Cash for Caulkers will save you… or will it?

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.

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About the Author

Michael Vass
Born in 1968, a political commentator for over a decade. Has traveled the U.S. and lived in Moscow and Tsblisi, A former stockbroker and 2014 Congressional candidate. Passionate about politics with emphasis on 1st and 2nd Amendments.

2 Comments on "Cash for Caulkers will save you… or will it?"

  1. The Republicans are for this bill, but only if the funding is clear. It’s not clear right now where the money is coming from…which is the problem. It’s too bad, because it has the possibility of creating lots of jobs (construction jobs), saving consumers money, and creating less dependence on foreign oil.

  2. Anne,

    First I find it interesting that you’re linked directly to a pro-Cash for Caulkers website. It is something that I believe you should have stated directly in your comment. Is your blanket comment a paid position? Do you work for a pro-Cash for Caulkers organization, and/or political party?

    But let me clarify the points you made. There are Republicans that voted for this Bill. I never said there weren’t, just that the 2 Republican Representatives from New York, my home State, did not. But to be exact 12 Republicans voted for this and 8 Democrats voted against it. Though this does not improve the effect of the Bill in the least.

    As I stated and you mentioned, there is no indication where the funding will come for this Bill. If this Bill is based on increasing the national debt, it will add to the interest payments that in 10 years will be unsustainable – as stated by economists across the spectrum. And that assumes no further spending to increase the debt, which is unrealistic. If it is paid for by increased taxation, the benefit is reduced by the impact of those taxes on the nation as well as those that benefit from the Bill.

    The job creation aspect is debatable. It is proposed that it will create roughly 160,000 jobs. Then again the Obama Stimulus was stated to have created 2 million jobs by this point in time. The Obama Stimulus was also supposed to have stabilized the unemployment rate at 7.5% at this time. Projections of success by the Government have always been incorrect to the high side over the past 40 years. It is closer to reality to expect that the job creation numbers are overestimates than accurate. Which says nothing of the fact that this is a temporary boost to job creation, only delaying the negative drag on jobs for a period of months at best.

    The savings I stated, given the published figures given by supporters, equates to $25.56 a month in savings (over 10 years as stated prior). But according to the site you are linked to my numbers are off. I assumed a maximum of $5,000, but the site you linked to states the maximum is $6,000. Thus the net savings for the projected 3 million households (assuming a cost of $6 billion dollars and no cost overruns that are rampant in Government – and not factoring in any other tax or proposed Bill) will pay back the investment in 235 months – rounded up. That’s 19.6 years to regain the improvement based on energy savings, 9.8 years if the tax credit is applied and cash is received. You get better returns from betting black on the roulette wheel in Las Vegas.

    But again, tens of thousands continue to be fired and/or laid off. The same investment if saved could provide a cushion to homeowners in trouble. Especially since Government programs to help homeowners, have to this point failed to live up to those projections (though they recieved $75 billion in funding). Add to this the fact that these funds are essentially duplicate to the funding made last year in the Obama Stimulus. If it did not work last year, why will adding more money make it work now?

    Plus, as a side thought, this Bill places an investment in less than 1% of Americans paid for by 100% of taxpayers. Why should the burden of someone else’s home improvement be added to my taxes, or why should my taxes be redirected away from programs that will help feed and clothe the needy? There is only so much tax money to be spent.

    Lastly the dependance on foreign oil. Given this will have some impact. But the impact is realistically neglible. Were it significant you would have cited the savings. Which says nothing of the fact that the only way to truly curb the dependance on foreign oil is to use another energy alternative. Given the fact that all forms of green energy currently under development are still 10 years away from mass implementation (at best) the only means of curbing foreign oil consumption are: 1) domestic drilling 2) increased use of coal 3) nuclear energy. This Bill addresses none of those factors, and with only less than 1% of the population involved it resolves nothing substantial.

    Thus in total review, this Bill does little to improve the NATIONAL economy in the best case scenario. It potentially helps to raise the national debt to unsustainable levels, though in a marginal part. It will improve the energy consuption in less than 1% of the population while adding a burden on 100% of taxpayers (in the most likely outcome of increased taxes). It will have its savings reduced dramatically if other Government mandates and proposals are factored in – such as the increased taxes and mandatory requirements of the Health Care Reform or the effect of the 150% increase in energy costs proposed by the Cap & Trade Bill.

    Most notably, a savings of $26 a month (for 10 years) is just slightly more than a joke. The additional money saved will not comfort a homeowner in default, nor provide a cushion to anyone that loses a job. The ROI (Return on Investment) is astoundingly low, so much so that no supporter is willing to quote the return.

    If you want to spout talking points in favor of a Bill, next time read my writing and address my concerns. But a blanket comment won’t go unanswered on my blogs. My readers deserve better than polispeak. And if you are part of a political position say so (whether for or against). You aren’t impartial, though I’m not sure if you are being paid for your opinion. My readers deserve to know if you are.

Thank you for lending your voice. We appreciate hearing what you have to say.

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