'Cap and trade' blows roof off spending
Created on April 1, 2009
Government's 'Cap and Tax' Threatens to Hobble Business, Raise
The energy policies outlined in President Barack Obama's budget
blueprint would sap power from the economy while adding hundreds of
dollars a year to household expenses. If the president wants to
make good on his promise to help the middle class, he should reject
ideas that cost Americans more money, limit their access to energy
resources and provide little, if any, environmental benefit.
"By far the most onerous element of President Obama's budget is
his cap-and-trade proposal to reduce carbon emissions," Ben
Lieberman, The Heritage Foundation's senior energy analyst, writes
new paper. "If enacted by Congress, it could produce one of the
largest tax hikes in American history."
Proponents may call it "cap and trade," but "cap and tax" is
more accurate. The idea would have the federal government drain
$1.6 trillion to $1.9 trillion from American businesses from 2012
through 2019, easily double the $646 billion estimate in the
blueprint, according to calculations by Heritage's Center for Data Analysis. In
turn, businesses would pass along these losses to consumers in the
form of higher prices.
For perspective: $1.9 trillion is more than half what America
spent to fight World War II, adjusted for inflation. It's 10 times
the cost of Hurricane Katrina. It's almost as much as combined
spending on the New Deal, space exploration and the Vietnam
"Although the Obama administration's blueprint euphemistically
refers to this money as 'climate revenue,' in reality it is an
energy tax that would force consumers to pay higher energy prices,"
Lieberman writes in a paper co-authored with research assistant
Nicolas Loris. "The plan may be intended to reduce greenhouse
gases, but actually it would kill jobs and devastate the
Obama proposes to reduce emissions of carbon dioxide 14 percent
below 2005 levels by 2020, and 83 percent below those levels by
2050. The program would auction "carbon emission credits," then
spend hundreds of billions in revenue on health care and other
The president's proposal to spend $150 billion on "clean energy"
technologies is "old, tired thinking," Lieberman and Loris say,
adding:"The notion of government investing in clean energy
technologies through tax breaks, incentives and subsidies is
tantamount to Washington picking winners and losers. It penalizes
successful sources of energy, which Americans use every day, to
subsidize unsuccessful ones."
The Department of Energy's budget, set to jump by $10 billion to
$34 billion, includes expanded subsidies to commercialize alternate
power sources such as wind, solar, biofuels and clean coal. Such
subsidies, Heritage analysts caution, distort market forces and
encourage corporate dependence on government. By making loan
guarantees to subsidize some of the cost of a project, for example,
the government diverts capital from more competitive projects.
"Loan guarantees and other subsidies encourage companies to
pursue political profit rather than economic gains," Lieberman and
Loris write. "When the government announces money will be allocated
for specific projects or technologies, the result is hand-over-fist
lobbying by power companies to secure taxpayer money. By continuing
to subsidize unproven technologies, government makes consumers pay
twice -- once to fund the subsidies and again with higher electric
At the same time, the Obama blueprint would increase the
Department of Interior's budget through punitive tax increases on
the oil and gas industry as well as multiply regulations limiting
their access to energy resources. The government would collect $31
billion in new revenues from oil and gas explorers, which already
shoulder generally higher tax rates.
When gasoline prices hit $4 per gallon last year, Americans let
their government know they wanted policies that increase the energy
supply and ultimately lower prices. But the "exact opposite" will
says, if the administration goes ahead with plans to impose new
excise taxes on offshore oil and gas production, cut off funds to
coal states for cleaning up abandoned mines and charge "user fees"
to business for processing oil and gas permits on federal land.
"President Obama's costly energy proposal will spend more and
raise energy prices for Americans by taxing cheaper, reliable
sources of energy to invest in unproven ones," Lieberman says.