The Corner

Insulate Your Home With Taxpayer Cash!

If you’re trying to get an early read on how the stimulators plan to rob us next, David Leonhardt’s column is a good place to look for information. Right from the start, you can tell this isn’t going to go well:

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.

Industry analysts at Edmunds concluded that most of the cash-for-clunkers sales were “pull-forward,” meaning that the program merely paid people to buy a car in July that they would have bought in September. Only 18 percent of the vehicles sold were “incremental,” meaning purchases that wouldn’t have happened anyway. Divide the cost of the program by the number of incremental vehicles sold and you arrive at a subsidy cost of $24,000 per vehicle. Cash for clunkers was a terrible program. Leonhardt is off to a bad start.

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.

Whether the stimulus has created any jobs at all is subject to serious debate — I take up this question in the next issue of NRODT — but one thing we know is that it has not created anywhere near the number of jobs its supporters claim it did. Tens of thousands of the jobs the stimulus reportedly saved were never really in danger; other job totals were inflated when government agencies and non-profits counted raises as new jobs. Scattered construction projects? You mean like the $3.4 million eco-passage for turtles in Florida or John Murtha’s airport to nowhere? There’s a reason these measures are not popular: They are powerful reminders that government has neither the incentives nor the information to guide economic resources to where they are most needed.

Despite the government’s abysmal track record in this regard, the alternative — letting individual economic decisions guide resources — is just too horrible for some people to contemplate. Case in point: Millions of homeowners have evaluated the costs and benefits of energy-saving weatherization projects and decided they’re not worth it. Horror! What’s needed, Leonhardt says, is a “cash for caulkers” program.

This idea is not new. The stimulus bill gave the Department of Energy $5 billion to fund weatherization efforts in low-income communities. For starters, these programs are especially prone to waste and fraud

The money is first allocated to state governments, which are then directed to give funding priority to “community action agencies.” (Hello, ACORN!) Prior to the stimulus windfall, the program had a tiny budget; its auditors nevertheless found tens of thousands of dollars’ worth of waste in one state (Pennsylvania) alone.

They also fail the test of timeliness: Unions have tied up the spending with lawsuits:

In another state (Nevada), the massive influx of stimulus funds met with delays and confusion after organized labor claimed it wasn’t getting a big enough share. After the stimulus passed, Nevada Democrats passed a law requiring half the new workers to have gone though union apprenticeships, adding to the cost of the program and slowing its pace. On top of that, the AFL-CIO sued the state housing division, arguing that all the new jobs should pay union wages and benefits. States and unions are involved in similar disputes in other states, leading even green advocates to question how much bang for the buck the program is providing.

Leonhardt stresses the need to make sure that we design cash for caulkers so that it doesn’t have all that waste and fraud normally associated with government programs. “The details . . . will matter enormously,” he writes. Leonhardt’s admonition will also serve as a handy excuse when the program becomes as big a bust as the rest of the stimulus. It’s not that the government is ill-equipped to spend money wisely or efficiently, you see. It’s just that it keeps screwing up the darn details!