The Heritage Foundation - Leadership for America

Any honest economist will tell you the Lieberman-Warner carbon cap bill being debated in the Senate this week is a massive energy tax that every government agency that has studied the issue says will drive up the cost of energy — hurting American consumers who already are feeling the pain of $4 a gallon gasoline. And any honest scientist will tell you that unless India and China vastly cut back on their own carbon emissions, Lieberman-Warner will do nothing to slow global warming.

So how do liberals defend this all-pain-and-no-gain policy? The Center for American Progress shows the way: “It is time to focus on the benefits — not just the costs — to consumers and ratepayers as a result of taking action to avert the climate crisis.” And what exactly are the “benefits” CAP identifies? Well, they are “the profits” generated from the government forcing businesses to buy emissions permits. CAP explains: “Initial estimates by the Congressional Budget Office project that an economy-wide cap-and-trade program would generate at least $50 billion per year, but could reach up to $300 billion.” And, in fact, Lieberman-Warner fits right in this range. The CBO estimates that “the profits” from permit sales would reach $130 billion a year by 2018.

CAP then produces a handy state-by-state interactive map that shows “the range of money available to each state if the funding was apportioned based on population.” So according to CAP’s map, a carbon-cap policy could create between $1.9 billion to $11.9 billion in new wealth that experts in the federal government then could invest in Ohio alone. But the esteemed scholars at CAP are for too modest. If carbon capping is such a surefire way to create “profits” for the government to then invest, then why stop at Lieberman-Warner’s modest 18% carbon emission reduction by 2020? Why not double it to a 36% carbon emission reduction and double the government revenue?

CAP doesn’t propose doubling the mandatory carbon reductions in Lieberman-Warner because its claim that carbon-cap policies create “profits” is a lie. Carbon caps are a tax. Governments can’t create wealth by taxing something. The very same CBO report that CAP cites saying a carbon-cap program would generate $50 billion to $300 billion a year in new government revenues also says: “Researchers conclude that much or all of the allowance cost would be passed on to consumers in the form of higher prices. Those prices would disproportionately affect people at the bottom of the income scale.”

So not only are carbon-cap policies a massive energy tax on the American people, but the very study CAP cites in its own research shows it is a massively regressive tax that will hurt the poor the most. Only in Bizarro World would anyone call this good public policy.

Quick Hits:

• President Bush used the five-year anniversary of the Jobs and Growth Tax Relief Reconciliation Act of 2003, which lowered rates on capital gains and dividends, to make a pitch to Congress to make the cuts permanent.
• Mortgage fraud is so prevalent in foreclosure hot spot Las Vegas that the FBI and local prosecutors have been forced to establish a special joint task force to tackle the problem.
• U.N. chief Ban Ki-moon told world leaders at Rome’s U.N. Food and Agriculture Organization that nations must minimize export restrictions and import tariffs during the food price crisis and quickly resolve world trade talks.
• Human rights groups say Venezuela dictator Hugo Chavez’s latest intelligence law changes will force citizens to inform on one another to avoid prison terms.
• According to a report by The Bradley Project, 63% of Americans believe our national identity is weakening and 25% believe our nation is so divided that a common identity is not possible.