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The Left Still Does Not Understand Where Wealth Comes From

Posted By Conn Carroll On April 24, 2009 @ 8:12 am In Energy | Comments Disabled

The dispute over MIT professor John Reilly’s cap and trade cost study [1] has exposed, again [2], how the left has no idea how wealth gets created.

The MIT study estimates that the government revenue from a carbon cap and trade policy would amount to $366 billion per year, or roughly $3,128 per American household. As Reilly readily admitted in a an email to the Weekly Standard, [3] the government revenue raised through cap and trade (which any economist and even Tom Friedman will tell you is just a tax [4]) will be ultimately be paid by American consumers in higher energy costs. Add $800 in dead weight loss and Reilly’s MIT study clearly shows cap and trade will cost the average American family $3,900 per year.

This is a very inconvenient truth for advocates of cap and trade like the Center for American Progress [5].  So this is how they attempt to spin it:

For example: Exxon Mobil became the largest corporation in the world by raking in $442.9 billion in revenue in 2008, “costing” the average American household $3,785.

Is the existence of Exxon Mobil a $3,800 tax on American families? No, because most of its revenues are redistributed in the economy — as oil rig employment, petroleum products (which fuel transportation and trade), and of course, multimillion-dollar salaries for its top executives and massive profits for its shareholders.

Follow the logic there? The Center for American Progress equates the $442.9 billion in revenue the Exxon Mobil created in 2008 with the “revenue” that a cap and trade program would generate. They simply cannot grasp the fact that cap and trade does not create any new wealth!!! The only “revenue” it generates, must come by taxing existing wealth creating entities like Exxon Mobil who, by the way, already paid pre-cap and trade taxes totaling $116.2 billion in 2008 [6].

This is not the first time the Center for American Progress has conflated tax revenues and wealth creation. Last year during the Lieberman-Warner cap and trade debate, CAP produced a study [7] purporting to show that “an economy-wide cap-and-trade program would generate at least $50 billion per year” in “profits [8]” for the American people. Yes, they actually called tax revenues “profits”.As we wrote at the time [2]:

“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?”

Reviewing the leftist documentary The End of Poverty, George Mason University economics professor Tyler Cowen recently wrote [9]:

A few months ago I went back and tried to read some Ayn Rand. As Adam Wolfson has suggested recently in these pages, it wasn’t easy. I was put off by her lack of intellectual generosity. I read her claim that “collectivist savages” are too “concrete-bound” to realize that wealth must be produced. I read her polemic against the fools who focus on redistributing wealth rather than creating it. I read the claim that Western intellectuals are betraying the very heritage of their tradition because they refuse to think and to use their minds. I read that the very foundations of civilization are under threat. That’s pretty bracing stuff.

I can only report that The End of Poverty, narrated throughout by Martin Sheen, puts Ayn Rand back on the map as an accurate and indeed insightful cultural commentator.

We can now say the same for the Center for American Progress


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/04/24/the-left-still-does-not-understand-where-wealth-comes-from/

URLs in this post:

[1] study: http://web.mit.edu/globalchange/www/MITJPSPGC_Rpt146.pdf

[2] again: http://www.foundry.org/2008/06/03/morning-bell-carbon-capping-in-bizzaro-world/

[3] readily admitted in a an email to the Weekly Standard,: http://weeklystandard.com/Content/Public/Articles/000/000/016/412cwueq.asp?pg=1

[4] which any economist and even Tom Friedman will tell you is just a tax: http://www.nytimes.com/2009/04/08/opinion/08friedman.html?scp=1&sq=friedman%20hide%20ball&st=cse

[5] Center for American Progress: http://wonkroom.thinkprogress.org/2009/04/23/weekly-standard-3900-lie/

[6] $116.2 billion in 2008: http://www.usnews.com/articles/opinion/2009/02/11/exxon-big-oil-profits-evil-only-until-you-weigh-their-tax-bills.html

[7] study: http://www.americanprogress.org/issues/2008/06/auction_revenue_report.html

[8] profits: http://www.americanprogress.org/issues/2008/01/capandtrade101.html

[9] recently wrote: http://www.the-american-interest.com/article.cfm?piece=601

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