People choose economic policies to bolster their standard of living and to create opportunity. While people disagree on the most effective economic paths, they agree that higher productivity, more employment, and stronger buying power across all economic strata are the final goals of sensible economic planning.
With that in mind, who in their right mind would choose an economic policy that promises a 2.5 percent reduction in gross domestic product over the next 40 years? Add to that the likelihood of at least a half-percent loss in employment, and a strategy that would increase the costs of a staple up to 45 percent in the near- and mid-term, a cost that will erode buying power most among the lowest income earners. Does that sound like an economic policy that any rational politician would propose, let alone an entire nation adopt?
Unfortunately, it does – and our own Congress has already proposed it. The cap-and-trade system for controlling the output of carbon dioxide has made it out of committee, sponsored by Henry Waxman and Edward Markey. President Barack Obama campaigned on this revamping of the American energy industry and is widely expected to support it in its current form.
Wait a minute, some of our readers will say. You're just quoting talking points from the right-wing corporate fascists sputter sputter Halliburton Cheney! Actually, while other think tanks have done notable work analyzing the impact of cap-and-trade systems on the American economy, the figures above come from the Brookings Institution, a center-left think tank in Washington, D.C.
However, these numbers tend to corroborate the analyses of other think tanks. Cap-and-trade proponents scorned a report from the George C. Marshall Institute when it was released in March, but the Brookings analysis matches closely to Marshall's:
“Estimated GDP losses vary widely, from a 0.3 percent-0.5 percent to 3 percent drop in GDP below the business-as-usual projections in 2015 and a 1 percent to 10 percent 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.”
The Marshall report, based on independent analyses of the Senate version of cap-and-trade sponsored by Joe Lieberman and Mark Warner, gives a range of results that into which the Brookings conclusions fall, both in the near and long terms. The Marshall report went into detail on the potential for job losses as well. Depending on the exact structure of the cap-and-trade system, net job losses by 2015 would be between 850,000 to 1.8 million lost employment opportunities. By 2030, that range goes up to 3-4 million potential jobs lost, as a net. One of the studies predicts a net job loss of over seven million by 2050, which would certainly account for a 2.5 percent drop in GDP.
The Marshall report went further in its economic predictions. It assesses the cost per household of energy price increases, which producers will pass to their customers, at an escalating rate as caps force producers away from abundant sources of energy, such as coal. Those costs – which Marshall calls a “tax” – start at $1100 per household per year, increasing to a range of $1400-$2000 by 2015, and peaking at $2000-$3000 by 2050.
Those in higher income strata will certainly feel the pinch of these unnecessary costs, but none more so than lower-income earners. Thanks to the loss of employment, they will have fewer opportunities and the market will suppress compensation as a natural consequence. At the same time, the rise in heating and lighting their homes will greatly reduce or entirely eliminate their discretionary money, meaning they will not consume any more than necessary.
This will place an even greater burden on the economy – and on government as well. Tax revenues will drop at the same time many of these lower-income earners will require extensive subsidies to pay for subsistence energy purchases. Standards of living in the US will drop, especially among the working class families who will get squeezed by cap-and-trade. Small business likewise will fail as the increasing costs of power force them to raise prices higher than their larger competitors, and they slowly die in the marketplace.
The end result? We will out-distance Europe in turning America into a nanny state, and most Americans into a dependent class. Government would control wide swaths of private industry through their grip on energy production. Only the largest and the richest will survive, but they will be burdened with the costs of the subsidies that the government distributes to everyone else.
What kind of politician deliberately chooses this kind of future for America? The kind that most needs replacing.
Edward Morrissey's Bio
Ed Morrissey writes for Hot Air, where he also has a daily political talk show. Ed has written for the Washington Post, the New York Post, the New York Sun, and has made numerous television and radio appearances. He lives in Minnesota with his wife, son, and two granddaughters.
Posted
06-11-2009 8:08 AM
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