No Bailout for You!
$40 billion (this month) to bail out the bankers? No problem. $500 million to help the poor pay their heating bills? No way. From USA Today:
Soaring fuel prices are creating a crisis among low-income people and senior citizens who can’t afford to heat their homes, say local agencies that distribute federal heating subsidies. “This is a scary, scary winter. I don’t know what folks are going to do,” says Debbie Hambly of Rhode Island’s East Bay Community Action Program. The average one-time, $325 grant there buys 100 gallons of heating oil — enough for about two weeks, she says. Applications for heating aid are up and more working poor are seeking help, Hambly and other officials say. Without more federal funds, says Mark Wolfe, executive director of the National Energy Assistance Directors’ Association, “we’ll see an awful lot of people in difficult situations.”
The federal program helps users of all home-heating fuels. The Energy Information Administration (EIA), the Energy Department’s analytical arm, says the average U.S. household will pay $986 this winter, up 10.9% from 2006-07. Residential heating oil is expected to average $3.23 a gallon, a 30% increase over last winter, the EIA says. About 7% of U.S. homes use heating oil, mostly in the Northeast. Propane is up almost 50 cents a gallon, to nearly $2.50, from a year ago, and average household natural gas costs are likely to be 7% higher.
Local agencies distribute federal funds from the Low Income Home Energy Assistance Program (LIHEAP) to those meeting income limits. About 5.87 million households received assistance in fiscal year 2007. Last month, President Bush vetoed a spending bill that included $2.4 billion for the program. That was $480 million more than he requested and would have increased spending $250 million from fiscal year 2007. More than 30 U.S. senators want to add $1 billion in this year’s budget; negotiations continue.
Would it be possible to amend the Constitution to say that every lawmaker has live on minimum wage the year after leaving office? With the current oligarchical electoral system this kind of negligence is only going to get worse, and the poor are suffering right now, among us.
Although I don’t pretend to understand much about economics, I think $40 billion for the banking system is basically a loan from the Fed to increase liquidity and help the entire economy weather the housing crisis. So it is not an outright gift to the banks, and it should be to everyone’s benefit.
On the other hand, money to help people pay for home heating oil is a grant, and not a loan. It is taking money from people who have enough (or more than enough) and giving it to people who don’t have enough. Being in the category of people who have enough or more than enough, I certainly support helping poor people pay to heat their homes. But I am glad the Fed is doing something to help the banking system.
David — a loan from the government when the market will not provide one is a gift, especially when, as I understand it, the government is allowing the banks to secure the loans with assets whose value is unknown (go try that at your local branch). Anyway, the point of the post is not to say the Fed should NOT be bailing the bankers out of the mess they created — if that is in fact good in the long run for all of us.
Eduardo,
I wholeheartedly agree with the point of the post. I just want it to be clear that it is the “compassionate conservative” president who doesn’t want to provide additional money for LIHEAP. And let’s not forget the “compassionate conservative’s” second veto of SCHIP.
When I taught Business Ethics in Chicago (14 courses!) I often asked students where one puts a corpse on a balance sheet. This usually came up when talking about winters in Chicago. It is a sad ritual in Chicago that, starting about Nov. 1, one can keep an eye on the Metro/Local section of the paper for house/apt. fires, and for deaths caused by these fires (not to mention injury and homelessness). The fires are usually caused by households using dangerous space heaters because they have no heat.
The radical in me thinks that a heated home in the winter is a human right. The radical pragmatist in me would like to see a policy of heating bill amnesty put in place. Amnesty would go something like this: Have the federal or state government pay 25% of of the cost of all unpaid bills and then wipe out ALL unpaid bills so that all households can get a fresh start. Many households do not have heat because they just can’t catch up on back payments. At the very least, I would like to know how much this would cost.
Great idea Joe! Now I won’t have to pay any gas or electric bills. The taxpayers picks up 25% of my bills and the local utility eats the rest (at least untill they file for Chapter 11). Somehow , I do not think that your idea would work.
LIHEAP is a good program. Expansion of the program could easily be funded by an excess profits tax on the producers and traders gas and oil.
Charles: Sarcasm is always a constructive form of analysis. If the utilities currently get far less than 25% return on their back bills (and I am betting they do), this would be a money maker for the utilities. If Amnesty were not an annual event, and I would never advocate that, folks would not simply refuse to pay bills just to benefit from Amnesty.
We do corporate bailouts all the time, as this post makes clear. The Christian in me thinks that a bailout of the poor and vulnerable is not such a bad idea. LIHEAP is a good program, but it still leaves past debt in place and forces the individual to work through government administration to get heating, and wondering when appropriations will run out. Amnesty could return those currently without heat to the status of customer.
Last question: How does one determine an excess profit?
Over and over, government policy issues here reflect the extent one is committed to the common good ideal.
As we talk about the middle class as the center of attention in debate speak these days, the poor are getting even shorter shrift.
Here’s my plan. Instead of paying for heating oil for those who can’t afford it, install solar panels. I have seen a couple of reports on television about how some states allow people with solar panels to be hooked into the “grid” and buy power when they need it, but sell back to the grid any excess power they generate. I believe it is cost effective in the long term, but the initial investment is high. The panels could belong to the government or the power companies. But perhaps people who get them could be given some kind of compensation if they generate more power than they use (by learning to use power at off-peak times). It’s an investment that benefits everyone (more power for the grid), it’s “green,” and it doesn’t put money in the pockets of the oil companies.
David: While in Chicago, I worked with some folks who rehabbed an apartment complex and put up solar panels. They did, in fact, pumped power BACK to the utility.
Joe,
The tv show I was remembering was on NOVA, and here’s a link to the description of the show on the PBS website
http://www.pbs.org/wgbh/nova/solar/about.html
As I recall, the people in one of the solar-powered homes generated so much power they wound up paying about $7 a month for power, which was the fee for being hooked into the grid.
What fascinated me was the constant fluctuation in the price of electricity. On a hot, sunny summer day, demand may peak, but those are the best days for generating solar power. So if you are careful to do things like run your appliances at off-peak times, you may even if you don’t generate more power than you consume, you can still wind up selling the power you do make when the rate is high, and buying the power you need when the rate is low.
Which one of the presidential candidates shall I offer this program to?
The economist in me says “If the banking system fails, people will have a lot more to complain about than heating.”
The environmentalist in me says “paying for people to heat their homes will result in…more people heating their homes, especially with ineffective and dangerous heating system.”
As a Canadian we don’t have the option of moving to a warmer climate. The government is not in the business of artificially creating a living standard for a group of people where such a living standard cannot exist due to economic or physical constraints. We see it in the extreme north of Canada where 90% of the budget for the territory of Nunavut comes from Ottawa. This only perpetuates a cycle of economic dependancy.
Having lived in Chicago a few years ago, I can imagine the demographic this is intended to help. However, when people spend a near fortune on clothing and eat fast food regularly, perhaps a little cold will cause a shift in their priorities.
I am considering building a home. Perhaps I should not work for a year so my income drops to nothing and I can get those solar panels for free. 10,000 a piece at the moment is out of my budget.
My program is only minutes old, and already it is under attack!
Adam,
Don’t you have a somewhat similar program in Canada’s Northwest Territories of subsidizing home heating for low-income people aged 60 and over?
http://www.hlthss.gov.nt.ca/seniors/housing/senior_home_heating_subsidy.asp
If we really want to give people an incentive to get out of poverty, shouldn’t we fine them or something? If making people suffering the discomforts and deprivations of poverty is an effective way to get them out of poverty, perhaps the process could be hastened by making their situation worse. There could be a law requiring poor people to keep their windows open during the winter. The credit card companies have already figured this out, which is why the less able you are to pay, the higher your interest rate. We need more of this kind of thinking.
Since it is such a rare moment, let me say that I believe kathy’s suggestion is the best and most practical. Let former (and how about aspiring) office holders live on the minimum wage for a year. To spell it out clearly none of their other assets should be made available during that year. Wonderful idea. Even more effective than the peace corps.
Joe
You missed my point. If the government along with the utilities will pay all unpaid and delinquent utility bills, why would anyone in there right mind pay any bill? Absent a means test (which LIHEAP provides), this is not a very good plan.
As for the utilities recovery of uncollectible accounts, typically after a preiod of time these amounts are written off. This becomes a tax deductible expense. so the utlilities will recover 35-40% of the cost. This of course does not apply to municipally owned utilities. In this case there is no tax recovery funded by the national tax payer base. It all falls to the local tax base.
As for the determination of excess profits, your point is well made. Better would be a surtax of some fixed percentage over and above the ordinary income tax rate applied only to the income derived from the production and trading of oil and natural gas.
Charles: Your point about the write off is helpful, but I am a little confused. If I am a poor homeowner who does not wear expensive clothes and eat fast food all the time, but have chosen to pay my rent or tuition for a private school for my very promising you child, and so have fallen behind in my heating, say by $1000 (round figure), and after 4 years of no heat, the utility claims a 35% writeoff on my debt, would it be unreasonable of me to ask for a clean slate and start over? In other words, if a debt is written off as loss for tax purposes, should it still hang over the head of a customer?
I’ve never liked the for-profit public utility monopoly system we have in the US. Heat in the winter is a basic human right. Istm that in some ways a heavily-regulated monopoly is the very worst way to deliver utility goods and services like heat and electricity. There is no natural incentive for the supplier to achieve efficiencies, no way for the consumer to shop on price, and a very real danger of corruption as a result of too-chummy relationships between the monopoly and the government agencies charged with regulating it.
Let the local government take ownership of the delivery infrastructure. Then let private suppliers compete to deliver the service. Finally, let the government, supplemented by and in concert with private aid organizations, step in with prudent assistance programs for those who can’t otherwise afford to heat their homes.
Btw, while it is somewhat rare for me to defend President Bush, I could invoke the very Catholic principle of subsidiarity to question why it is the Federal government’s responsibility, rather than the state or local government’s, to subsidize heating oil for freezing citizens in one particular sector of the country. Contempt for the poor isn’t just a problem in Washington.
If anyone is still reading this, I have two questions that I could not quickly answer by going to the LIHEAP website: 1) Can one use LIHEAP funds to past due utility bills? 2) Can one qualify for LIHEAP if one’s utilities have been turned off due to failure to pay past bills?
The rather obvious reason I ask this question is that if the answer to both questions is NO, as I suspect it is, then there is a serious hole in LIHEAP coverage; a hole that those who care about the most vulnerable in our society should also care about.