The coming cap-and-trade tax

Barack Obama insists that his new tax increases will not affect 95% of Americans, who will not pay even a dime more.  He may be right about that, at least directly, but Obama has another plan that will hit every single American with a massive cost burden.  The George C. Marshall Institute analyzes the potential impact of the cap-and-trade energy system that Obama espouses and finds a big price tag that only gets bigger as we go along.

First, it will depress growth, which almost everyone predicts (page 3):

Estimated GDP losses vary widely, from a 0.3%-0.5% to 3% drop in GDP below the business-as-usual projections in 2015 and a 1% to 10% drop in 2050. The timeframes of new technology development and growth in existing clean sources of energy, availability of offsets (domestic, international), and banking of allowances are likely to account for most of these differences in GDP costs estimates.

Loss of GDP means a retracting economy, less opportunity, fewer jobs, and a decline in living standards.  The Marshall Institute offers the question of whether the US wants that as a tradeoff for the questionable effects of limiting carbon-dioxide emissions into the atmosphere.  Unfortunately, the present administration and its backers won’t acknowledge that as the choice before us, preferring to paint rosy pictures of increased living standards and prosperity while the government chokes off energy production, a contradiction they claim to solve with an explosion of “green energy” from sources that don’t exist at the moment.

How do we know that?  Even Europe, which led the “green” movement, has discovered that stopping conventional energy production doesn’t magically produce realistic, mass-production alternatives.

But the bad news gets worse.  Not only will the GDP drop over both the short and long terms, but the increased price of energy will result in substantial costs to all Americans — not just Obama’s 5% at the top (page 9):

We find that a mitigation path consistent with Lieberman-Warner’s provisions is equivalent to a permanent tax increase for the average American household. This increase is projected to amount to an additional $1100 in taxes in 2008. Moreover, this cap-and-trade “tax” increases over time in real terms from about $1400 to $2000 during 2015-2030 and approximately $2000 to $3000 in 2030-2050. The de facto tax increase becomes quite significant when one considers the average American household spends about $2500 on food annually, or approximately $208 monthly.  The decrease in consumption per capita of $277 annually is equivalent to more than one month’s food budget for the average American household, keeping other consumption levels constant.

Another way to gauge this cap-and-trade tax impact is comparing it to auto-loan payments. For example, a new 2009 C-Class Mercedes can be leased for around $429 per month.  A decrease in consumption by $1110 amounts is equivalent to 2.5 monthly payments on this luxury car. This tax amounts to aboutlmost three and a half monthly payments in 2015 and almost seven payments in 2050.

Great.  So we make less, get less, and pay more — or do without.  I can’t afford two Mercedes autos now, and given the way the markets are heading at the moment, I may not be able to afford two Schwinns by 2015.

A nation looking to boost growth has to first rely on cheap and plentiful energy.  Without that, investment disappears and so do jobs, production, and consumer confidence.  John McCain’s Lexington Plan addressed that, even if it took Paris Hilton to explain it properly.  It addressed short- and medium-range energy needs by expanding domestic oil and natural gas production and boosting nuclear power while using the proceeds of those industries to develop alternatives for the long term. Without that, all we have is energy rationing … and look how well that worked for us in the 1970s.

Read the entire Marshall analysis, and start letting your friends know that the tax on the other 95% is coming.  Soon.