How Much “Cash for Caulk” Do We Need?

Nicolas Loris / September 16, 2010

Congress is back, but before Members head home again to campaign, they have to first do what they do best: spend other people’s money.

Today, Congress will vote on the Rural Energy Savings Program Act, H.R. 4785—a bill that would authorize $5 billion over five years for the Department of Energy’s Home Star loan program and the Department of Agriculture’s Rural Star program. The Home Star program, also known as “cash for caulkers,” provides low-interest loans for consumers to make energy efficiency improvements to their homes, while the Rural Star program provides loans to rural utility providers who in turn give loans to farmers “for the purpose of implementing energy efficiency measures or farm efficiency measures.”

If consumers and farmers want to make cost-saving energy efficiency improvements from their homes, they can do so without federal handouts. Why should all taxpayers, including those who don’t own homes, subsidize renovations for those who do? Further, such programs can have long-term effects on consumption patterns in the U.S. If consumers come to expect a handout from the government, they may hold off on buying a new product. As we saw with cash for clunkers, the effect was more of the timing of when consumers purchased new vehicles, not the volume. (more…)