Job-Creation Idea No. 3: The Joys Of Retrofitting
(Part of Huffington Post's America Needs Jobs series; see the introduction.)
Let's say you're running a country that's suffering from a terrible jobs crisis -- but you're worried about adding to the national deficit.
Well first of all, you shouldn't be so worried. The best way to reduce future deficits, hands down, is to spur economic growth. And the evidence is pretty overwhelming that spreading a lot of federal money around right now will pay off handsomely down the road.
But let's say that due to the political exigencies of the moment, you insist on hard numbers. You want your investment to pay for itself within a few years and then start reducing the deficit by real, measurable amounts of money.
Have I got the program for you. And in addition to putting people back to work and lowering the long-term deficit, you'll be increasing the country's energy independence, reducing greenhouse gases, and growing a key sector of the economy.
What does all that? A massive investment in retrofitting buildings to make them more energy efficient.
The Home Star program, also known as "Cash for Caulkers," is President Obama's plan to use federally subsidized low interest loans to encourage consumers to make energy efficient improvements to their homes. Legislation to that effect has passed in the House and has stalled in the Senate.
That's a fine idea, but even at low interest, it's hard for some homeowners to make any kind of investment in their homes these days, no matter how quick the returns are going to be.
For the federal government to retrofit its own buildings, however, is truly a no-brainer.
There are lots of ways that adapting to the challenges we face in the areas of energy and climate change could put America back to work; I'll be writing about a new energy economy, a carbon tax, and investing in public transit in the coming days. But I singled out this idea because it has a certain purity to it.
"The one area in the green economy that in my mind is the most fertile right now is retrofitting public buildings," says Bob Pollin, an economist at the University of Massachusetts at Amherst. "The payoff is very, very quick," he said -- as soon as three or four years.
The 2009 stimulus package contained a fair amount of funding for retrofitting, including $5 billion in weatherization services to low-income families, $4.3 billion for high-performance energy upgrades to federal buildings, and $4 billion for the energy-efficiency modernization and renovation of public housing facilities.
But Pollin, who has been tracking the effect of those programs on job creation, says they haven't reached critical mass. "The numbers are still too low, and they're not going to get big unless the government forces them to get big. And the best way to do that is to mobilize the government itself," he told The Huffington Post. "Let's start hiring crews."
It's the economies of scale that really intrigue John A. "Skip" Laitner, director of economic and social analysis at the American Council for an Energy-Efficient Economy. A big commitment to retrofitting government buildings doesn't just create jobs and reduce energy costs, it also provides huge incentives for the private sector to invest in research and technology and infrastructure and labor in ways that will bring the cost of energy efficiency down for everyone.
With the government providing a large, stable market -- "a beachhead, an anchor if you will," Laitner said -- private industry will improve quality, reduce costs and expand operations in a way that it wouldn't have had the confidence to do otherwise.
Laitner sees a government initiative -- something on the order of $20 billion a year -- sparking a burst of investment and competition among performance building design firms, the contractors and architects that feed into them, and manufacturing firms that produce improved construction materials, heating and ventiliation systems, lighting systems, controls and wiring, and even turbines and generators
"All those things ripple through the economy in very productive ways," Laitner said.
They also speed up the payoff for the government's investment. "The payback right now may be 7 to 10 years, but as the economies of scale begin to kick in, it may be a 4 to 5 year payback," Laitner said.
Pollin says he has some reasons to hope that the idea will capture Obama's attention. For one, the president has already declared the concept of retrofitting "sexy."
Speaking at a Home Depot in Northern Virginia in December, Obama had this to say: "I know the idea may not be very glamorous -- although I get really excited about it. We were at the roundtable and somebody said installation is not sexy. I disagree..... Here's what's sexy about it: saving money. Think about it this way: If you haven't upgraded your home yet, it's not just heat or cool air that's escaping -- it's energy and money that you are wasting. If you saw $20 bills just sort of floating through the window up into the atmosphere, you'd try to figure out how you were going to keep that. But that's exactly what's happening because of the lack of efficiency in our buildings."
The Vice President is a fan, too. His Middle Class Task Force put out a whole report on the topic of Recovery Through Retrofit.
In an article in the Nation in March, Pollin showed his math:
There are roughly 24 billion square feet of building stock in hospitals and healthcare, education and government buildings. This is about 20 percent of all US building stock. Retrofitting these buildings would cost about $150 billion. If we assume this program is implemented over three years, at $50 billion per year, this would generate about 800,000 jobs per year over those three years. Retrofits are a highly efficient source of job creation, since all the work must be done within local communities, and a large proportion of the budgets go to hiring workers, as opposed to buying equipment, land and energy.
This government-led project could be the launching point for a larger effort to build the institutional and market support for retrofitting remaining private-sector structures on an economy-wide scale. In addition to private hospitals and schools, the potential market for private retrofits for commercial and residential buildings is in the range of $650 billion. If even 20 percent of these buildings were retrofitted by the end of 2012, it would create another 800,000 jobs per year. Retrofitting alone could thus generate about 1.5 million of the 18 million jobs we need to create by the end of 2012. About 600,000 of them would be in construction, making up for one-quarter of the 2.6 million construction jobs lost since mid-2007.
Trevor Houser, a visiting fellow at the Peterson Institute for International Economics, describes yet another positive effect. Spending just $10 billion a year on retrofitting government buildings, he writes, would not only create up to 100,000 jobs between 2009 and 2011 and start saving the government about $1.6 billion per year on its utility bills, but by reducing overall energy demand would lower energy prices.
As a result, he writes:
$10 billion spent on government retrofits would save the economy as a whole an additional $2 billion per year. Redirecting this money from energy purchases towards the normal basket of household purchases would create and sustain an additional 20,000 net jobs through 2020.
Jobs for American workers, reductions in carbon emissions, increased energy independence, it pays for itself and then offers big savings down the line. What's not to love?
Only in a town utterly paralyzed by partisanship and hobbled by an inexplicable, self-destructive and short-sighted deficit phobia would it even be a contest.
TOMORROW IN THE AMERICA NEEDS JOBS SERIES: Putting Young People To Work
(Want to learn more about the series? Read the overview. Got an idea you think we may have overlooked? Email froomkin@huffingtonpost.com.)
Dan Froomkin is senior Washington correspondent for the Huffington Post. You can send him an e-mail, bookmark his page; subscribe to RSS feed, follow him on Twitter, friend him on Facebook, and/or become a fan and get e-mail alerts when he writes.
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First Posted: 09/23/10 11:19 AM ET Updated: 05/25/11 06:50 PM ET