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Obama's "Cap and Trade" proposal will hurt economy.
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The office of the president has a limited ability to directly interfere in the millions of daily transactions, which drive our economy. However, the true danger always has been the indirect effects of the taxes and regulations coming out of Washington. Taxes and regulations that have the effect of limiting supply and raising costs.
In the last two weeks, Obama has started to roll out his proposals for balancing the budget and influencing the economy. One of the big platforms is the limitation of man-made global warming by bringing the emission of carbon dioxide to an end in the US.
The method being proposed is called "Cap and Trade". A new bureaucracy would be commissioned to propose standard maximum emissions for various enterprises and all emitters would be provided with a government approval to emit a certain quantity of carbon every year. If they desire to emit more than the government-approved level, they need to trade with other carbon producers for their credits.
The idea is to price fossil fuels out of existence by making the production of energy through burning of fossil fuels more expensive than the green-approved methods of solar and wind. This method has already been tried in Europe and failed when the current economic slump reduced energy usage enough hat credits which had been priced in the 30-45 Euro range dropped to the 8 Euro range as the market became flooded with credits. Since then one writer for the Guardian in the UK actually admits in one article bemoaning the collapse and failure of the Euopean program:
The market must be unashamedly rigged to force supply below demand.
Think about that. Here is a writer who admits that the whole theory of Cap and Trade fails unless the government adds additional costs to the system to generate shrotages.
And it gets worse. Two Clemson University professors wrote a 44 page analysis titled "The Cost of Climate Regulation for American Households". This detailed report looks at the predictions of multiple government as well as non-partisan research efforts regarding the ship and long term effects of a Cap and Trade system, and the evidence is damning. Not even the most generous predictions from government agencies predicts less than a 0.3% drop in GDP over the next 5 years, and the high predictions approach 3%. That is the equilivent of taking the current recession and dropping another recession of equal size lasting a whole year on top of the economy. We are not talking a few jobs lost, but millions due to increased energy costs. Its lengthy and clearly written for a professoral readership, but it is a strong indictment of any cap and trade program.
And those costs won't just be for electricity itself, which is part of why Cap and Trade is so dangerous. Its easy to claim that since it only effects carbon emitters, that your average suburbanite won't feel a thing, but that is just not true. Increased electricity costs at factories and farms means they have to demand a higher price from their customers. Increased gasoline fuel prices means that the vast fleet of trucks which move products around this nation will need more money to keep them running. Your local grocery store will see its costs rise as it has to pay higher fees for the product to arrive. The end result is very predictable. Prices will increase and selection will decrease.
I am not against trying to find a truly market based solution to pollution. However, I have visited Russia and I can say that the US is a cleaner and less polluted nation because of the power of capitalism, rather than despite it. The money for adding scrubbers to smokestacks and catalytic converters to automobiles comes only after other expenses are paid. A wealthy nation like the US can afford such luxuries, but should the economy shrink and struggle because of overzealous regulation, the very improvements people work for might disappear when the money vanishes.
Before we jump into the fire of increased regulation and limited supply, careful consideration needs to be taken. The US economy grew strong on a diet of abundant and inexpensive energy. Do we want to risk that by putting a limit on the supply? Europe cheated on its Cap and Trade plan by granting credits to Russia, a nation that does not enforce the system, and has a shrinking economy. Russian companies can sell their allowances to other companies in Europe without impacting the Russian economy. This has prevented any shortage of supply. When the system was first proposed a number of economists and businessmen noticed this feature, and correctly stated that it was being used to make the program a showpiece that would not accomplish any true reduction. A true reduction will hurt the economy.
Talking about capping carbon sounds good, but the real threat of it will only reduce investment in expansion for any business that currently relies on inexpensive and abundant energy. The costs are too great for any benefit.
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