In response to Sarah Palin’s July 14th Washington Post op-ed, Senators John Kerry (D-MA) and Barbara Boxer (D-CA), in their own WaPo op-ed, write they want to “put facts ahead of fiction and real debate ahead of rhetorical bomb-throwing.” Senators Kerry and Boxer will likely be the co-sponsors for the Senate bill to accompany the Waxman-Markey bill passed in the House June 26th.
Kerry and Boxer first refute Palin’s claim that job losses are all but certain. Boxer and Kerry assert that investing billions of dollars in clean energy will jumpstart the economy by creating millions of jobs. They point to a recent report by Robert Pollin, James Heintz and Heidi Garrett-Peltier of the Political Economy Research Institute (PERI) that says the bill will create more than 1.7 million jobs.
Heritage economist Karen Campbell dismantles the PERI study saying:
“The study investigates the question of how many jobs would be needed if $150 billion were invested in clean energy over the next 10 years versus how many jobs would be needed if the same amount were invested in carbon-based energy industries. This is not any policy currently being debated today, and therefore is irrelevant to the debate. Secondly, this tells us nothing about the overall economic effect of borrowing money and using it to build clean energy capacity. Instead, they assume the money comes from a helicopter drop in the sky.
While the methodology of the study tells us nothing about overall job creation, it did quite effectively demonstrate that it takes 2.5 million workers to get the same amount of energy from renewable fuel that 800,000 workers produce using carbon-based fuel. That is, the authors found it will take 1.7 million more workers to generate 4, 618 billion kwh of electricity in 2020 if 15 percent of it must come from renewable sources mandated by ACES versus the current mix (pg. 49).
Yet, while the authors reiterate the loss in efficiency throughout the study, they seem unconcerned by the loss of economic growth and lower wages implied by basic economic principles.”
The reality is that it will destroy 1.15 million jobs. Higher energy prices ripple through the economy, producing slower economic growth and higher unemployment. The Heritage Foundation’s Center for Data Analysis found that, for the average year over the 2012-2035 timeline, job loss will be 1.1 million greater than the baseline assumptions. By 2035, there are a projected 2.5 million fewer jobs than without a cap-and-trade bill. But Heritage isn’t alone in these estimates. The Brookings Institute, a supporter of a carbon tax, projects that cap-and-trade will increase unemployment by 0.5% in the first decade below the baseline. Using U.S. Census population projection estimates, that’s equivalent to about 1.7 million fewer jobs than without cap-and-trade. A study done by Charles River Associates prepared for the National Black Chamber of Congress projects increases in unemployment by 2.3-2.7 million jobs in each year of the policy through 2030–after accounting for “green job” creation.
Kerry and Boxer then point to the acid rain program established under the 1990 Clean Air Act as reason to dismiss cap and trade skeptics: “Naysayers predicted it would cost the economy millions of jobs. In fact, the United States added 20 million jobs from 1993 to 2000, as the U.S. economy grew 64 percent.”
Not one of the three groups (Heritage, Brookings or CRA) is suggesting that the economy won’t grow if Congress passes cap-and-trade. It’s that the economy will be operating well under its potential. Senators Kerry and Boxer need a lesson from French economist Frederic Bastiat on the seen and the unseen. That is, the employment losses and losses in economic activity ($393 billion per year) occur relative to no cap-and-trade bill.
Proponents of a cap-and-trade program for carbon dioxide often point to the acid rain cap-and-trade program as a success story – a reason to pass a carbon capping CO2 bill. But the market was already responding and reducing sulfur dioxide before the start of the program. Moreover, the acid rain program and a carbon dioxide cap-and-trade program are on two entirely different scales. Reducing carbon emissions is far more complex and ambitious than sulfur dioxide. A better comparison would be taking a look at what’s going on in Europe. We in the U.S. should be so fortunate that Europe’s gone through with a cap-and-trade program, because it is a perfect example of what not to do.
Testifying before the Committee on Foreign Relations, The Heritage Foundation’s Senior Policy Analyst in energy issues explained:
“Most western European nations are currently learning, the hard way, that ratcheting down carbon emissions [through cap-and-trade] is very difficult and expensive…To the limited extent European nations have reduced emissions below business-as-usual levels, it has hurt their economies. Almost every western European nation has had higher unemployment and energy costs than America, and a weaker overall economy, even as emissions were rising. Far from seeing evidence of the new green economy some are now promising, we are seeing that cap-and-trade has contributed to the harm. For example, Spain has been cited repeatedly as the example of a successful clean energy economy and source of green jobs, but it is rarely mentioned that Spain currently has 18 percent unemployment.”
If Kerry and Boxer want substantive dialogue, they should stop filling the newspapers with fluff. For more substance, check out The Heritage Foundation’s Rapid Response page.