The Cap-and-Trade Bill Is an Economic Disaster 

ByInvestor's Business Daily

Fiscal Policy: The House of Representatives is preparing to vote on an anti-stimulus package that in the name of saving the earth will destroy the American economy. Smoot-Hawley will seem like a speed bump.

Not since a misguided piece of legislation imposed tariffs that turned a recession into a depression has there been a piece of legislation as bad as Waxman-Markey.

The 1,000-plus-page American Clean Energy and Security Act (H.R. 2454) is being rushed to a vote by House Speaker Nancy Pelosi before anyone can seriously object to this economic suicide pact.

It's what Janet Napolitano, secretary of Homeland Security, might call a "man-caused disaster," a phrase she coined to replace the politically incorrect "terrorist attack." But no terrorist could ever dream of inflicting as much damage as this bill.

Its centerpiece is a "cap and trade" provision that has been rightfully derided as "cap and tax." It is in fact a tax on energy everywhere it is consumed on everything it is used to make or provide.

It is the largest tax increase in American history — a tax on all Americans — even the 95% that President Obama pledged would never see a tax increase.

It's a political bill that could come to a vote now that a deal was struck with farm-state legislators concerned about the taxation of even bovine flatulence.

As part of the agreement reached Tuesday night and announced by Rep. Henry Waxman, D-Beverly Hills, agricultural oversight for cap-and-trade was transferred from the Environmental Protection Agency to the U.S. Department of Agriculture.

Farmers hope the USDA will be less intrusive. The EPA has been tasked by a Supreme Court ruling to regulate greenhouse gas emissions from your nostrils to your lawn mower. This even covers the emissions of barnyard animals, including the methane from cows.

The American Farm Bureau warns that cap and trade would cost the average farmer $175 on every dairy cow and $80 for beef cattle. So farm-state politics trumped climate change.

We all know about farmers paid not to grow food. But now, American taxpayers apparently will be paying companies not to chop down trees. The Washington Times reports that as part of the legislation, the House will also be voting Friday on a plan to pay domestic and international companies around the world not to cut down trees.

Such offsets "would be a transfer of wealth overseas," said William Kovacs, vice president for environmental affairs at the U.S. Chamber of Commerce. So if a tree falls in a Brazilian forest, does a U.S. taxpayer make a sound?

As we've said before, capping emissions is capping economic growth. An analysis of Waxman-Markey by the Heritage Foundation projects that by 2035 it would reduce aggregate gross domestic product by $7.4 trillion. In an average year, 844,000 jobs would be destroyed, with peak years seeing unemployment rise by almost 2 million (see charts below).

Consumers would pay through the nose as electricity rates would necessarily skyrocket, as President Obama once put it, by 90% adjusted for inflation. Inflation-adjusted gasoline prices would rise 74%, residential natural gas prices by 55% and the average family's annual energy bill by $1,500.

Hit hardest by all this would be the "95% of working families" Obama keeps mentioning as being protected from increased taxation. They are protected, that is, unless they use energy. Then they'll be hit by this draconian energy tax.

And what would we get for all this pain? According to an analysis by Chip Knappenberger, administrator of the World Climate Report, the reduction of U.S. CO2 emissions to 83% below 2005 levels by 2050 — the goal of the Waxman-Markey bill — would reduce global temperature in 2050 by a mere 0.05 degree Celsius.

President Obama has called on the U.S. to "lead by example" on global warming. During the campaign, he said: "We can't drive our SUVs and eat as much as we want and keep our homes on 72 degrees at all times . . . and then just expect that other countries are going to say OK."

Soon we may not be able to. Other countries can just sit back and watch us destroy ourselves. Where will you be when the lights go out?

NBCC Study Finds Waxman-Markey Reduces GDP by $350 Billion
New study finds Waxman-Markey could cost 2.5 million U.S. jobs by 2030 and reduce earnings

Press Release:

WASHINGTON — Today, in anticipation of Friday’s House Energy and Commerce Committee vote on the Waxman-Markey legislation, the National Black Chamber of Commerce (NBCC) released a new study that determines the potential economic impacts of the federal cap-and-trade system outlined in the bill. Compiled by CRA International, the analysis determines that by 2030 the law would:

• reduce national GDP roughly $350 billon below the baseline level;
• cut net employment by 2.5 million jobs (even after accounting for new “green” jobs); and
• reduce earnings for the average U.S. worker by $390 per year.

NBCC President and CEO Harry Alford notes, “These findings add to a growing body of evidence that demonstrates cap-and-trade would make American consumers poorer and the products they buy more expensive.

“Moreover, the NBCC study finds there will be little, if any, environmental impact to justify the high price U.S. families will have to pay, since the trading system will deliver virtually negligible changes in global CO2 emissions so long as developing nations such as China and India don’t buy in.

“The House cap-and-trade bill seems to profit special interests at the expense of small businesses and hard-working families. It’s evident from the some 85 percent of emissions permits that politicians have already given away for free to favored industries that the 111th Congress is learning that producing laws (like making sausages) requires a lot of pork.

“The inherent complexity of a government-regulated emissions trading system sets the stage for a perpetual struggle for political handouts. This makes Waxman-Markey a good way to promote corruption, but not energy efficiency.”

To speak with Harry Alford or to learn more about the NBCC study, please contact Kay Debow at (202) 466-6888 or kdebow@nationalbcc.org.

The NBCC is a nonprofit, nonpartisan, nonsectarian organization dedicated to economically empowering and sustaining African American communities through entrepreneurship and capitalistic activity within the United States.

Cap-and-trade facts according to the Administration – Video
FACT: “Cap-And-Trade” Increases Energy Prices On American Consumers…

Then-Senator Barack Obama: "Under My Plan Of A Cap And Trade System, Electricity Rates Would Necessarily Skyrocket." OBAMA: "You know, when I was asked earlier about the issue of coal, you know - under my plan of a cap and trade system, electricity rates would necessarily skyrocket. Even regardless of what I say about whether coal is good or bad. Because I'm capping greenhouse gases, coal power plants, you know, natural gas, you name it — whatever the plants were, whatever the industry was, they would have to retrofit their operations. That will cost money. They will pass that money on to consumers. You can already see what the arguments will be during the general election. People will say, ‘Ah, Obama and Al Gore, these folks, they're going to destroy the economy, this is going to cost us eight trillion dollars,’ or whatever their number is. If you can't persuade the American people that yes, there is going to be some increase in electricity rates on the front end, but that over the long term, because of combinations of more efficient energy usage, and changing lightbulbs and more efficient appliances, but also technology improving how we can produce clean energy, that the economy would benefit."

Watch: http://www.youtube.com/watch?v=ydqg7ThZB04

Watch: http://www.youtube.com/watch?v=Ms-M--v2_5I

FACT: “Cap-And-Trade” Is A Tax On The American People…

Warren Buffett: “It’s A Huge Tax And There’s No Sense Calling It Anything Else.” CNBC’S BECKY QUICK: “You said you didn't like cap and trade especially in this economy though, because it puts a tax on people.” WARREN BUFFETT: “I think if you get into the way it was written, it's a huge tax and there's no sense calling it anything else. I mean, it is a tax. And it's a fairly regressive tax. If we buy permits, essentially, at our utilities, that goes right into the bills of the utility customers and an awful lot of people in Iowa, in Oregon, and Utah, and places where we are, very poor people are going to pay a lot more money for electricity. So I think that can be improved.” (CNBC, 6/24/09)

Rep. John Dingell (D-MI): “Cap-And-Trade Is A Tax And It’s A Great Big One.” DINGELL: “Nobody, nobody in this country realizes that cap-and-trade is a tax and it’s a great big one. I want to get a bill that works. How do we choose the best course, cap-and-trade, carbon tax? At times, my dear friend, Albert, you have been an advocate of a carbon tax as the better way to go. How do we address this problem?” (U.S. House of Representatives Energy And Commerce Committee, Hearing, 4/24/09)

Watch It Here: http://www.youtube.com/watch?v=t_VqTQiQsp4

FACT: “Cap-And-Trade” Drives Manufacturing Jobs To Other Countries…

In An Interview With The New York Times, Energy Secretary Steven Chu Said That “The Concern About Cap-And-Trade In Today’s Economic Climate Is That A Lot Of Money Might Flow To Developing Countries.” “Dr. Chu said reaching agreement on legislation to combat climate change would be difficult in the current recession because any scheme to regulate greenhouse gas emissions would probably cause energy prices to rise and drive manufacturing jobs to countries where energy is cheaper. ‘The concern about cap-and-trade in today’s economic climate,’ Dr. Chu said, ‘is that a lot of money might flow to developing countries in a way that might not be completely politically sellable.’” (John M. Broder And Matthew L. Wald, “Big Science Role Is Seen In Global Warming Cure,” The New York Times, 2/12/09)

From the Wall Street Journal

The Cap and Tax Fiction
Democrats off-loading economics to pass climate change bill.

House Speaker Nancy Pelosi has put cap-and-trade legislation on a forced march through the House, and the bill may get a full vote as early as Friday. It looks as if the Democrats will have to destroy the discipline of economics to get it done.

Despite House Energy and Commerce Chairman Henry Waxman's many payoffs to Members, rural and Blue Dog Democrats remain wary of voting for a bill that will impose crushing costs on their home-district businesses and consumers. The leadership's solution to this problem is to simply claim the bill defies the laws of economics.

Their gambit got a boost this week, when the Congressional Budget Office did an analysis of what has come to be known as the Waxman-Markey bill. According to the CBO, the climate legislation would cost the average household only $175 a year by 2020. Edward Markey, Mr. Waxman's co-author, instantly set to crowing that the cost of upending the entire energy economy would be no more than a postage stamp a day for the average household. Amazing. A closer look at the CBO analysis finds that it contains so many caveats as to render it useless.

For starters, the CBO estimate is a one-year snapshot of taxes that will extend to infinity. Under a cap-and-trade system, government sets a cap on the total amount of carbon that can be emitted nationally; companies then buy or sell permits to emit CO2. The cap gets cranked down over time to reduce total carbon emissions.

To get support for his bill, Mr. Waxman was forced to water down the cap in early years to please rural Democrats, and then severely ratchet it up in later years to please liberal Democrats. The CBO's analysis looks solely at the year 2020, before most of the tough restrictions kick in. As the cap is tightened and companies are stripped of initial opportunities to "offset" their emissions, the price of permits will skyrocket beyond the CBO estimate of $28 per ton of carbon. The corporate costs of buying these expensive permits will be passed to consumers.

The biggest doozy in the CBO analysis was its extraordinary decision to look only at the day-to-day costs of operating a trading program, rather than the wider consequences energy restriction would have on the economy. The CBO acknowledges this in a footnote: "The resource cost does not indicate the potential decrease in gross domestic product (GDP) that could result from the cap."

The hit to GDP is the real threat in this bill. The whole point of cap and trade is to hike the price of electricity and gas so that Americans will use less. These higher prices will show up not just in electricity bills or at the gas station but in every manufactured good, from food to cars. Consumers will cut back on spending, which in turn will cut back on production, which results in fewer jobs created or higher unemployment. Some companies will instead move their operations overseas, with the same result.

When the Heritage Foundation did its analysis of Waxman-Markey, it broadly compared the economy with and without the carbon tax. Under this more comprehensive scenario, it found Waxman-Markey would cost the economy $161 billion in 2020, which is $1,870 for a family of four. As the bill's restrictions kick in, that number rises to $6,800 for a family of four by 2035.

Note also that the CBO analysis is an average for the country as a whole. It doesn't take into account the fact that certain regions and populations will be more severely hit than others -- manufacturing states more than service states; coal producing states more than states that rely on hydro or natural gas. Low-income Americans, who devote more of their disposable income to energy, have more to lose than high-income families.

Even as Democrats have promised that this cap-and-trade legislation won't pinch wallets, behind the scenes they've acknowledged the energy price tsunami that is coming. During the brief few days in which the bill was debated in the House Energy Committee, Republicans offered three amendments: one to suspend the program if gas hit $5 a gallon; one to suspend the program if electricity prices rose 10% over 2009; and one to suspend the program if unemployment rates hit 15%. Democrats defeated all of them.

The reality is that cost estimates for climate legislation are as unreliable as the models predicting climate change. What comes out of the computer is a function of what politicians type in. A better indicator might be what other countries are already experiencing. Britain's Taxpayer Alliance estimates the average family there is paying nearly $1,300 a year in green taxes for carbon-cutting programs in effect only a few years.

Americans should know that those Members who vote for this climate bill are voting for what is likely to be the biggest tax in American history. Even Democrats can't repeal that reality.