Today the House of Representatives passed HR 5019 in a vote 216 for and 161 against. The Bill is the Cash for Caulkers plan, officially known as Home Star Energy Retrofit Act of 2010. In New York State all but 2 Represntatives voted for this Bill (Peter King and Christopher Lee, both Republicans).
The concept of the Cash for Caulkers Bill is that homeowners will be motivated to improve their home’s energy efficiency, thus saving money while at the same time helping the economy by creating (or saving) construction jobs. The concept is good on it’s face. But the details are more questionable.
The cost of the Bill is estimated to be $6 billion over 2 years. Considering the nature of Government, it is assured that the actual price will be potentially 10% higher or more. But where is the funding for this Bill coming from? That question remains unanswered to date.
Seperate of that question is another. How effective will this BIll be in helping the economy and homeowners? Supporters are stating that it will create/maintain over 160,000 jobs in construction. They state it will save 3 million homeowners $9.2 billion over 10 years on energy bills. Again, government estimates are always wrong, and almost invariably to the disfavor of the public – so those estimates should be taken with a pound of salt.
But this Bill treads on the same ground covered by the Obama Stimulus. Last year $4.7 billion was authorized for the weatherization program, the majority of which went unspent as complications in dispersing the funding delayed it. Of the funds spent, little positive effect has been seen. Equally dubious has been the overall effect of the Obama Stimulus that has failed to stimulate the economy or create/save jobs in the private sector as was its stated purpose. Which does not even touch upon the $1,500 energy tax credit that was created last year, essentially for the same purpose as Cash for Caulkers proposes.
If the prior tens of billions of dollars in funding and programs have failed to stimulate the economy, the construction industry, or help save homes what reason is there to believe that billions of more dollars will do it?
It gets more questionable when viewed from the position of homeowners. 1 in 6 homeowners are in some form of default right now. Over 1 million homeowners are expected to lose their houses this year. Foreclosure rates are at all-time highs. Government programs were authorized to spend in excess of $75 billion to help save mortgages, and have not been able to hit a single target in that goal.
Looking at it from a more regional aspect, the Broome county area has an unemployment rate of about 9.3%. Mortgage forclosures in Broome County are 1 in 2,372 an indication that is considered high. In Binghamton it is exceedingly high.
Given these facts, contemplate what the Cash for Caulkers program is proposing. Homeowners are expected to take money they are saving in case of job loss (potentially in the range of $1,000 – $5,000) and spend it on renovations to their home – that has lost at least part of its value over the last 2 years. The reward for this will be a slightly slower energy bill, roughly $307 a year or $25.56 a month (based on the numbers stated by supporters). This does not factor in the increase in taxes and mandatory expense of the Health Care Reform or the potential increase in energy costs if Cap & Trade is passed.
Therefore Representatives like Rep. Maurice Hinchey (representing the area above area) believes that a homeowner should spend $5,000 of savings, to eventually get a rebate of $2,500 at some future point – likely off of their IRS taxes which does not mean actual cash in hand – so they can retain $26 a month. Assuming that any hiccup occurs in the economy (like the economic problems of Greece expanding to Europe and thus affecting America), the potential for further job loss (like the recent layoffs at Lockheed Martin, NYSEG, Vestal School District and others) increases. If any homeowner has taken “advantage” of this Bill as Rep. Maruice Hinchey would advise, they would have no funds available to maintain their mortgage. Considering the over 1 year backlog of other Government programs to help homowners keep their homes, it would be feasible that they would therefore lose their homes.
Looking at it in yet another manner. Is the potential gain of $26 a month worth spending $5000 all at once? It will take 192 months (16 years) to recover the investment of $5000 or 8 years to recover half that amount – if the rebate equates to cash in hand after taxes. In an economic downturn that is expected to last several more years, at best, is that really where money needs to be spent?
Rep. Maurice Hinchey believes so. This will likely be one of the highlights of his re-election campaign. That he is helping to save money and stimulate the economy for constituents. Yet it is highly unlikely that Rep. Hinchey will mention that the savings will be $26 a month, or that if the funds come from the national deficit the interest alone will exceed the savings by 2x.
Thus we are left with the question, is Cash for Caulkers a plan that will help millions of Americans, or a bullet point for politicians looking to be re-elected? You might want to ask your local Congressman before November.