How many cities and counties turn down "free money"?
Greensboro city council members are thinking more than twice about accepting a $5 million U.S. Department of Energy (DOE) grant of "free money" for retrofitting homes to make them more energy efficient.
According to Sam Heib’s Carolina Journal article, the city council has twice tabled the staff’s request to approve the grant. The grant requires local homeowners who want to take advantage of the grant money to take out a loan to pay for energy-saving improvements. Presumably, energy savings will help homeowners repay the loans. In addition to the $5 million of federal taxpayer money, the grant requires the city come up with $20 million in city taxpayer money over three years.
Council members are asking some of the right questions:
Council member Danny Thompson expressed concern about homeowners taking on more debt, which he said largely was responsible for the economic meltdown still plaguing the country.
"I think this is what got us into a crisis in the first place," Thompson said. "I ask that we proceed with caution."
Skepticism over the program reached its height when council members Dianne Bellamy-Small and Trudy Wade — normally on opposite sides of the issues — both agreed that it was hard to see the winners in this program, aside from government bureaucrats.
Bellamy-Small — probably the most liberal member of a conservative-majority council — described the grant program as "government as its usual self.
Bellamy-Small said. "I will not support encouraging an 80-year-old woman to go out and get a loan, because she’s probably not going to live to pay it off."
That remark about government bureaucrats being the winners refers to the potential two new staff positions and $1.8 million to pay consultants in the grant.
But those questions are just the tip of the iceberg. Greensboro council members should also be asking about how federal "stimulus" funds create jobs and about the significant personal financial conflicts of interest by DOE officials responsible for this program.
Back in January 2009 when President Obama proposed his nearly $1 trillion stimulus bill, JLF Vice President for Research Dr. Roy Cordato predicted that the spending would not create jobs or get the nation out of the recession. (Several other North Carolina economists made similar predictions.) Here we are nearly two years later and unemployment remains high, job growth is stalled, and the economy is still faltering. Lucky guess? Hardly.
Cordato made his predictions based on economic science. Regardless of what Keynesian economists say, the federal government cannot spend its way out of a recession. Government spending, even at the trillion-dollar level, will not work because that money comes from the private sector — either by taxes, borrowing, or printing money — where it is needed to create real jobs.
As the wealth-creating sector of the economy suffers under the burden of higher taxes, the disfavored industries may be forced to lay off workers or even close their doors. Consumers whose incomes depend on those industries will be forced to spend less, harming all those who would have been beneficiaries of that spending. Instead of economic stimulus, we get a wealth transfer from private entrepreneurs motivated by real human preferences and resource scarcities to those who are favored by the whims of congressional vote trading and special-interest pressures.
Greensboro council members should ask the staff to prove that the number of jobs "created" would be greater than the number jobs destroyed by this DOE program. Of course, the jobs created are visible, and politicians are there to take the credit. But the greater number of jobs destroyed by this government spending are largely unseen.
They are the people who lose their jobs because their industries have to cut back. Or it may be those who are finding it impossible to get a job because private-sector investors are being squeezed out of the market by government-financed demand for scarce resources. These costs are real, but those who bear them cannot trace their plight easily to the government policies.
On the other hand, it can be easily demonstrated that the stimulus money goes to politically favored industries, or what is commonly known as "crony capitalism," a policy practiced by both parties (see John Stossel’s explanation of the term here.)
Serious Materials is a leading manufacturer of energy-efficient windows. Both President Obama and Vice President Biden have visited the company’s plant near Pittsburgh and praised its work.
Unfortunately, the DOE assistant secretary responsible for energy efficiency programs and her husband have significant financial conflicts of interest. According to the McClatchy Washington Bureau:
Cathy Zoi, the assistant secretary of energy for energy efficiency and renewable energy, owns between $250,000 and $500,000 worth of stock in Landis+Gyr, a Swiss-based manufacturer of special electric meters that are used to create an efficient "smart" grid of electricity use.
Her husband, Robin Roy, owns options on at least 120,000 shares of Serious Materials, a leading manufacturer of energy-efficient windows that’s been singled out for praise by President Barack Obama and Vice President Joe Biden. As an officer of the company, Roy receives options on an additional 2,500 shares every month and will continue to do so until October 2012.
Greensboro city council should ask city staff if the DOE grant would pay for replacement energy-efficient windows and if there is a possibility that these windows would be purchased from Serious Materials. Greensboro council members could have an opportunity to take a principled stand against crony capitalism and corruption at DOE.
Every city council member and county commissioner in cities and counties that are currently considering DOE programs or are administering DOE grants should ask staff these questions.
Please let me know when and if you get the answers.
