The Waxman-Markey bill proposes a new national tax of historic proportions. Though levied directly on carbon-based energy, the tax's impact spreads through the economy, increasing prices, reducing income, destroying jobs, and significantly expanding the national debt.
As with many policies coming from Washington these days, the Waxman-Markey bill seeks to "level the playing field" by making a more competitive player weaker, in this case hamstringing carbon-based energy sources, rather than ensuring an environment where less competitive players can become stronger. This policy hurts everyone, including alternative-energy investors, because it uses resources less efficiently, which creates deadweight losses. This means there will be underused resources leading to fewer opportunities in the future as slower growth reduces the resources available to help power the research and development investments that will create the technologies of the future.
As President Obama said about his cap-and-trade program during the presidential election campaign, "electricity prices would necessarily skyrocket." The same applies to many other prices as the Waxman-Markey energy tax spreads through the economy. Businesses and consumers will adapt as well as possible to these higher prices. They will spend more for less energy. They will build smaller houses and buildings. They will drive smaller, less safe vehicles. They will turn thermostats up in the summer and down in the winter. They will divert income to more expensive energy-saving appliances. But these activities and more will not be enough to offset the higher energy costs. The net effect is lower income, higher prices, and fewer jobs.
In particular, the Heritage analysis projects that by 2035:
* Gasoline prices will rise 58 percent (or $1.38) above the baseline forecast, which already contains price increases;
* Natural gas prices will rise 55 percent;
* Heating oil prices will rise 56 percent;
* Electricity prices will rise 90 percent;
* A family of four can expect to pay $1,241 more for energy costs per year;
* Including taxes, a family of four will pay $4,609 more per year;
* A family of four will reduce its consumption of goods and services by up to $3,000 per year, as its income and savings fall;
* Aggregate GDP losses will be $9.4 trillion;
* Job losses will be nearly 2.5 million; and
* The national debt will rise an additional $12,803 per person.
(All figures are in constant 2009 dollars.)
All of these costs will be paid for no more than a 0.2 degree (Celsius) moderation in world temperature increases by 2100, and no more than a 0.05 degree reduction by 2050. Saddling the next generation with higher prices, higher debt, less income, fewer jobs, and more taxes does not seem like a worthy legacy--especially when the purported environmental benefits are so small they can barely be measured.
My op-ed on "cap and trade":
- Sarah Palin