Remember when President Obama declared that insulation was sexy? In the wake of the global economic downturn, a “green jobs” formulation has been launched, not just here, but in every major world capital. While the White House’s financial and rhetorical commitments to the creation of green jobs are significant, no administration has made these policies as central to their government as that of Prime Minister Kevin Rudd in Australia. The results there should provide a cautionary tale for President Obama, whose trip “Down Under” is currently scheduled for June.
The creation of "green jobs" fits a simple (if not simplistic) Keynesian/Van Jonesian paradigm: Let’s pay people to retrofit their homes and offices for greater energy efficiency, and in doing so drive down unemployment and green house gas emissions in one fell swoop.
In Australia, a hastily assembled $2.7 billion(AUS) plan to insulate over two million homes started in July has led to thousands of lay-offs, the electrocution deaths of four insulation installers, almost 100 house fires, and the demotion of Australia’s Environment Minister – former “Midnight Oil” frontman Peter Garrett. It stretches the imagination to think of a national public policy going any more wrong.
It all seemed so straightforward last summer. In a nation where around half the homes have little to no insulation (partially due to the country’s temperate climes) and emit a significant portion of overall green house gases, the idea of giving Australians a $1,600 credit towards insulating their houses made perfect progressive sense - both ecologically and politically.
Rudd’s Administration made the insulation plan the centerpiece of a $4 billion “energy efficient homes” package. Treasurer Wayne Swan, in his first address after Australia's stimulus bill was passed, trotted out Craig Langstone, the owner of a small insulation company. In disturbingly glowing terms, Swan predicted happy days with the green jobs program: “Thinking of Craig Langstone makes me think about what we can do together if we try, the jobs we can create and the jobs we can save.”
Within a month of the program’s start, problems arose. At their root was a profound breaking of central economic tenets: the laws of supply and demand. The massive and immediate Federal intrusion into the insulation marketplace created significant shortages in supply of materials, as well as of qualified labor, with deadly results. Along with this, it incentivized a huge market for scamming (or “rorting,” as the Aussies say).
Supplies of standard, paper-backed “pink” insulation sold out across the country, leaving installers to use the much more dangerous foil-based reflective insulation. Stapling this insulation into the tight and dark attics of older homes with exposed wiring became a cruel game of “Australian Roulette”. In October following the first electrocution death of an installer using foil insulation, Malcolm Richards, president of the nation’s Master Electricians Association, forecast more danger ahead based solely on the government program: “In the normal course of events, foil products would not be used,” but with the inflated demand, workers were “grabbing whatever they can lay their hands on.”
Meanwhile, an international con operation emerged, prompted by the opportunity to earn a quick $1,600. Installers who couldn’t even spell insulation telephoned unsuspecting Australians, urging them to remove their insulation, even though many did not qualify for the program. The Herald Sun recently interviewed a resident of Mount Martha, who received a call from an offshore telemarketer who claimed to work with the Australian Government: “I could barely understand them. They just said they were authorized by the Government. I said I already had insulation, my home was only built in 1995. But they wouldn't take no for an answer, they said it didn’t matter.”
There have been hundreds of cases where predominantly older Australians have been duped into having good insulation removed, only to be replaced by an inferior – and, in some instances dangerous – product. Some of these “cowboy” installers paid for their shoddy work and inexperience with their lives, others paid with their “client’s” houses; nearly one hundred homes suffered electrical fires caused by the foil insulation. A recent Federal audit revealed that 16% of homes insulated under the program do not meet government standards, while at least 8% have been made “unsafe”.
The Rudd government’s initial response to the debacle was deflection, blaming both the installers and even the installation process. After the third installer was electrocuted in early February, Minister Garrett laid the responsibility at the feet of the dead: "Metallic foil is conductive, and when installed incorrectly, without undertaking the mandatory risk assessments and in breach of clear program requirements, this product can be dangerous.”
Another senior administration official, Robyn Kruk, testified: “With all respect, the strategies were put in place in an industry that has inherent risk,” adding, with words which perhaps deserved more serious deliberation last spring: “There is probably only one way of ensuring a risk free environment in this regard and that is not to go into ceilings to put in place insulation.”
The fiasco has resulted in the program’s suspension with a possible re-authorization in June.
And as for the green jobs? Experienced insulation installers have, ironically, been swept up in the program's failure. Insulation company owners like Tony Arundell of Eureka Insulation in Sydney find themselves on the verge of bankruptcy, having horded evermore costly supplies, which now sit in warehouses, and hired dozens of workers who now must be laid off. In a recent interview for Australia’s ABC News, Arundell, who’s run the business for almost three decades, cited the debt he’s incurred due to the Federal program. "Now we're held with stock and Yellow Pages commitments that we can't get out of to the value of $250,000. It's hit us pretty hard." He and others have let go thousands of workers who may not be available if the program re-initiates in June.
Most disturbing is that the full deleterious impact of the program – both in safety and financially – has yet to be realized. Environment Minister Garrett recently commissioned the inspection of thousands of newly insulated homes to assure their safety at the cost of tens of millions of dollars. It is believed that almost 1,000 homes may be unsafe. Joe Hockey, spokesman for the Opposition Treasurer forecast that government costs due to future lawsuits could top $1 billion.
For the recently fired installers, Rudd has announced a new $41 million fund for re-training. Some are understandably suspicious. Michael Tempny - another insulation company owner, interviewed by Australia’s The Age newspaper , demurred, ‘‘If it was something that was going to help my employees then I would definitely look at it, but if it's just a way that we can re-employ them to do nothing, then that doesn't really work."
All this said, the story of the Rudd government’s insulation program is not simply one of incompetence – though it is certainly that – but a tale of how an ideology clouded the minds of senior government officials in the creation of the program itself, causing them to run through a number of red lights in the pursuit of “green jobs”. A singular theme of recent attacks on both the Prime Minister and Environment Minister has been criticism of their repeated dismissals of contrarian studies and voices leading up to the bill’s passage. Garrett’s job hangs in the balance because an April 2009 independent risk analysis which warned of “major fall-out” due the rushed launch date apparently didn’t make it to his desk until February.
Rudd turned a deaf ear to industry experts who called for better accreditation guarantees for installers, and a more customized and focused approach to the program rather than the blanket $1,600.00 credit. Last October, Opposition climate change spokesman Greg Hunt, accused: "It appears that his industry consultations made it absolutely clear that a figure of $1000 to $1100 would have been appropriate as a cap for the [insulation] rebate. Most significantly, he [Rudd] and Mr. Garrett appear to have been warned that if they over-inflated the price by fifty per cent, retailers would simply lift the price to the $1600 figure.” That’s exactly what happened.
In light of these actions, it is difficult to view the Rudd government as anything other than a progressive bull in the policy china shop. To continue the bovine imagery, the implosion of the insulation program gores progressive oxen from Keynesianism to “green jobs.”
But the principal of centralized decision-making must also come under severe inspection. Janet Albrechtsen, a columnist for the right-leaning Australian puts it best: “Here is a textbook lesson in what happens when government throws money at industries they don't understand and have no business being in. In short, we are learning that the bigger the government, the bigger the problems.”
At each stage in the policy-making process, when administrative officials were presented with options, they leaned towards the most expensive, the broadest, and the fastest course with the least amount of local input or oversight. Maybe when President Obama steps off Air Force One in Sydney later this month his first words to the Australian Prime Minister should be, “Heckuva job Rudd-y.”
Pete Peterson is executive director of Common Sense California, a multipartisan organization that supports citizen participation in policy-making (his views do not necessarily represent those of CSC). He also lectures on state and local governance at Pepperdine’s School of Public Policy.