October 23, 2009

October 23, 2009 | Commentary on Energy and Environment

Questionnaire May Shed Long-Overdue Light on Cap-and-Trade Legislation

Reps. Henry Waxman and Ed Markey did a little digging last week. It was the kind of thoughtful investigative work our lawmakers should do more often.

What Waxman and Markey did was ask The Heritage Foundation and six other outfits about the methodology they used in estimating the cost of their cap-and-trade bill. The bill authors sent an identical list of 33 methodological questions to each group probing both the analytical techniques used and the range of inquiry.

As they explained in their cover letter, they wanted to spark a transparent conversation about how these measures would affect American families. "[T]his transparency will allow members of Congress and the public to put model results in appropriate context."

We were delighted to engage. Our study had reached conclusions not at all pleasant to the eyes of the bill sponsors. It showed that, when all the tax impacts were added up, the Waxman-Markey legislation would cost the average per-family-of-four cost almost $3,000 per year. Over the 2012-2035 time period, we forecast total per-family-of-four costs would tally roughly $71,500.

And economic costs extended far beyond that. Even after accounting for "green job" creation, our analysis predicted net job losses approaching 1.9 million in 2012 and 2.5 million by 2035. The manufacturing sector alone would lose 1.4 million jobs by 2035.

Doubtless these findings brought little joy to Congressmen Waxman and Markey. Yet the questions they asked about our research revealed no pique. Rather, they were totally legitimate.

For example, they asked if our model took into account an increase in private sector investments in research and development that would be sparked by the legislation and a new carbon market. Answer: It did. Our model incorporates both short and long-run responses to higher energy prices.

They also asked if we had considered the benefits of reductions in air pollution. Answer: We had not, just as we had not analyzed the impact of moving production from relatively clean domestic manufacturing plants to less clean production in the developing world.

This back and forth is not only a civic obligation as Congress debates this legislation, but it is also a useful exercise in transparency. There has been a shroud of secrecy over negotiations on energy taxes, health care reform and stimulus legislation this year. Closed door meetings and private backroom negotiations have largely prevailed, while the general public and most of Congress are left outside.

We commend Chairman Waxman and Chairman Markey for opening these doors. We humbly believe that our research models are second to none, and welcome the chance to share our research and results with anyone who is interested, regardless of their political affiliation.

But we are but one voice in this debate, and we welcome this opportunity to put all economic models on the table, with their supporting data, and the answers to the Chairmen's questions.

The Heritage Foundation has devoted a space on our website, www.heritage.org, where we will post our answers in their entirety. We have formally invited the other organizations who were asked these questions to allow us to post their responses as well, in the interest of full transparency.

We are also inviting three other prominent organizations-the Brookings Institution, the Political Economy Research Institute, and the Congressional Budget Office-to voluntarily send us their responses to these questions so that no organization is excluded from this open and transparent discussion.

We're not sure why the Congressmen didn't send the questionnaire to these outfits. They were prominently engaged in the debate-especially the CBO, whose study (an accounting-type analysis rather than a comprehensive, econometric analysis) delivered far lower cost estimates and was cited frequently and uncritically by the bill's supporters.

Now that the rush to mark-up has passed, we can take time to let in some sunshine. As Sir Winston Churchill once said: "Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning."

Let's hope the Waxman-Markey questionnaire signals that a serious debate can now take place. American families deserve to be kept fully apprised of how Congress intends to act, and how those actions will most likely affect their pocketbooks, their jobs, and their lives.

David W. Kreutzer is senior policy analyst at The Heritage Foundation.

About the Author

David W. Kreutzer, Ph.D. Senior Research Fellow, Energy Economics and Climate Change
Center for Data Analysis

Related Issues: Energy and Environment

First appeared in The Politico