Riding on the recent success of the Cash for Clunkers program that gave U.S. consumers an incentive to replace their gas-guzzling cars with fuel-efficient ones, the president is considering a program that would encourage Americans to improve the energy efficiency of their homes.
John Doerr, a venture capitalist with Kleiner Perkins Caulfield & Byers, proposed creating a Cash for Caulkers program to encourage Americans to improve their homes' efficiency. Doerr made the suggestion at Monday morning's meeting of the President's Economic Recovery Advisory Board (PERAB).
In addition to creating energy savings, Doerr suggested that retrofitting more than 100 million American homes would also create "high-wage, permanent jobs that will not be out-sourced."
"Just as the Cash for Clunkers program mobilized American car dealers to promote their fuel-efficient cars, so could a Cash for Caulkers program engage private enterprise, such as Lowe's and Home Depot, to put private capital to work," Doerr said.
The president seemed receptive to this idea, as it supports his main economic priority -- putting people to work. "We have brought the economy back from the brink. Now, we need to focus on getting people back to work," he said to the members of the PERAB.
Since the proposal has not been made formal, there were no details on its cost or scope. However, if 100 million homes were to be retrofitted, the likely cost would be substantially more than the $3 billion the government spent on the Cash for Clunkers' program.
In addition to creating green jobs to make homes more energy efficient, the president also highlighted the jobs that could be created through infrastructure repair and replacement. He asked Richard L. Trumka, president of the AFL-CIO, for his view on the state of American infrastructure.
"According to the American Society of Civil Engineers, we have a couple trillion dollars in overdue infrastructure spending," Trumka said. He pointed out deficiencies in the transportation system, waste management system and in school modernization as examples of where infrastructure spending is most needed.
"Public investment will crowd in" private investment by creating a foundation for growth, Trumka claimed. "The public sector must be the engine for sustainable growth."
In acknowledging the need to repair the country's infrastructure, Obama also recognized the scarcity of funds to do the job. "The era of fiscal constraint we are now in says that we need to find innovative ways to finance these projects." Obama later added, "We still have a lot of capital on the sidelines that is looking for a good return on its investment."
Robert Wolf, the chairman and CEO of UBS Group Americas, has one idea on how to bring that capital into the game.
"We should create a National Infrastructure Bank (NIB) whose main objective will be to finance large, innovative cross-state projects," Wolf suggested. This bank would support projects on their merits and provide financing on a cost-benefit basis, he added.
Wolf said that the NIB would supplement rather than replace current state municipal bond funding. It also would not fund a high-speed rail system or a national electric grid.
"We are not going to create the next GSE [government-sponsored enterprise] with high leverage and a return to the moral hazard" problems that contributed to the current crisis, Wolf emphasized.
Charles E. Phillips, Jr., the president of Oracle Corporation, emphasized the difficulties private markets currently face in raising funds.
Many of the bonds that raise funds for infrastructure spending are "backed by monoline insurance companies that are either impaired or out of business," Phillips said, referring to companies that provide insurance to only one industry. He noted that more than 700 private equity funds would like to invest in this area, and to encourage them to act, "the government should step in and replace the monolines to bring confidence back into the market." Phillips suggests creating an expert panel to evaluate the feasibility of these projects.
In concluding the meeting, the president said, "I think the American people can get behind our ideas." He added that "we are going to move beyond tax policy" and "create an environment where government creates the right incentives for business to move in."