Cap and trade: It's an economic catastrophe
ALG Editor's Note: In the following featured commentary, the Denver Post reveals how cap-and-trade, if the American people are not alerted in time, will be an economic catastrophe:
Cap and trade: It's an economic catastrophe
By David Harsanyi
If you have even a basic grasp of cap-and-trade policy, you're one in a million.
According to a recent Rasmussen poll, given a choice of three options, only 24 percent of voters could even identify that cap-and-trade policies had anything to do with environmental issues.
A higher number believed that it was about regulating Wall Street. A plurality had no idea what it was at all.
Who can blame them? It's preposterously convoluted.
And that's precisely the kind confusion the backers of cap-and-trade schemes are counting on.
When it comes to environmental policy, politicians will rely on your good intentions on the issue and not much else. With cap-and-trade, however, the economic tradeoffs are so damaging, the environmental benefits so negligible and the plan such a clutter, that selling it — even to Democrats — is turning out to be difficult.
The cap-and-trade bill being rammed through Congress by Henry Waxman, D-Calif., and Ed Markey, D-Mass., aims to dramatically reduce carbon dioxide emissions by making greenhouse gas-emitting businesses purchase or trade government-rationed or -auctioned coupons in a "market."
Now, while most markets will trade commodities that are actually worth something, this artificial market would effectively nationalize the energy industry. And like any huge economic undertaking, it would be highly susceptible to fraud, insider trading, political influence and every other ugly consequence of big government and big business getting cozy.
We can turn to the failed European experience of cap and trade to understand how. As The New York Times reported in 2008, a comparable system in Europe "unleashed a lobbying free-for-all that led politicians to dole out favors to various industries, undermining the environmental goals. Four years later, it is becoming clear that system has so far produced little noticeable benefit to the climate — but generated a multibillion-dollar windfall for some of the Continent's biggest polluters."
Oh, and from 2000 to 2006, European emissions rates under the cap-and-trade policy increased by 3.5 percent. During that same time, U.S. emissions increased by 0.7 percent.
So why go through all that trouble when there is a straightforward way to bring about similar — and hopefully better — environmental results?
When Colorado proponents of cap-and-trade visited the editorial board at The Denver Post, I asked them why Congress couldn't simply affix a carbon tax on these corporations. One reason, they admitted, was that there was no public appetite for a tax. (They failed to mention that cap-and-trade's tangled bureaucratic web would be nearly impossible to escape from once implemented, which I believe is the driving purpose of the bill.)
The trouble is that no matter what they call the cap-and-trade bill, it is a new tax.
A recent study released by the Tax Foundation contends that the cap-and-trade bill is a regressive tax on families, as the bottom 20 percent of income earners would pay 6.2 percent of their income toward the tax while the top 20 percent of income earners will pay 1.4 percent.
The report estimates that on average, this cap-and-trade scheme would cost the average household $1,218 extra a year. (The Congressional Budget Office analysis estimates that cap-and-trade would cost the average American family $1,600; others contend it would be even higher.)
Even if you believe such estimates are inflated, or that such sacrifices are worth it, wouldn't you, at the very least, expect results?
Martin Feldstein, a Harvard economics professor writing in The Washington Post, stated the "proposed legislation would have a trivially small effect on global warming while imposing substantial costs on all American households."
Feldstein points out that our share of global CO2 emissions is now less than 25 percent — and, because of other growing economies, in a percentage decline. Yet, a 15 percent drop in CO2 output at home — if it happens — would only lower global carbon output by less than 4 percent. The cost for such a negligible improvement would make little sense.
You will, of course, hear the argument that doing anything is better than doing nothing. The problem is that's not the choice we face — and cap-and-trade proponents know it.
David Harsanyi is an editorial page columnist.