Bagworms brutha!
Edited to add: You can kill them with acephate (orthene) and various permethrins as well. Just read the labels carefully and apply per the label rates and timing.
BT (Bacillus thuringiensis) only works on them well when they are young early in the summer. I would opt for a systemic like the Orthene and maybe some Sevin as well to cover all bases.
You will have them back next year becuase they will actually drop and pupate early if they detect pesticides. they only produce one generation a year so getting a hit on them early with the BT (very safe to use) in June and follow up with something like Orthene, or Talstar if you can find it, later on will probably knock them out. Be glad the little bastards don't develop a taste for your siding! Voracious they are.