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Cap and Trade Vote. Expect Much Higher Energy Bills
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Cap and Trade Legislation
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.
[Review & Outlook] Associated Press
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.
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Paul's Motor Car Service
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Senate Majority Leader Harry Reid intends to bring the disastrous cap-and-trade energy-rationing bill to the Senate floor this week. A cloture vote on the motion to proceed to debate of the bill is scheduled for Monday, June 2nd, so there is no time to waste! Get your calls into your Senators' offices now!
Sponsored by Senators Joseph Lieberman (D-CT) and John Warner (R-VA), America's Climate Security Act (S. 2191) would restrict energy use to combat so-called "global warming." This bill has received lots of hype, but very little serious analysis of its implications.
There are FOUR Major Problems with the Senate Cap-and-Trade bill:
* Drastically increases energy taxes. The bill forces down supply by restricting carbon dioxide emissions from coal, oil, and natural gas, and thus boosts the price of energy.
* Hurts the American consumer. Higher energy costs will hit poorer Americans the hardest. If Lieberman-Warner passes, the manufacturing sector projects that over 1 million jobs will be lost by 2022 and two million by 2027. The price of household energy, including electricity, will also drastically increase.
* Massively increases scope of government. Lieberman-Warner puts the federal government in charge of deciding how much energy Americans can use. This is an unacceptable infiltration into the lives and liberty of American citizens.
* The same Cap-and-Trade policies in Europe are proven failures. The environmental benefits have proven small to non-existent. The bill reduces emissions of "greenhouse gases" in the United States only. China is the world's largest polluter, with India and other fast-developing nations not far behind. This bill is nothing more than a giant tax increase and an attempt to increase governmental control over your lives!
A recent poll conducted by the National Center for Public Policy Research found that 65% of Americans oppose spending even a penny more for gasoline in an effort to reduce "greenhouse gas" emissions.
The Lieberman-Warner bill promises hardship for the economy and the American consumer. Call your Senators' Capitol Hill offices now and tell them to vote NO on Lieberman-Warner today!
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Paul's Motor Car Service
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Senate Committee Mulls Cap-and-Trade System
The Senate Environment and Public Works Committee is due Wednesday to review details of a cap-and-trade system that could help the United States cut greenhouse gas emissions. It creates a financial incentive for emission reductions by assigning a cost to polluting.
The way it works, the government would decide how many tons of greenhouse gases the United States can emit in a given year. Power plants, refineries and some factories would need permits for each ton they pollute. Over time, the total amount of emissions allowed would be cut, so there would be fewer permits. That's the cap.
As for the trade, take two companies that pollute and give each 100 permits. The first company may easily reduce its emissions and find itself with 50 extra permits. The second firm may not find easy ways to reduce emissions and need to increase production, but it will need more permits.
"The first firm would say I have 50 permits to sell and the second firm would say how much would you sell it to me for? And there would be markets in which those firms could undertake that kind of transaction just like there are financial markets today for selling stocks of a firm," said Peter Orszag, director of the Congressional Budget Office.
That's the basic concept. But there are variables for Congress to consider. Chief among them is whether to initially give away the permits to companies or to sell them.
Orszag says it's a big question because of the amount of money at stake. "Our estimate suggests that under many of the proposals under discussion the value of the permits would be between $50 billion and $300 billion a year by 2020."
One advantage of giving them away is political. It will please the companies and attract votes from senators who support coal and other fossil fuel industries.
The draft bill being considered in the Senate committee would start out giving away most of the permits. But by 2036 companies would have to buy the permits from the government through an auction.
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Paul's Motor Car Service
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