Economic Recovery: A Choice, Not a Hope

Recent economic news is not encouraging. The New York Times reports that when it comes to recovery, “experts see a false dawn.” One particularly troubling area is housing, where a new report shows home sales were 4 percent lower this November than last year, even if November was slightly better than October. Median price was down below $165,000. In a May 24 editorial, the Times stated that “Until the [housing] market recovers, the entire recovery is imperiled.”  The data, which at best show a few percent gains from previous months, and at worst still show declines, do not point to a recovery of any magnitude.

What are we doing about this as a nation? Essentially nothing. Congress passed American Recovery and Reinvestment Act in 2009, and the effects of this stimulus are almost over: all of the money will soon be spent. Congress is now debating about whether to cut the payroll tax again for the final ten months of 2012, and most economists think this would produce several hundred thousand jobs. But it comes at the cost of increasing the deficit.

This is the problem with all conventional-wisdom solutions. Economists of all political persuasions agree on seven causes of the recession, and virtually no proposed solution improves all seven factors.  

Well, I propose one - energy efficiency improvements can solve all seven causes.

There is over a trillion dollars of cost-effective efficiency investment waiting to be made, and some modest and non-controversial actions can unleash this torrent of business and consumer spending.

Three pieces of legislation could make a big difference. All three have bipartisan support. First is the Sensible Accounting to Value Energy (SAVE) Act of 2011 sponsored by Michael Bennet (D-Colorado) and Johnny Isakson (R-Georgia); it would require all federal lenders to consider projected energy efficiency when underwriting mortgages.

Second is the Cut Energy Bills at Home Act introduced by Senators Olympia Snowe (R-ME), Jeff Bingaman (D-NM) and Dianne Feinstein (D-CA). This bill would provide a $2,000 to $5000 tax credit for home energy efficiency retrofits for a 20 percent or larger reduction in home energy use, with incentives increasing as the certified energy savings from efficiency measures get larger.

Third is the Energy Savings and Industrial Competitiveness Act introduced by Rob Portman (R-OH) and Jeanne Shaheen (D-NH), which adopts a number of important efficiency policies, including a set of appliance efficiency standards that the industry also supports and that will save over $40 billion, producing about 100,000 jobs. There are also a number of other actions, such as extending and reforming tax incentives for efficient appliances, new homes, and commercial buildings, as well as for renewable energy sources.

While Congress has been sitting and waiting for things to get better (or, cynically, waiting for this NOT to happen so that they can blame the other party), the Obama administration has taken several proposed actions that will promote a sustainable recovery, including these two giants steps forward:

1.)    The new fuel economy standards proposed for automobiles will encourage technology innovation by car companies, helping make American companies more competitive and will produce new jobs.

2.)    The new mercury emissions standards will cause utilities to invest billions of dollars in cost-justified investments that will save 11,000 lives annually and help promote investment in both cleaner generation that can take advantage of an unexpectedly large supply of natural gas and in the immense efficiency investment opportunity.

At the core of both actions is *efficiency* that will result in innovation and jobs.

Unfortunately, the Administration failed to take the key step to allowing more housing construction to occur: incorporating energy and transportation costs into mortgage underwriting. The SAVE Act is one way to make this happen.

The year 2011 will be remembered as a year that Congress watched and waited to see the shoots of economic recovery start to grow.  Watching and waiting does nothing.  You need to actually do something – water and fertilize those shoots – in order to foster growth. 

Congress needs to start off the New Year on a more pro-active footing and get to work on the issues that will truly benefit our nation as a whole.