The Questionable Authority

Weatherization Assistance Money = Good Stimulus and Good Evidence-Based Energy Policy

Posted by Mike Dunford on January 27, 2009
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Back at the end of last week, I took a couple of minutes to make fun of House Minority Whip Eric Cantor’s rather bizarre assertion that providing money to help poor people weatherize their homes won’t stimulate the economy or create jobs. Since then, I’ve taken a much more detailed look at the program, and I’ve begun to realize not only just how good an idea this particular part of the stimulus package is, but also just how many different ways this is smart.

Here’s the proposal as it stands right now:

$6,200,000,000 shall be for the Weatherization Assistance Program under part A of title IV of the Energy Conservation and Production Act (42 U.S.C. 6861 et seq.).

Let’s look at some of the different reasons that this bit of funding is a good idea. Since this is a stimulus bill, we’ll start out by looking at the reasons that this is a good economic stimulus.

As I write this, I’m listening to one of Cantor’s deputies – Chief Deputy Minority Whip Kevin McCarthy – give an interview to MSNBC. He’s objecting to the stimulus bill for a number of reasons. Among the laundry list of objections he’s citing are that the money isn’t going to get into the economy quickly enough, and that it doesn’t do enough to help small business. At least as far as this particular line item is concerned, those objections do not apply.

The Weatherization Assistance Program has been around for a long time, although not at anything remotely close to the proposed funding level. (The stimulus proposal represents about a 25-fold funding increase.) Because the program already exists, it will be much easier to get the money distributed than would be the case if we were talking about an entirely new idea. All of the mechanisms for distributing the money are in place already, so it should be possible to start spending this money within a matter of a couple of months of the OK, at most.

The amount of money that can be used under this program to fix a single house varies from state to state, but the average is under $3,000. Weatherization improvements tend to be relatively small – as are the companies that do most of the work. Most of this money will be going to home improvement contractors, not to major corporations. This will help small businesses. In fact, it will help lots of small businesses all over the country.

That’s because under this program the Department of Energy distributes the money to the individual states, following a formula that divides up the funding based on a number of different factors. The states then set eligibility criteria, and distribute the money to the families that need it. This means that not only is the money going to be spent quickly, it will also be spent in all 50 states.

This is also spending that should help the employment picture, at least in the short term. According to the Department of Energy, this program has been responsible for weatherizing between 75,000 and 100,000 homes per year. Even if we assume that only a third of the funding will be spent this year, and that the amount spent per home almost doubles, that number should climb to over 400,000 homes this year. That’s going to require more workers than have been involved in the past. That’s not necessarily going to create new jobs, but at the absolute worst it will save some by providing work for contracting firms that would otherwise have been underemployed.

In addition to the short-term benefits that I just outlined, there are other economic benefits that are less direct.

In most states, Weatherization Assistance Program money is restricted to families making less than 150% of the federal poverty level. Energy expenses tend to make up a larger proportion of the budget for these families than is the case in the higher income brackets. A $358/year reduction in energy costs – which is about what you get with weatherization – might not sound like much to a lot of us. But to a family of four at 150% of the poverty line, that works out to the equivalent of just over 1% of their annual income.

And that’s not just $358 this year. That’s a savings that will recur every year for the lifetime of the weatherization. Even if we assume that the weatherization is only going to last for 10 years, that’s a long-term income boost of over $3,500 per weatherized home, and that’s above and beyond whatever short-term economic benefits are produced by the actual construction work.

And then there are the energy policy benefits.

In his confirmation hearing, Energy Secretary Steven Chu described increasing energy efficiency as, “the lowest-hanging fruit” when it comes to both reducing our carbon footprint and decreasing our dependence on foreign sources of energy. He could not possibly be more right.

A caulk gun might not be as sexy a piece of green technology as a solar panel, or a Prius, or a clean coal plant – particularly when it’s being wielded by someone displaying four inches of hairy butt crack – but it’s got enormous advantages over all of that other stuff. It’s cheap, it requires relatively little training to use effectively, it’s here now, AND IT WORKS.

Weatherizing a house can reduce that home’s energy consumption significantly. According to a 2002 study conducted by the Oak Ridge National Laboratory (pdf), a weatherization project that costs approximately $2,500 per home can reduce that home’s energy costs and carbon dioxide emissions by between 14% and 25%, depending on where the house is located and how poorly weatherized it was to begin with.

Let’s stop and think about that for a second. Effectively, this means that even if just 10% of the homes in this country are in need of weatherization, we could theoretically cut emissions by 1%-2% just by fixing that problem. We could do that at an up front cost of only $2500/home, realize long-term economic benefits of $3500/home or more, stimulate the economy in the process, and get the job done in a couple of years using nothing more than currently existing technology. That’s not just a low-hanging fruit. That’s a huge, juicy, delicious low-hanging fruit.

Would anyone like to take another crack at explaining why this is actually a bad part of the stimulus package that won’t really do anything for the economy?

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Comments

  1. #1 Joshua Zelinsky
    January 27, 2009

    Three possible reasons that this is considered to be bad by Cantor:

    1) He is of the mindset that environmentally friendly actions will never help the economy. This seems like a common mindset among certain elements of the Republican party.
    2) He thinks in terms of economic stimulation to large businesses and this will go to small contractors.
    3) This hurts rather than helps oil and gas companies.

    Oh, you wanted an explanation that makes economic sense? Never mind then.

  2. #2 BaldApe
    January 27, 2009

    Given the Republican record on managing the economy, I hope I can be forgiven if I suspect that Republican expertise in economics is similar to creationist expertise in biology. Everything they say is either a lie or a delusion. They don’t even seem to be trying to connect with the real world.

  3. #3 Alison Hardy
    January 28, 2009

    Thank you for seeing the light! My company does “weatherization” (a dreadful word that only Washington could concoct)and I employ three people and want to hire more if I have assurance that business will continue to be good. Yes, our projects are small money, but our customers (not low income homes) are delighted to have windows and doors that work, keep out the drafts, and are original to the house. This kind of investment has a very immediate payback both to the property owner and to the business community like me that provides these services.

  4. #4 James Bordonaro
    February 12, 2009

    I’m hoping to start a new weatherization business in Central Kansas. Any suggestions on how to tap into the new stimulus money?

  5. #5 Chris Glover
    March 16, 2009

    I have eighteen years of experience in weatherizing homes and offices using heat resistant window films that help reduce solar energy by up to 79% savings on costly bills.

    Does anyone know if “window tinting” falls into the Weatherization Assistance portion of the Stimulus Package?

  6. #6 techskeptic
    April 22, 2009

    Sorry to be so late to the game here.

    this is why the weatherization part of the stimulus package is bad:

    “ASSISTANCE FOR PREVIOUSLY WEATHERIZED DWELLING
    UNITS.—Section 415(c)(2) of the Energy Conservation and Production
    Act (42 U.S.C. 6865(c)(2)) is amended by striking ‘‘September
    30, 1979’’ and inserting ‘‘September 30, 1994’’.”

    This allows homes in the last 15 years, that were already weatherized, to be weatherized again. What we want are more homes to get weatherized at least once, before we go ahead and start improving already improved homes.

    That is not to day that the whole program is bad, just this aspect of it. At least to me.

  7. #7 ccoupon
    June 8, 2009

    Good news is the money trickles down to local agencies. Bad news is that there are over 900, and counting, different agencies involved. I found a useful book that tells you how to get going and who to contact at http://www.weatherizationriches.com Its not free but all the legwork has been done. Hope this helps

  8. #8 Cher N
    September 29, 2009

    You contradicted your own self…”That’s not necessarily going to create new jobs…” Dah!
    A lot of this taxpayer money goes to landlords(or slumlords in some cases) who only have to pay a small percent of the cost although they could afford it! Why should everyone pay into his income?!

  9. #9 Robert
    November 26, 2009

    People get government jobs for security. Most do not want to be challenged. They just want to show up for work and collect their paycheck. Trying to “ramp up” this program at this speed is a considerable challenge. Those tasked with this challenge are not up to it. So it will surely be a complete waste of time and money. Read the comments at the end of this article.
    http://www.businessweek.com/technology/content/jan2009/tc20090129_222846.htm?chan=top+news_top+news+index+-+temp_technology

  10. #10 Lambert jackson
    November 29, 2009

    I am interested in applying for the program

  11. #11 QA's Mom
    November 30, 2009

    In order to find out where to apply contact your local elected official. They should be able to tell you how to begin.

  12. #12 GregOregon
    December 6, 2009

    Ok everyone.. Glad I stumbled across this article. I am an insulation contractor in Southern Oregon. I, like many other fellow american contractors across the country have watched and waited to see how the “stimulus” money would trickle down to the few of us that have any idea just what weatherization is. When I finally found out how to apply for the “contractor” portion of the stimulus money, I quickly realized that this was going to be a very narrow and selective format for qualified companies. Here is my take I’ll try to be brief;
    New construction had completely stopped. Contractors were going bankrupt everywhere. I wasn’t getting paid from my “prime” contractors and I was laying off guys every month. The stimulus money included weatherization money which was a foreign word to me, but had everything to do with insulation and what my company does. I applied for the contract which was a very lengthy and in depth process and was awarded part of it along with 3 other companies. This is what I know… This program has produced 8 positions in my small business so far. I am hiring another 6. The other companies are hiring about the same. Many people that are on assistance (meaning their energy bills are being paid by tax dollars) are getting their homes weatherized with stimulus money. This will save the taxpayers money in the long run in more ways than I can put down here. Also, when you weatherize a home, you are creating a safer and healthier environment for the occupants which helps taxpayers not pay as much because the people on assistance aren’t burdening the healthcare system as much.
    Anyhow, it seems smart to me to spend money now to save money later. The only downside is that it takes a huge amount of paperwork and extra expense for oversight. A lot of hoops and stipulations to be able to qualify my business for this. I had to show that my company did this type of work already, certain certifications were required and I had to be able carry (financially) the jobs until they were tested with a pass. This really limited who could really do this because almost every small business was broke or had poor credit rating which was another stipulation. I couldn’t have a criminal background (felony) or any of my employees. I had to have a huge insurance policy and current staff in place. Really, it was only by the grace of God that I was able to maintain all of this long enough to qualify for the contract. I had to sell everything I had left of any worth to stay afloat. It is a hard road to recovery people. Never quit.
    GC

  13. #13 Darin
    December 18, 2009

    Funny how everybody’s 1st impression is that it’s easy work and doesn’t take much for training…