense environmental cleanup was $5.35 B.
 Craig Severance, “Business Costs and Risks of New Nuclear Power,” January 2, 2009, at http://climateprogress.org/2009/01/05/study-cost-risks-new-nuclear-power-plants/.
 Mark Z. Jacobson, Energy Environ. Sci., 2009, DOI: 10.1039/b809990c, at http://www.rsc.org/Publishing/Journals/EE/article.asp?doi=b809990c. For summary see Stanford Report, December 10, 2008, “Wind, water and sun beat other energy alternatives, study finds."