Weatherization: More Clouds on the Horizon

The American Recovery and Reinvestment Act (ARRA), the so-called stimulus package, continues to be a source of contention and controversy as the end of 2009 approaches.  When Congress first considered the $787 billion legislation, CAGW expressed grave concerns about the entire plan, especially those programs which received massive increases in their budgets.

One such program is the Department of Energy’s Weatherization Assistance Program (WAP).  The annual WAP budget had been $225 million, but the program, which has not been subject to oversight and review for many years, received $5 billion in the stimulus bill to be spent over a three-year period.

In December, President Obama upped the ante on weatherization again by announcing his intention to subsidize homeowners around the country to increase energy efficiency.  During a speech staged at a Home Depot in Alexandria, Virginia on December 15, 2009, Obama unveiled what skeptics are calling “Cash for Caulkers,” a new two-year $23 billion incentive program to spur homeowners, who would stand to get between $2,000 and $4,000 to buy new doors and windows.

Most analysts view the program as yet another giveaway program to appease the President’s green supporters.  It is also a way to throw a bone to the nation’s construction industry (which has lost 1.6 million jobs since 2006, according to the Bureau of Labor Statistics), manufacturers of costly energy-efficient appliances, and energy accrediting organizations, which could be tapped to provide training for energy auditors.

A November 17, 2009 New York Times article by David Leonhardt detailed many of the complications and pitfalls associated with implementing such a plan to ensure its effectiveness.

He first noted that homeowners already have numerous incentives to weatherize their homes (such as dramatically lower energy bills) and they are not doing it.  Leonhardt retained an energy auditor (at a cost of $400) who gave him a detailed plan on which weatherization upgrades for his own home were worth the cost.  The auditor told him that it would be a waste of money to install new windows, which President Obama alluded to in his Home Depot address as one weatherization option.  Overall, the auditor recommended $4,500 worth of work, but the energy savings would only amount to $400 a year, meaning that Leonhardt, or someone with similar work done on a home, would have to wait more than a decade for the weatherization investment to pay off.

Leonhardt’s column pointed to other steps that would achieve better results that homeowners could take on their own at minimal cost.  For example, Leonhardt says, the Energy Department could help by simply publishing a “weatherization-for-dummies fact sheet…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 other words, instead of a new $23 billion subsidy program, the federal government’s role could be limited to educating Americans on which weatherization steps would be most cost-effective.

That kind of common sense, which calls for the government to limit its expenditures and its involvement, is in very short supply.  John Doerr, a Silicon Valley venture capitalist who is a member of the President’s Economic Recovery Advisory Board and one of the architects of the “Cash for Caulkers” program, told Leonhardt that his goal was to “keep it really simple so we can do it really fast.”  If recent history shows anything when it comes to federal spending, simple plus fast does not equal effective or efficient; it is a fantasy which leads to massive waste.  A cursory glance at the massive fraud uncovered so far in the new homeowners’ tax credit program provides a hint at what could be in store in the cash for caulkers program.

The President’s newest weatherization brainstorm prompted CAGW to go back and find out how the stimulus bill’s WAP program was going almost one year after its enactment.  As of September 30, 2009, according to a December 2009 Government Accountability Office (GAO) report, only 2 percent of the $5 billion allocated for weatherization assistance had been spent (about $113 million), and 1 percent of the proposed 593,000 housing units has been weatherized.

Of course, the weatherization bureaucracies at the energy department and in each state have grown exponentially; the DOE itself has retained 5 percent of the funds to cover administrative overhead and each state is following suit, at differing levels.

Most states reported difficulties in implementation of WAP because of the requirement in the stimulus bill that all contractors involved in weatherization be paid Davis-Bacon, or union, wages, including fringe benefits.  States and the hundreds of community action agencies which will act as conduits for the billions in weatherization funds almost uniformly reported concerns about the huge fiscal burden and onerous paperwork requirements with which they must now comply.

For example, Michigan officials reported that they were forced to hire 22 employees to implement the program, including a Davis-Bacon specialist.  Most states that GAO interviewed had no clue how to measure any energy savings associated with the program. 

In regard to job creation numbers associated with the WAP, they are completely suspect, as all the jobs numbers on recovery.gov.  In Ohio, GAO noted that the “inconsistency between potential positions and actual hours worked resulted in an inaccurate reporting of jobs created.”

The WAP is so exposed to waste, fraud and mismanagement that the Energy Department has begun hiring one program officer for each state, the District of Columbia, and all of the recipient Indian tribes, just to help monitor the expenditure of funds.

This administration and this Congress continue to demonstrate an almost religious fanaticism about controlling as much of the economy and individual behavior as they can through direct spending and increasing regulations.  In this way, they can reward favored constituencies and allies with taxpayer handouts and special carve outs, and use their power to punish those who resist.  When it is clear that the weatherization program, indeed the entire stimulus bill, has become a trough for fraud and abuse, the implementation of yet a $23 billion subsidy program for even more “weatherization” should be unacceptable to taxpayers, and rejected by Congress, which has so far failed to show a shred of self-restraint on spending.