Cap and Trade - The Conservative Stance

The Cap-and-Tax Man Cometh

March 10, 2009
by Dan Holler of The Heritage Foundation

Ratcheting down carbon emissions, as President Obama campaigned on and outlined in his budget, produces a windfall for the government.

Over eight years (2012-2019), the government will raise $646 billion by auctioning off carbon dioxide emissions permits But that's only the beginning. The administration's own budget blueprint acknowledges that revenues may far surpass those projections. Constraining carbon is, quite simply, shaping up to be a very large tax.

Over the past 12 years, America's elected officials have been quite clear that reducing affordable energy is not in America's best interest. In 1998, the Senate rejected the Kyoto Protocol. In 2003, the Senate rejected "cap-and-trade" legislation sponsored by Sens. John McCain and Joseph Lieberman. In 2008, the Senate rejected another "cap-and-trade" bill sponsored by Lieberman and Sen. John Warner (R-Va.).

A Heritage Foundation analysis of last year's relatively modest Lieberman-Warner legislation revealed devastating economic results. In the first 20 years alone it would have:

* Resulted in aggregate real GDP losses (adjusted for inflation) of nearly $5 trillion -- equivalent to the economic damage done by more than 600 hurricanes.
* Destroyed between 400,000 and 800,000 jobs.
* Caused nearly 3 million job losses in the manufacturing sector by 2029.
* Caused some manufacturing sectors (e.g., paper, chemical and plastics) to shed over 50% of their jobs.
* Brought about significantly lower levels of employment, economic growth and lower family consumption.

The facts haven't changed, but the rhetoric is. This week, Rep. Chris Van Hollen (D-Md.) will introduce a so-called "cap-and-dividend" legislation. Conservatives may be attracted to the word "dividend," but they must recognize that the "cap" would harm the economy.

The intellectual architects of the "cap-and-dividend" plan acknowledge "higher energy prices that would result from an emissions cap." However, they believe that harm can be mostly mitigated by returning "much of the cost of a carbon cap to consumers." That calculation leaves businesses to absorb the cost of higher energy prices, which they will do by raising prices, cutting costs or just closing shop.

Last year, Americans saw their rebate checks devoured by soaring energy prices. The same will be true under a "cap-and-dividend" plan. Our country cannot afford more self-inflicted pain.

Bad Spending Habits

In his inaugural address, President Obama said that "those of us who manage the public's dollars will be held to account -- to spend wisely, reform bad habits and do our business in the light of day -- because only then can we restore the vital trust between a people and their government." The new administration and Congress has failed to honor that pledge on their $1.1 trillion "stimulus" plan. It took two grand bargains for that bill to become law, and both were brokered behind closed doors with little minority input.

The bloated $410 billion omnibus spending bill is shaping up the same way. The House of Representatives rushed the bill through two weeks ago, but things bogged down in the Senate. Late last week, Senate Majority Leader Harry Reid announced he lacked the votes to cut off debate. The American taxpayer should be wondering what grand bargain was struck over the weekend.

Besides the lack of transparency, tax dollars are certainly not being spent. The bill contains nearly 9,000 earmarks worth $7.7 billion and double-funds dozens of agencies and accounts that received money from the $1.1 trillion "stimulus" plan. Americans are cutting back on basic necessities, and lawmakers need to do likewise. When will Obama hold Congress accountable?