I don’t know anybody who lives on planet Earth and who doesn’t want to save it, but I know plenty of people who suspect many of the big, planet-saving ideas are going to hurt them, at least in the wallet.
Getting a big thing wrong in a big way is hardly a new mistake. Progressives convinced Congress to pass Prohibition and we got Al Capone, whose business model probably was enhanced by that populist tariff bill that Sen. Reed Smoot (R-Utah) and Rep. Willis Hawley (R-Ore.) put together. And just 15 years ago, ideas to expand home ownership were irresistible around Congress. Then ordinary mortgage lending was hijacked by activists like ACORN and sharpies like Lehman Brothers, and we got a job-eating recession instead of the American dream.
This sorry story is now beginning to repeat itself with the Waxman-Markey global warming legislation and its CO2 emission permits. What we are talking about is a government-created paper commodity potentially worth trillions of dollars, with the influential and politically savvy benefitting most and the taxpayer least. If you liked credit default swaps, I think you’re going to love carbon emission derivatives.
That’s because the Energy and Commerce Committee-passed global warming bill starts with CO2 emitters who swapped their support for the bill for a free ride on the status quo bus. Only 15 percent of the permits will cost companies anything at the start; the other 85 percent are to be given away to CO2 emitters. The catch is that all will be bought and sold on a government-created market and the costs will be billed to electric utility consumers. Even radical environmentalists think that’s a mistake, not because they care about your electric bill going up, but because it means environmental effectiveness is lost.
On top of everything else, we know something today that we did not know when we were voting on the global warming bill: the actual numbers. According to the Congressional Budget Office’s too-late-for-prime-time analysis, the bill gives away $821 billion worth of allocations to special interests while consumers are going to pay $846 billion more in carbon energy costs. These numbers probably are understated.
To get a feel for what it means to you, tune in to this hearing-room exchange between Rep. Fred Upton (R-Mich.) and David Sokol, chairman of MidAmerican Energy Holdings, a Midwestern power supplier.
Upton: “And how much is that for the average consumer? Is it really 15 cents?—
Sokol: “No, and those numbers, you can make numbers say whatever you want. If you like, I can go through the example of the state of Iowa. The public power stations and rural electric co-ops also oppose this bill for the same reason we do, and the reason is it throws the consumer under the bus. In Iowa, our cost increase just for 784,000 customers is $283 million in the first year just for the allocation purchases. That’d be $110 per month, per customer.—
I wonder how long it will be before the voters start asking us how on earth a committee of Congress passed Waxman-Markey without knowing the price tag. I suspect the quizzing will begin shortly after the arrival of the first Waxman-Markey electric bills.
Another troubling part of the bill’s complex emissions allowance scheme is the transfer of wealth from state to state. Penalties for failing to generate enough power from renewable energy sources, combined with the trading of carbon permits, mean the coal-reliant Midwest will be forced to pay the hydropowered West Coast for permission to power America’s industrial base. The result is that jobs and money flee the Midwest for California.
Like all other free allocations, the regional biases were political, and they underscore why any system of issuing free allowances is inherently vulnerable to manipulation, just as they were in Europe.
Finally, while we’re told that the job losses caused by Waxman-Markey will be offset by glorious gains in the new, green economy, I wonder. At that hearing I mentioned earlier, Steve Cousins, the vice president of an El Dorado, Ark., refinery called Lion Oil Co., said Waxman-Markey would close his plant and lay off all 1,200 workers. His average annual net of $13 million, he said, simply wouldn’t stretch far enough to cover the $180 million worth of permits he’ll need to stay in business.
But wouldn’t his laid-off employees land new, green jobs at comparable wages? “We don’t have any of those jobs in our area right now,— he said.
Another witness, from the Boston-based economic consultant CRA International, told the committee that states should expect to lose at least 1.3 percent of their jobs, with energy-intense Western states sustaining a 3.5 percent drop.
With unemployment close to 13 percent in some areas and national unemployment at 9.4 percent and the Waxman-Markey Crock-Pot boiling over with insider deals that will raise it more, put me down as skeptical that Congress is likely to do more good than harm when it tries to fix a problem that nobody can see, smell, taste or touch.
Rep. Joe Barton (R-Texas) is ranking member on the House Energy and Commerce Committee.