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Old fridge? Here comes ‘Cash for Appliances’

On the heels of its "Cash for Clunkers" program for cars, the federal government is expected to announce another tax-supported shopping extravaganza, known as "Cash for Appliances."
Image: Appliances
While the "Cash for Appliances" programs will vary by state, some of the proposed rebates that have been announced so far range from $50 to $100 per item.Joe Raedle / Getty Images file
/ Source: a href="" linktype="External" resizable="true" status="true" scrollbars="true">The Washington Post</a

In U.S. history, there may have been no better time to own a junk car, a rattling old fridge and a leaking dishwasher.

On the heels of its ballyhooed "Cash for Clunkers" program for cars, the federal government is expected to finalize details in the coming weeks of another tax-supported shopping extravaganza, known as "Cash for Appliances."

Supported by $300 million from the economic stimulus, the program will offer rebates to consumers who buy energy-efficient refrigerators, dishwashers, air conditioners and other appliances to replace their older models.

And like the $3 billion cars program that gave consumers money for swapping their clunkers for more fuel-efficient rides, the appliance initiative seems destined to inspire shoppers, drive up sales for a while and profoundly divide economists over how much lasting good this chunk of government spending will do for the economy.

"The premise seems to be that for Americans to be richer, they need to throw out their old appliances faster — I don't see it that way," said James D. Hamilton, an economics professor at the University of California at San Diego, who has blogged about the clunkers rebates. "I don't like the idea of just spending money for its own sake."

While many economists believe that government incentives to lift consumer spending can boost the economy during a recession, they differ over whether the sales spikes that accompany the rebates are meaningful or merely concentrate sales that would have occurred before and after the rebate period anyway.

'Shift expenditures'
The Obama administration's Council of Economic Advisers has indicated that the clunkers program provided a worthwhile boost even though many of the 690,000 clunkers sales would have happened anyway. In their baseline assessment, the program increased car sales in 2009 by 330,000.

Clunkers "is one of several stimulus programs whose purpose is to shift expenditures by households, businesses, and governments from the future to the present," the council wrote in a September report. "Such time-shifting is valuable in a recession, when the economy has an abundance of unemployed resources that can be put to work at low net economic cost."

The appliances program may be destined to continue the debate. For when it comes to stimulus, timing can be critical, and the implementation of the effort has dragged on, possibly diminishing its usefulness.

Although the $787 billion stimulus program was signed by Obama in February of 2009, much of the cash-for-appliances money won't hit the streets until next February, March or April. The rebate program is being run by state governments, which must define and enact their rebate plans with federal government funding and approval. A survey of some of the largest states shows that California is planning to begin its program in March, New York in February, Pennsylvania in the spring, Illinois in January and April.

Under the program, Virginia is expected to receive $7.5 million, Maryland $5.4 million and the District $568,000, but the requirements and rebates have not yet been disclosed.

Now the home appliance manufacturers who celebrated the passage of the program worry that the delay in its implementation might actually depress sales at first, with consumers putting off purchases until the rebates begin.

"Our desire would be to see these programs rolled out as soon as funding is available," said Jill Notini, a spokeswoman for the Association of Home Appliance Manufacturers. "Unfortunately, you may have people saying, 'It's kind of on the blink, but we'll wait.' We wish that the states would follow the intent, which is to stimulate the economy now."

The number of shipments of home appliances in the United States, which is closely linked to new home construction, is down 12 percent from last year, Notini said, and this comes after three years of decline.

No one doubts that the appliances program will attract consumers. While the programs will vary by state, some of the proposed rebates that have been announced so far range from $50 to $100 per appliance. The state-administered programs also have varying requirements regarding whether consumers must recycle an old appliance to qualify for the rebate.

The states are required to estimate how many jobs their programs will create. California, which will receive $35 million, preliminarily estimated that it will create 350 jobs. This was based on the assumption that for every $92,000 expended, one job would be created.

Overshadowing the debate over the rebate program are questions regarding the health of the U.S. economy, which despite some signs of strengthening is still beleaguered by high unemployment. So while the rebates will be slower to get into consumer's hands than some had hoped, some economists said the economy remains weak enough to justify the program even if it isn't enacted yet.

"No one is saying we are going to have too much growth next year," said Zach Pandl, an economist at Nomura Securities. "We want full employment of the economy's resources, and we're nowhere near that at this point."