About Me 0126: personal finance programs

On Monday, I linked to this op-ed from Tom Esvlin, Vermont's "stimulus czar," lamenting the way the money got spent. "Although I'd like to think Vermont did better than many states, much of the money ended up continuing bloated programs rather than providing a transition to a sustainable future," he wrote. That same day, Brookings' Gary Burtless e-mailed in a rebuttal that's worth quoting at length, as it's a very clear description of where the stimulus funds actually went, and why such a small percentage was directly devoted to building things. So here it is, with some edits for space:

The main problem with that silly op-ed is that it refers to only a small slice of the actual federal spending on stimulus authorized by the Feb. 2009 legislation. So far, the overwhelming share of that stimulus has been devoted to three items: Tax cuts for households; direct benefits to people adversely affected by the severe recession, mostly the unemployed or poor; and fiscal relief to state and local governments. Vermont did not need any "Czar" to receive or administer funds under these programs. The money for them quickly left the U.S. Treasury without any effort on the part of the Czar who penned this highly misleading op-ed piece. People in Vermont *directly* received benefits from the stimulus as: (1) lower federal tax withholding from their paychecks; (2) extended unemployment benefits; (3) premium subsidies so they could maintain their health insurance after they were laid off from a job in which they received health protection; (4) miscellaneous benefits (e.g., for college costs) under one provision or another; and (5) aid from the Treasury that permitted Vermont and its localities to finance their Medicaid and K-12 education programs without hiking taxes or lowering other public spending. The kinds of infrastructure spending for which the WSJ's "Czar" had some responsibility constituted a small percentage of the stimulus the Congress authorized for 2009 and 2010.

In FY 2009 and 2010, the EXPECTED spending on infrastructure and other items for which the Vermont “Czar” may have had partial responsibility accounted for just 11% of anticipated spending under the stimulus legislation. The other 89% had nothing to do with the programs criticized by Vermont’s supposed Czar. Thus, all of his complaints – even if justified – are essentially irrelevant to the programs mainly supported by the stimulus law … at least so far. Obviously, in the years 2011-2019, that kind of stimulus spending would have accounted for a vastly larger share of outlays. But (and perhaps Vermont’s Czar has not kept up with this because he does not read a daily paper) the Congress just passed and the President just signed ANOTHER stimulus program consisting of more than 90% personal and business tax cuts and less than 10% extensions in unemployment benefits. So far as I know, very little additional spending has been authorized for those hated infrastructure / technology investment projects. Below is the CBO’s year-by-year analysis of the spending authorized under the Feb. 2009 stimulus law:

My own private view is that the country would probably have been better off if *MORE* of the original stimulus had been devoted to infrastructure / technology investment (more of it would have been spent on goods and services produced in the U.S. rather than China, East Asia, and Europe). Setting aside that consideration for a minute, what infuriates me about the piece cited in your blog is that it reinforces the very widespread but totally erroneous impression that Congress and the Administration were unaware of the administrative hurdles to fast spending that the “Czar” points out in his op-ed. Those hurdles were understood from the very beginning, which is precisely the reason that infrastructure/technology investment projects constituted such a small percentage of the total package. It is perfectly legitimate to criticize the pace of spending on these projects, but it is utterly deranged to think that the slow rate of spending on the projects constitutes a serious indictment of the spending authorized under the Feb. 2009 stimulus program. Very little of the expected spending under the stimulus program (at least so far) was supposed to be devoted to those projects.

A Pennsylvania startup Viridity Energy drew a series B investment of $14 million from Braemar Energy Ventures and Intel Capital, the company reported today.

Founded in 2008, Viridity Energy offers “distributed demand management software, systems and services,” that can turn very energy-consuming businesses into producers and sellers of power back to the grid. Viridity’s technology can also help companies get paid to control and reduce their energy consumption.

The company’s customers to-date have been retailers, hospitals, universities and various military and government agencies. In Philadelphia, Viridity set up systems for the transit authority (SEPTA) that capture energy released by braking, electric subway trains, and store it in rail-side battery arrays, routing the power back through the third rail to reuse it for trains’ acceleration.

Yep, electricity can be recycled.

SEPTA reported that the project cut expenditures directly. It also allowed SEPTA to get credits and incentives from the regional power authority for decreasing energy use during peak hours, and in general. The company plans to bring similar systems to other cities and transit systems in the U.S. this year.

Viridity Energy’s chief executive and president Audrey Zibelman said on Tuesday:

“We’re moving from an [energy] industry dominated by large-scale generation where customers are passive to one where customers are active in what they consume, and what they produce. First, there were personal computers. Now we’re going to personal energy.”

Her company plans to work as a “technology agnostic, market enabler,” she said. Its focus near term is to develop more, “micro-grids” in the northeastern U.S., California and Texas — all regions with aggressive goals to switch from hydrocarbon to renewable energy sources, or to curb greenhouse gas emissions.

Its new-found capital will go towards hiring technical and sales talent to get new projects going, Zibelman said. Her company will also continue to build partnerships with other smart-grid and distributed energy players, such as the manufacturers of control systems, or banks and energy programs that finance solar, storage and power generation assets.

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Thursday, January 13, 2011

personal finance programs

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