November 18, 2009
Economic Scene
A Stimulus That Could Save Money
By DAVID LEONHARDT
WASHINGTON
The one highly visible success of the stimulus bill has been the cash-for-clunkers program. It induced a boom in vehicle sales this summer that clearly would not have happened otherwise.
The rest of the stimulus bill has created a lot of jobs — 700,000 to 1.5 million, according to economists’ estimates. But it has done so in thousands of little ways: scattered construction projects, plugged-up school budgets and the like. Politically, these measures are not popular enough to create a groundswell for more of them.
And the economy still needs help. So White House officials are looking at creating a new version of cash for clunkers — this time for home weatherization.
John Doerr, the Silicon Valley venture capitalist, and former President Bill Clinton have separately suggested versions of the idea to the White House. Mr. Doerr calls his proposal, which would give households money to pay for weatherization projects, “cash for caulkers.” Rahm Emanuel, President Obama’s chief of staff, told me, “It’s one of the top things he’s looking at.”
The idea has a lot to recommend it. The housing bust has idled contractors and construction workers, who could be put to work insulating homes and caulking air leaks. Many households, meanwhile, would save substantial money — not to mention help the climate — by weatherizing their homes, research by McKinsey & Company has shown. All in all, a cash-for-caulkers program seems like a promising part of the jobs program for 2010 that Mr. Obama has suggested he is planning.
But I would also mention one point of caution: the details of any caulkers plan will matter enormously. Weatherizing a home, as I recently discovered, turns out to be a lot more complicated than buying a car.
This year, my wife and I had an energy audit done on our home. We were interested in finding out if we could save money and, given the attention that weatherizing was starting to get, I figured it could also make for good column fodder. For $400, an auditor spent hours scouring our house, with the help of a big fan he set up in our front door and an infrared camera. He produced a full-color, 13-page detailed report, informing us of the leaks in our house, and he was also willing to tell us which changes were usually a waste of money (new windows).
Even so, we are still trying to figure out which weatherization projects we should do. The whole package would probably cost $4,500 and save us something like $400 a year. We may not stay in the house nearly long enough to justify the investment.
Such concerns are typical. How do you find an auditor? How do you know whether you should seal a few ducts or pay $2,000 for new insulation? Which of the existing subsidies — state and federal — might you qualify for?
Mr. Doerr and Mr. Clinton are well aware of these problems. Mr. Clinton has sent the White House a memorandum written by his foundation staff that lays out the reasons people don’t weatherize their homes. Mr. Doerr, who sits on a board of outside economic advisers to Mr. Obama that is working on a formal cash-for-caulkers proposal, told me that his goal was to “keep it really simple so we can do it really fast.”
The Doerr plan would cost $23 billion over two years. Most of the money would go for incentive payments, generally $2,000 to $4,000, for weatherization projects. The homeowner would always have to pay at least 50 percent of the project’s total cost. About $3 billion would be set aside for retailers and contractors in the hope that they would promote the program, much as car dealerships promoted cash for clunkers. (Mr. Doerr says he owns no stake in any weatherization companies.)
The Clinton plan depends on the reallocation of clean energy money from the stimulus bill that has not yet been spent. It covers not just houses and apartments but also commercial and industrial buildings.
Perhaps most intriguing is its proposal to help homeowners and building owners who are nervous they will end up selling their property before a weatherization project has paid for itself. Under the Clinton plan, they could add the project’s cost to their long-term property tax bill, effectively splitting the cost with the next owner. The New York State Legislature approved such a program on Monday.
All these efforts would lead to more weatherization. But I would be surprised if they were enough to create a program as successful as cash for clunkers. Remember: Many homeowners could already save money by weatherizing their homes. And they are not doing so.
That’s in large part because the projects can seem so daunting. To date, energy experts, in the government and the private sector, have not done a good job of distributing useful information. What does exist tends to be either too complicated or too general. I recently asked various experts what percentage of homes should get new insulation, for example, and several replied that it varied by region — which is both true and unhelpful.
Imagine, though, if the Energy Department put together a weatherization-for-dummies fact sheet and Mr. Obama began promoting it.
It could start by noting that almost all homes should have a programmable thermostat (about $100) to turn down the heat or the air-conditioning when nobody is home. Other simple steps can include wrapping a water heater with an insulation blanket and replacing heating and cooling filters. Next on the list would be sealing easily accessible holes in air ducts, which can cost just a few hundred dollars and pay for itself in a few years. In California, the average duct system loses 30 percent of its heating or cooling to leaks.
Finally would come the more complicated categories, including insulation and heating equipment. Yet some basic information could still help enormously here. What share, say, of Midwestern homes built before 1950 could use more attic insulation? How quickly would the insulation pay for itself on average? Every home is different, obviously. But without any reference point, many people won’t be confident enough to plunge into a project.
The shining example that Mr. Clinton cites is a Houston program in which the local government pays about $1,000 to weatherize any home in a given neighborhood. It works in part because the houses need similar improvements, which makes the program easy for residents to understand.
“Unlike traditional programs that provide an audit and a customized package of solutions for each home,” the Clinton memorandum notes, Houston “offers a fixed set of interventions that include climate-appropriate ‘low hanging fruit.’ ”
The bottom line is that cash for caulkers would be trickier than cash for clunkers — yet would have the potential to do far more good. McKinsey, the consulting firm, estimates that households could reduce their energy use by 28 percent over the next decade. In terms of greenhouse gases, that would be the equivalent of taking half of all vehicles in this country off the road.
And unlike many other climate-friendly policies, it would not cost money over the long term. Done right, cash for caulkers would be precisely the kind of stimulus that makes the most sense: spending money now to save money later.
