On Friday, the house is voting on a very hidden but important bill: the Waxman-Markey bill designed to establish a Cap and Trade system.  Like most other global environmental legislation, this bill would be an absolute disaster for the US economy.  Proponents, including Obama, say the bill is designed to decrease our carbon footprint on the world.  Sure, it sounds good on the surface, but digging into this bill reveals that it is another attempt by leading Democrats to increase taxes and governmental regulation on the private sector.

For those who are not aware, a CO2 Cap and Trade is a system where the government regulates the amount of CO2 that can be released into the atmosphere by private industry.  If this bill passes, the maximum level of carbon that US citizens and businesses could emit would be set.  Then, they would issue carbon credits to each industry based upon its size, type of industry, etc (raise your hand if you already smell an opportunity for corruption).  Companies that do not use all their credits (aka don’t emit as much CO2) would then sell their carbon credits to companies that have used up all their credits.  Essentially, a market for carbon credits would arise.

Elections have consequences, and electing a stridently big government Democrat to the White House, has already cost us trillions.  However, a bill as whacky as this, can, and should be, defeated.

To start, a Cap and Trade system creates new governmental regulations.  Companies are already burdened with costs of complying to every little regulation Washington or their state capital requires of them.   Now, they will have to allow federal carbon auditors (what a scary combination of words) to monitor their energy output.  Find me a business owner who is excited about that.

Second, it opens up the flood gates for private interests and government corruption.  Who is going to decide how many carbon credits each industry gets?  In the past, such systems benefitted industries that have a greater access to government.  It will also create, as the Philadelphia Inquirer notes, “entrenched interests enriched by an expanded carbon-offset industry. They, along with those who would profit from the bill’s permits to pollute, would vigorously fight reform even after the system’s flaws became obvious.”  For an Administration that wants to reduce the entrenched interests in Washington, this bill is a huge step back.

By far the biggest problem with this bill is the cost to the average American.  A Cap and Trade system essentially functions as an energy tax as companies have to pay for their energy, with the government wielding the power to sell more carbon credits.  The Obama Administration says the economic cost will amount to 22 billion a year; or about $175 for a family of four.  While that is certainly a hefty price just to reduce CO2, they drastically understate the effects on the economy and GDP.

The Heritage Foundation, a free market think tank, points out:

“Most problematic is their complete omission of economic damage from restricting energy use… ‘The resource cost does not indicate the potential decrease in gross domestic product (GDP) that could result from the cap. The reduction in GDP would also include indirect general equilibrium effects, such as changes in the labor supply resulting from reductions in real wages and potential reductions in the productivity of capital and labor).’ That’s a pretty big chunk of change to ignore. In The Heritage Foundation’s analysis of the Waxman-Markey climate change legislation, the GDP hit in 2020 was $161 billion (2009 dollars). For a family of four, that is $1,870 that they ignore”

As usual, the Democrats are misrepresenting the economic implications of government intervention.  If you listen to them talk, they say they are just taxing the big bad polluters, and its all to save the elephants (or whales) or whatever.  Of course, any tax on business just gets passed along to the consumer in the end.

The Democrats like to pretend they are both the party of the poor and the environment.  However, protection of the two do not go together.  Sweeping environmental regulation, especially Cap and Trade, functions like a regressive tax.   Legislation like this hurts the poor and middle class well more than it does the rich.  It essentially taxes energy, which the poor and middle classes spend far more of their income on.

Just stop and think about it, who is hurt more when energy costs go up?  Do rich or poor people get hurt more when gasoline and electricity costs double?  When you tax the big bad energy using corporations- who deliver everything to poor and middle class consumers, from food, to clothing, to transportation, to beer, to entertainment- they pass the cost along to the consumer.  This increase in price is noticed not by the rich, but by the middle class and the poor.

There are numerous other reasons to oppose Cap and Trade that I didn’t get to here.  But you know when John Dingell, the Democratic Congressman from California says “Nobody in this country realizes that cap and trade is a tax, and it’s a great big one”, you know you have a bad bill.

-Bob