Eerlier Henry Waxman, Chairman of the House Energy and Commerce Committee says that controversial Waxman-Markey climate change bill will pass through the energy committee before Memorial Day. Some Democrats have been hesitant to get behind it, and many outright oppose. Michigan Democrat John Dingell recently said “Nobody in this country realizes that cap-and-trade is a tax – and it’s a great big one.”
Obama is anxious to get the legislation through, and various alternatives have been proposed to get wavering Democrats to get behind the bill and ensure passage. The Heritage Foundation has a new web memo explaining why cap-and-trade, and other proposed alternatives are a bad idea. According to the memo, there are plenty of reasons why cap and trade is a bad idea, "including lack of transparency and potential for fraud and abuse. But above all it is an economic burden and jobs killer."
A Heritage Foundation analysis of Waxman-Markey found devastating economic impacts. Specifically, the analysis projects that by 2035 the bill will:
- Reduce aggregate gross domestic product (GDP) by $7.4 trillion;
- Destroy 844,000 jobs on average, with peak years seeing unemployment rise by over 1,900,000 jobs, net of any "green jobs" created;
- Raise electricity rates 90 percent after adjusting for inflation;
- Raise inflation-adjusted gasoline prices by 74 percent;
- Raise an average family's annual energy bill by $1,500; and
- Increase inflation-adjusted federal debt by 29 percent, or $33,400 additional federal debt per person, again after adjusting for inflation.
Although touted as market-oriented, placing an arbitrary limit on carbon emissions and permits to emit is market-distorting and attempts to force consumers to change their behavior.
Other alternatives proposed are only slightly different from "cap and trade" and are not much better. One alternative, "cap and dividend" proposes that businesses "bid for carbon credits through an auction" and the proceeds from these auctions would be passed on to consumers in the form a rebate. Whether or not these rebates would offset the inevitable higher prices of fossil fuels isn't known, but even if it did, "he higher energy prices would reduce economic activity by forcing businesses to cut costs elsewhere, possibly by reducing their workforce, and thus doing damage that no check would cover."
Another proposal, "cap and invest," is similar to "cap and dividend" but instead of rebate checks to consumers, the proceeds of these carbon credit auctions would be put toward government research into renewable energy technology. Heritage explains why this is another bad idea:
Not only does [cap and dividend] thwart innovation by reducing incentives to make renewable technologies more economically efficient, but it places the power to innovate in the hands of bureaucrats. In all sectors of the economy, history shows that it is the private sector--not the federal government--that is best at meeting consumer demand and innovating to provide more efficient products.
Heritage also notes that "energy taxes fall disproportionately on the poor, since low-income households spend a larger percentage of their income on energy."
The next is a direct tax on carbon emissions. While this sounds simpler, it would also hit lower-income families the hardest, and do very little to curb emissions. Businesses would still be forced to cut costs and jobs, and/or pass the costs on to the consumer.
No matter how they modify cap and trade, it's a bad deal for everyone.
Republicans are pushing their own their own changes to the bill, including a proposal to include nuclear power and "clean coal" as a clean energy alternatives, and of course killing cap and trade. But, Henry Waxman and Edward Markey will have to convince members of his own party first.