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It Wants Your Wallet! Beware the Cap and Trade Monster

Stephen Bloom

It Wants Your Wallet! Beware the Cap and Trade Monster

August 24, 2009

Imagine an America where a gallon of gas costs you more than $7.00. An America where your electricity bills have doubled or tripled or worse. An America where our producers of goods and services are punished by crushing new fees, taxes, and regulations, causing prices to rise for everything you buy and costing you your job. And then imagine the rest of the world carrying on business as usual, smugly watching America's decline and fall from economic power.

Now, try to imagine you're happy about all this. Seriously. Imagine this nightmarish new America is the fulfillment of your greatest dreams. To you, this is exactly what success looks like.  Having a hard time celebrating? Well, start getting used to it, because this ugly vision is exactly what the cap-and-trade bill, already passed by our House of Representatives and headed for a Senate vote (with strong support from the President), is designed to achieve!

What is cap-and-trade? Cap-and-trade is a fancy name for the simple notion that carbon emissions into our atmosphere should be capped by laws forcing industries to pay for "carbon credits" which can be traded (bought and sold) in a giant new marketplace. For example, a coal-fired power plant emitting carbon dioxide as part of its electricity generation process will need to buy enough carbon credits to authorize the emissions. And, the cap-and-trade theory goes, the high cost of these carbon credits will impose incentives for industries to reduce carbon emissions. When you cut through all the legalese and jargon, cap-and-trade is a heavy new tax penalty specifically targeted against American manufacturers and energy producers.

Those promoting cap-and-trade use feel-good clichés about environmental sustainability, green jobs and green energy, and a prosperously pristine planet. They try to paint an appealing picture. Even the name of their legislation, The American Clean Energy and Security Act of 2009, sounds noble and patriotic. But behind their persuasive imagery is a destructive economic reality.

In fact, one very prominent cap-and-trade advocate did recently go on record describing the pain his plan would inflict on American consumers. His name? Barack Obama, then a U.S. Senator, in January of last year. Listen to the words of his chilling warning: "Under my plan of a cap-and-trade system, electricity rates would necessarily skyrocket. Even regardless of what I say about whether coal is good or bad. Because I'm capping greenhouse gases, coal power plants, you know, natural gas, you name it — whatever the plants were, whatever the industry was, they would have to retrofit their operations. That will cost money. They will pass that money on to consumers."

President Obama hasn't dared speak that kind of blunt truth about his energy agenda since entering the White House, but the cap-and-trade law he soon hopes to sign accomplishes exactly what he promised. Your energy bills will skyrocket, along with the prices of everything you buy. And not because of some unexpected mistake or unforeseen consequence, but because that is exactly what cap-and-trade is designed to do.

Cap-and-trade uses the laws of economics, brutish and irresistible, to force us into compliance with the government's idea of how much energy we should use. When the price of something goes up, the quantity demanded goes down. That's Economics 101. Under cap-and-trade, prices of gas and electricity and everything else we make through carbon-emitting industries are pushed up (way up) on purpose, so you will consume less. Under cap-and-trade, you will drive less, use less electricity, and get less of most everything else, all while paying more. In short, you and most other Americans will be poorer.

The impact of cap-and-trade will be devastating for individuals and potentially catastrophic for our nation's already troubled economy. Leading economic number-cruncher William W. Beach, Director of the Heritage Foundation's Center for Data Analysis, foresees grim results. "Inflicting a strong cap-and-trade law on our sickly economy would be like throwing an anemic flu patient into a pool of blood-sucking leeches," warns Beach, "The prognosis for recovery would be dim."

So why even consider enacting a plan to impoverish Americans and permanently cripple our economy? Why would our President and so many congressional leaders want to punish their own supporters with economic disaster? Is there some beautiful hidden silver lining of cap-and-trade to outweigh all the sacrifice?

In the case of cap-and-trade, the alleged silver lining is green. But, unfortunately, instead of the green of genuine environmental progress, it's the green of forced redistribution of wealth. Cap-and-trade will transfer wealth from struggling American industries (and your own wallet) to the pockets of a whole new class of bureaucrats and elite environmental profiteers. The Heritage Foundation estimates the cost of new government staff required under cap-and-trade to be more than $8 billion, and the expense to consumers from higher energy prices to be nearly $10 trillion over the first 24 years of the plan. And meanwhile, Wall Street banks and hedge funds, major proponents of cap-and-trade, are already shrewdly positioned to exploit the complex new carbon credit markets.

Humanity's God-given dominion over the earth carries with it the burden of stewardship, the duty to be good caretakers of the planet. But cap-and-trade is a monumentally expensive fiasco when it comes to actual environmental benefit. Even those who cling to the premise that carbon emissions cause measurable changes in our always changing global climate will readily admit that the vast majority of carbon emissions arise outside of the United States, beyond the scope of any U.S. law. And in a quote published in the August 13, 2009 issue of the Wall Street Journal, Thomas Crocker, the man who invented the cap-and-trade concept, said "I'm skeptical that cap-and-trade is the most effective way to go about regulating carbon."

Cap-and-trade puts the United States at a worldwide competitive disadvantage, reducing our ability to prosper. History shows that economic prosperity is the only path to real improvements in environmental conditions. Poor countries simply can't afford the luxury of protecting their environments, and cap-and-trade will make us a poorer country.

Other than destroying and redistributing our wealth and permanently eroding our American standard of living, cap-and-trade accomplishes nothing. It's an expensive, misguided, inefficient tangle of economically strangulating governmental excess. Beware! Cap-and-trade is a big green monster, and it wants to eat your wallet!

Stephen L. Bloom, J.D., teaches economics and personal finance at Messiah College. He is a consultant at the United Methodist Stewardship Foundation of Central Pennsylvania and an estate planning and transactional attorney at the Pennsylvania law firm of Irwin & McKnight, P.C.  A frequent media guest and speaker, he is author of The Believer's Guide to Legal Issues (2008, Living Ink Books).