WSJ: Cap-and-tax a great deal … if you don’t measure the costs

posted at 2:40 pm on June 25, 2009 by Ed Morrissey

Democrats have hailed the CBO estimates of the costs per family of their new cap-and-trade carbon-emissions scheme, which show an impact of only $175 annually.  What they don’t tell voters, the Wall Street Journal explains, is that those costs begin to sharply escalate in ten years.  Democrats also fail to mention that the cost estimates of the CBO come just from the trading mechanism and nothing else:

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.

Nor does this take into account regional variations; these numbers are national averages.  The bill will decimate the economies of coal-producing areas of the country, hiking unemployment not just from miners and coal-producing power plants but from the entire supply chain of both.  Essentially the same areas of the country now reeling from the collapse of the auto industry, the economies of these states will wind up subsidizing the green dreams of coastal liberals.

Will this result in more energy?  Supposedly, cap-and-trade will push green-energy producers into mass production.  However, no one has a clue whether any of these resources will have that kind of capability even after we start squeezing conventional energy producers out of business.  Instead, the White House and Congressional Democrats have taken an approach that crosses Field of Dreams with European failure — If you build the cap-and-trade market, mass-production green energy will come.

How did that work for Spain, perhaps the leading nation for green-energy public investment? Poorly, as George Will reminds us:

The Spanish professor is puzzled. Why, Gabriel Calzada wonders, is the U.S. president recommending that America emulate the Spanish model for creating “green jobs” in “alternative energy” even though Spain’s unemployment rate is 18.1 percent — more than double the European Union average — partly because of spending on such jobs?

Calzada, 36, an economics professor at Universidad Rey Juan Carlos, has produced a report that, if true, is inconvenient for the Obama administration’s green agenda, and for some budget assumptions that are dependent upon it.

Calzada says Spain’s torrential spending — no other nation has so aggressively supported production of electricity from renewable sources — on wind farms and other forms of alternative energy has indeed created jobs. But Calzada’s report concludes that they often are temporary and have received $752,000 to $800,000 each in subsidies — wind industry jobs cost even more, $1.4 million each. And each new job entails the loss of 2.2 other jobs that are either lost or not created in other industries because of the political allocation — sub-optimum in terms of economic efficiency — of capital. (European media regularly report “eco-corruption” leaving a “footprint of sleaze” — gaming the subsidy systems, profiteering from land sales for wind farms, etc.) Calzada says the creation of jobs in alternative energy has subtracted about 110,000 jobs elsewhere in Spain’s economy.

I wrote about this study three months ago.  As Will notes in his column, the White House simply dismisses it, rather than rebuts it — perhaps because they can’t.

Waxman-Markey will get a vote, perhaps as early as tomorrow, in the House.  Call your Congressman and explain that we don’t want to throw away our economic future for the pleasure of a few statists exploiting an unproven theory as a means to gain control of energy production.  This fight, though, will be won or lost in the Senate.

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Wow, 85% of the taxes being raised by this is going to special interests, not into the Treasury.

karenhasfreedom on June 25, 2009 at 5:28 PM

If anyone is from the 6th District of PA, Jim Gerlach…
Please call 202-225-4315. I called this afternoon and the
girl hung up on me when I told her I was not from PA!! I intend to email his office about this. As long as these critters’ vote affects the rest of the American people, we have a right to voice our opinion. Many act as if your voice only counts if you live in their district. Got to run, been on the phone calling for about 4 hours today. Time to eat!!

bluefox on June 25, 2009 at 5:34 PM

hope and change my A$$

Just how stupid are the American people to allow this$

Another crime and injustice by the boy king aided and abetted by the MSM.

We have no more say than the Iranian people and a leader worse than the other Muslim.

Just as equally important to take to the streets!!!!!!!!!!!

bluegrass on June 25, 2009 at 5:40 PM

forgive me, I’m going to plagerize myself..

I implore you to call your representative as I just did.
I asked where the esteemed Al Green, D-TX9, stood on the legislation. “He is still evaluating the bill”
When does vote? “Tomorrow I think”,
and he has no feel for which way he is leaning? “No, they are still amending the bill”
Really?, will he be putting out a statement? “Mr. Green will put out a statement when he has finished evaluating the bill and listening to his constituents.”

Go ahead and do it because if this is close in the house it will make a difference in the senate.

DanMan on June 25, 2009 at 5:40 PM

A funny aspect of this is the way they’re hiding Al Gore, knowing he’s only second to Biden as the gaffemeister. Pelosi said something like we don’t want him to leave TN unless it’s justified by the energy use involved. LOL.

JiangxiDad on June 25, 2009 at 5:41 PM

This fight, though, will be won or lost in the Senate.

Lost. Our white knight in this fight has already thrown in with the Democrats.

spmat on June 25, 2009 at 6:14 PM

Heard on Cavuto that Peolsi is heavily invested in a green energy company and stands to gain fianancially when the bill passes. Didn’t she ridicule repubs on taking money from oil companies. Her hypocracy knows no bounds.

HoustonRight on June 25, 2009 at 6:19 PM

If I had a dog that looked like Henry Waxman I’d shave his *ss and make him walk backwards.

kg598301 on June 25, 2009 at 6:39 PM

Gore was a no show on behalf of the bill this afternoon. He always avoid real debate.

onlineanalyst on June 25, 2009 at 6:45 PM

Cap and Trade is a TAX writ large.

Do not allow our Representatives to vote yes on this destroyer before they run off for their July 4 holiday break.

Crush them with phone calls, faxes, and emails. Just say NO!

onlineanalyst on June 25, 2009 at 7:19 PM

Ugh, that horse-faced SOB should have been thrown out of office years ago.

Kensington on June 25, 2009 at 7:36 PM

I emailed my Rep (Upton-R-Michigan) and begged him NOT to vote for this horrendous bill, that Michigan is suffering enough as it is. ‘Course I emailed the same thing for the TARP bill and got a person letter basically saying, “Uh, no.” And we all know how well TARP turned out.

blr2449 on June 25, 2009 at 8:13 PM

I cant help it. Waxman looks like a mole.

faol on June 25, 2009 at 8:45 PM

Gotta say folks….


This scares the hell out of me.

Hawkins1701 on June 25, 2009 at 9:44 PM

Oregon just shelved their own “Cap and Tax”…said it would be harmful to any hope of a state recovery…we here, are screwed, if it passes the US house, and Senate!! I called all the US House members in my state…2 of them had “full” phone message boxes…I HOPE they listen!!

jrandall on June 25, 2009 at 10:47 PM

ok hate me for my simple statements but feel free to copy to send to your congressman. Mine does not support cap and trade:

Dear Congressman XXX,

I appreciate your stance on cap and trade but would ask you to do all you can to impose a moratorium on all new spending until the economy shows signs of strengthening against the wind of out of control spending by the current administration.

This cap and trade will cripple manufacturing and increase costs for all in every segment of our lives. Please speak with all your colleagues and let them know that a vote favorable, once the costs set in, will assure them of being driven out of a cushy seat in Washington.

I would like to see more nuclear energy plants and more drilling in the US. I believe this will strengthen our Nation. Perhaps you can take a Stand for the Nations best interest.

I also believe that no one currently goes without the best Health Care in the World and I do not subscribe to the crisis mentality. We already have Medicare and Medicaid for those in need and those Government Programs are failing now. I do NOT want the Government involved in the Health of me or my Family. Improvements of course can be made to Health Care, I say not now when we are in so much debt as it is.
Nationalizing it, or running another Industry into the ground without a solid plan, I think not.

If I see one more bill passed without time for the American Public to debate it with FACTS I will scream. I am APPALLED.

If that is not enough, now we have a new Immigration Policy being whispered about. I have lived in border States, and I have MANY immigrant LEGAL friends. If this “new” agenda is anything but closing the borders and mandating stricter policy I will be opposed. Period, as will my friends that made the effort, worked and went through the system to do the right thing.

Lastly, I ask you to oppose ANY NEW SPENDING. Period. Until the programs already introduced show sign of working, I say stop the madness now, declare a moratorium on ANY TAXPAYER DOLLARS or NEW TAXES ON ANYTHING be firmly and decisively opposed on my behalf.

With all Respect,

seesalrun on June 25, 2009 at 11:46 PM

How much does it take for people to see that these Democrats are either, incompetent, flim-flam artists, outright thieves, or all of the above?

Cybergeezer on June 26, 2009 at 8:08 AM

That “$175” is utter hogwash. Go here, and you can calculate what cap-and-trade will actually cost your household.

J.E. Dyer on June 26, 2009 at 11:07 AM

Meanwhile, Geraldo and Fox News continue focusing on Michael Jackson.

Big thumbs down for Fox on their priorities on this one.

Barrack on June 26, 2009 at 12:38 PM


Fox just changed from Michael Jackson story to SC Governor!

GUYS, Capn Trade, Iran, and North Korea do warrant full attention right now, don’t ya think?!


Barrack on June 26, 2009 at 12:40 PM