Friday, March 27, 2009

Op-Ed Against Cap and Trade

Op-ed by Tom Jenny and Phil Kerpe of Americans for Prosperity, arguing against passing a massive tax hike in the guise of climate change legislation.

Don’t Let Cap-and-Trade Become Tax-and-Spend
Tom Jenney and Phil Kerpe

The surprise revenue source to pay for much of the gigantic Obama budget is something known deceptively as “climate revenues,” also known as “cap-and-trade.” But Obama’s cap-and-trade plan is really a tax-and-spend plan. It would mean a trillion-dollar tax increase, with sweeping consequences throughout the economy, both nationally and here in Arizona.

A cap-and-trade tax hike is the worst kind of tax increase, because the tax increase is hidden behind a complex regulatory apparatus that only adds to the cost.

The size of the tax is a mystery. Companies know they have to pay a tax, but they don’t know what the tax rate is, because they will be forced by government to bid at auction for permits to use fossil fuels. The Obama budget initially slated the cap-and-trade auction process to generate approximately $646 billion in revenue for the federal government over eight years.

More recently, however, the deputy director for the White House National Economic Council, Jason Furman, reported that the tax scheme would actually raise two-to-three times that much, bringing in upwards of $1.3 to $1.9 trillion. The truth is that nobody knows how much it will cost — and that’s a large part of the problem.

We do know that the impact on our economy here in Arizona would be staggering. An analysis conducted by the respected forecasting firm SAIC and commissioned by the American Council on Capital Formation projected the economic impact of last year’s version of cap-and-trade for Arizona. They found that by 2020, with the bill in effect just eight years, we would have 23,000 to 34,000 fewer jobs, $800 to $2,600 in lower annual disposable income per household, and an annual hit to the Arizona economy of between $2.6 billion and $3.6 billion.

Much of the damage would be caused by significantly higher energy prices: 20 to 67 percent higher prices for gasoline and 23 to 30 percent higher prices for electricity. The study also found that lower-income families — people who are least able to absorb higher energy costs — would be hardest hit.

Those numbers were the projected impact of last year’s Lieberman-Warner legislation. We don’t have numbers yet on Obama’s new proposal, but it is more extreme and would be even more expensive.

These astonishing economic costs are not an unfortunate side effect of the bill. They are its intended purpose. President Obama explained to the San Francisco Chronicle last year that passing costs on to consumers is an important part of his plan. “Under my plan of a cap and trade system,” he told the Chronicle, “electricity rates would necessarily skyrocket… 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.”

Worse, these tax increases may not buy us anything of value on the environmental side. Even if emissions targets are met, climate models show that the reductions would have no discernible effect on the global average temperature. The National Center for Atmospheric Research found that the Kyoto Protocol would reduce the global average temperature 0.07 degrees Celsius in 50 years and 0.15 degrees Celsius in 100 years. Feel-good symbolism is not worth trillions of dollars in higher energy taxes.

Lest we be accused of obstructing efforts to deal with climate change, we want to remind readers that AFP’s No Climate Tax campaign simply asks Congress to oppose any environmental schemes that result in a net increase in government revenue. In other words, climate policy should not become yet another excuse to transfer dollars from hard-working citizens to the bureaucrats in Washington and to the beneficiaries of pork-barrel politics.

Arizona Congressmen Jeff Flake and John Shadegg have already signed AFP’s No Climate Tax pledge ( But the real fight will be in the U.S. Senate, and we can only hope that Sen. John McCain will decide to vote against any cap-and-trade scheme that raises overall taxes.

We cannot let cap-and-trade become tax-and-spend. The long-term health of our state and national economies may depend on it.

--Tom Jenney is Arizona director and Phil Kerpen is national director of policy for Americans for Prosperity (

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