From the folks who brought you Cash for Clunkers.
In late 2009 or early 2010, you may be eligible to receive rebates from your state or territory for the purchase of new ENERGY STAR-qualified appliances.
These rebates are being funded with $300 million from the American Recovery and Reinvestment Act of 2009. Under this program, eligible consumers can receive rebates to purchase new energy-efficient appliances when they replace used appliances.
Programs will differ in every state, and DOE anticipates that rebates will be available to consumers in most parts of the country by early 2010.
Banaian also leads us to the Council of Economic Advisors report on Cash for Clunkers, which explains that the macroeconomic stimulus from such measures comes from giving consumers an incentive to buy the product during the period of the rebate:
The Car Allowance Rebate System (CARS) is one of several stimulus programs whose purpose is to shift expenditures by households, businesses, and governments from the future to the present. (Other programs with the same motivation include support for bringing forward future infrastructure investments, and accelerated depreciation to bring forward business investment.) Such time-shifting is valuable in a recession, when the economy has an abundance of unemployed resources that can be put to work at low net economic cost.
In the case of the CARS program, the CEA report acknowledges that part of the extra spending in July and August came at the expense of a particularly dismal September. For the appliances sequel, the fact that the rebates may not come until the spring gives an incentive for customers not to buy in December or January. Peter Whoriskey writes in the Washington Post:
Now the home appliance manufacturers who celebrated the passage of the program worry that the delay in its implementation might actually depress sales at first, with consumers putting off purchases until the rebates begin.
“Our desire would be to see these programs rolled out as soon as funding is available,” said Jill Notini, a spokeswoman for the Association of Home Appliance Manufacturers. “Unfortunately, you may have people saying, ‘It’s kind of on the blink, but we’ll wait.’ We wish that the states would follow the intent, which is to stimulate the economy now.”
Even if the programs succeed in their mission of persuading Americans to abandon their old cars and appliances sooner than they otherwise would, I remain deeply skeptical that junking working capital in this fashion is the best way to grow Americans’ wealth.
As for the objective of improving energy efficiency, I would prefer to see a clearer identification from Washington of those tasks for which the government may be uniquely positioned to make a constructive difference. For example, a strong case can be made for facilitating greater use of our abundant natural gas supplies as a transportation fuel by encouraging the infrastructure investments that would make this possible. I applaud some of the initiatives announced in August by the DOE (hat tip: Green Car Congress):
Energy Secretary Steven Chu today announced the selection of 25 cost-share projects under the Clean Cities program that will be funded with nearly $300 million from the American Recovery and Reinvestment Act. These projects will speed the transformation of the nation’s vehicle fleet, putting more than 9,000 alternative fuel and energy efficient vehicles on the road, and establishing 542 refueling locations across the country. The Department of Energy also estimates they will help displace approximately 38 million gallons of petroleum per year….
The projects announced by Secretary Chu will support a combined total of more than 9,000 light, medium and heavy-duty vehicles and establish 542 refueling locations across the country. The vehicles and infrastructure being funded include the use of natural and renewable gas, propane, ethanol, biodiesel, electricity, and hybrid technologies.
Keynes wrote in his General Theory of Employment, Interest and Money:
If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing.
Destroying durable goods in order to build new ones goes beyond even this colorful recommendation from Keynes. But I would at least endorse his qualifying remarks– far better to make sure we are using government expenditures wisely, than simply to spend money for the sake of economic stimulus.