The Senate will vote this week on a bill that will raise energy prices, create a huge federal bureaucracy when we have too many as it is, and will lower carbon emissions over the next 25 years by half of what we’ve accomplished over the last six through free-market initiatives. Who would vote for such a monstrosity? Most of the Senate, if the debate vote gives any indication. Senator James Inhofe warns against the passage of the massive bill, pointing out that the bill hurts the poor and working class most of all:
With average gas prices across the country approaching $4 a gallon, it may be hard to believe, but the U.S. Senate is considering legislation this week that will further drive up the cost at the pump.
The Senate is debating a global warming bill that will create the largest expansion of the federal government since FDR’s New Deal, complete with a brand new, unelected bureaucracy. The Lieberman-Warner bill (America’s Climate Security Act) represents the largest tax increase in U.S. history and the biggest pork bill ever contemplated with trillions of dollars in giveaways. Well-heeled lobbyists are already plotting how to divide up the federal largesse. The handouts offered by the sponsors of this bill come straight from the pockets of families and workers in the form of lost jobs, higher gas, power and heating bills, and more expensive consumer goods.
Various analyses show that Lieberman-Warner would result in higher prices at the gas pump, between 41 cents and $1 per gallon by 2030. The Congressional Budget Office (CBO) says Lieberman-Warner would effectively raise taxes on Americans by more than $1 trillion over the next 10 years. The federal Energy Information Administration says the bill would result in a 9.5% drop in manufacturing output and higher energy costs.
Carbon caps will have an especially harmful impact on low-income Americans and those with fixed incomes. A recent CBO report found: “Most of the cost of meeting a cap on CO2 emissions would be borne by consumers, who would face persistently higher prices for products such as electricity and gasoline. Those price increases would be regressive in that poorer households would bear a larger burden relative to their income than wealthier households.”
Any policy that drives up energy costs will have a disproportionate effect on lower-wage earners and those with fixed incomes. Energy prices affect prices of all goods brought to market, which erodes buying power through inflation. We saw this in the 1970s when Congress, as it does now, restricts domestic development of energy supplies and attempts to tax or regulate energy production.
As the cost of goods goup, the proportion of disposable income declines, which means that people wind up buying less. This proportional effect on disposable income increases for those earning less, who use a higher percentage of their wages for essentials. The squeeze results in a lower standard of living for those who can ill afford it, while remaining more or less a nuisance for those in the higher tax brackets.
Across the board, however, consumer confidence will drop and capital investment will dry up. The economy will start declining as prices rise in this manner as investors move to defensive postures. The economy will turn towards “stagflation”, that condition we saw thirty years ago that resulted from economic mismanagement but at the core was caused by energy shocks. And Lieberman-Warner promises a return to those policies.
What does it produce? A 1.4% reduction of CO2 in the overall atmosphere by 2050. We have lowered American emissions of CO2 by twice that in six years, thanks to the Bush administration’s efforts to use the free market to press for emissions improvements. In fact, we have outperformed Europe in that regard — and they’re using a system similar to Lieberman-Warner.
Why should we adopt failure in place of success? We’ll talk to Senator Inhofe today on the Ed Morrissey Show about this bill at 3 pm ET.
Update: Interview added: