May 13, 2008

May 13, 2008 | News Releases on Energy and Environment

U.S. Economy Would Wilt Under Climate Bill, Heritage Forecasts

WASHINGTON, MAY 13, 2008-The Senate's leading climate-change bill, while aiming to combat global warming by reducing carbon dioxide in the air, actually poses "extraordinary perils" for Americans and the economy, according to a new study from The Heritage Foundation.

The study, produced by Heritage's Center for Data Analysis (CDA), forecasts severe consequences-including crushing energy costs, millions of jobs lost and falling household income-if Congress enacts the so-called Lieberman-Warner bill.

"Lieberman-Warner achieves its goals by hobbling the economy," said William W. Beach, CDA director and co-author of the report. "The Americans who will suffer most already need a bigger piece of the pie."

Sponsored by Sens. Joseph Lieberman (I-Conn.) and John Warner (R-Va.) and titled America's Climate Security Act, the bill sets strict limits on emissions of greenhouse gases, mainly carbon dioxide (CO2), from combustion of coal, oil and natural gas. The fossil fuels targeted by what the report calls the "most expensive environmental undertaking in history" produce 85 percent of the energy powering the economy.

"The burden would be shouldered by the average American," the study concludes. "The bill would have the same effect as a major new energy tax-only worse. Increases are set by forces beyond legislative control."

Rising prices for electricity, natural gas and home heating oil would drive the typical consumer's total annual energy bill higher and higher-$938.63 more in 2030 than 2012 after adjusting for inflation. That's about six weeks' worth of groceries now for a typical family of four, according to Department of Labor data.

When initial investment ends, annual employment losses after 2013 would exceed 500,000 jobs-approaching 1 million in both 2016 and 2017-as a result of what the analysts describe as "an extraordinary level of economic interference by the federal government."

Factory jobs would decline sharply, reaching 2.3 million lost jobs in durable-goods manufacturing in 2029 as the changes forced the economy rapidly away from that sector. Much-promised "green-collar" jobs can't make up for such losses, the report says.

Hardest-hit states within a few years: Wisconsin, New Hampshire, Illinois and Maryland. By 2025, others would include Minnesota, Nebraska, Utah, Wyoming, South Dakota, Colorado and Iowa.

By 2016, annual household income for a family of four, adjusted for inflation, would fall by $1,494-about what that family pays now for two months of food. As consumers' disposable income drops and they spend less, financial services and non-emergency medical services as well as durable goods particularly would feel the pinch.

The Heritage study, "The Economic Costs of the Lieberman-Warner Climate Change Legislation," stresses that contemplated "cap and trade" restrictions are arbitrary and based on undeveloped technologies such as carbon capture and sequestration.

Those restrictions, the analysis says, would force severe curtailments on energy use and rising prices. The system of emission permits or "allowances" set up by Lieberman-Warner would transfer trillions of dollars from the energy-using public to a select list of special interests, including tribal groups and preferred technology sectors.

Among other projections made by Beach and fellow Heritage analysts David W. Kreutzer, Ben Lieberman and Nicolas D. Loris, based on the study's "generous" assumptions as well as more likely, or "reasonable," assumptions:

  • The nation's economic output, which today stands at $14 trillion, begins to decline sharply by 2018 because of higher energy prices. Cumulative losses to gross domestic product (GDP) by 2030, adjusted for inflation, run from $1.7 trillion to as high as $4.8 trillion.
  • One-year losses in economic output, or GDP, hit at least $155 billion and could exceed $500 billion.
  • Disposable personal income, adjusted for inflation, drops by at least $47 billion and as much as $120 billion within seven years. The decrease averages $68 billion over the next 20 years.

The 27-page report, which describes the simulations and methodology it relied on, contains 16 charts and tables projecting the economic costs of Lieberman-Warner. Heritage soon will supplement the report with a detailed breakdown, available by state and congressional district, of job losses and other consequences.

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