The Foundry

Sometimes the best offense is a good defense and sometimes the best action is inaction. With unemployment surpassing 10 percent (go here to watch unemployment grow), Midwestern Congressmen want to ensure that Congress will protect three key areas of their respective state’s economy: agriculture, manufacturing and small business. One sure way to protect these jobs is not to implement climate change legislation.

Congressman Bob Latta (R-OH) and 31 more Midwestern Members of Congress sent a letter to the Chairmen and Ranking Members of the House Energy and Commerce, Agriculture, and Small Business Committees requesting a joint hearing to how climate change would affect these important industries, not only in the Midwest, but all across the United States. Let us give you a preview, and the news is not good.

Manufacturing: The higher energy costs from cap and trade will kill economic activity and jobs. This is particularly true for energy-intensive industries – such as manufacturing. Economists in The Heritage Foundation’s Center for Data Analysis estimate that, because of the Waxman-Markey cap and trade bill, manufacturing jobs will fall on average by 400,000. Peak year unemployment in the manufacturing sector alone rises by almost 1.4 million. Some will disappear entirely as business cannot afford to operate. Others will go overseas to countries that choose not to implement a carbon reduction scheme where the costs of operation will be much lower. While manufacturing employment had an expected decline in years past as efficiency gains put labor and capital to more productive use, cap and trade would needlessly shrink the manufacturing industry well beyond what would occur with it.

Farming: Farming is another energy-intensive industry with its fuel, chemical, electricity and natural gas-derived fertilizer costs. Cap and trade’s effect on farmers should raise a red flag for those in the farm belt and will put U.S. agriculture at a tremendous competitive disadvantage if enacted. Farmers themselves will lose big time. Heritage estimates that farm income would drop $8 billion in 2012, $25 billion in 2024, and over $50 billion in 2035. These are decreases of 28%, 60% and 94%, respectively. The average net income lost over the 2010-2035 timeline is $23 billion – a 57% decrease from a world without cap and trade. And consumers will feel the pain as well, not only from the increase in their own energy prices, but increased food prices.

Small Businesses: In tough economic times, small businesses are struggling to make ends meet and making necessary cuts to stay afloat. There’s little talk of expansion and job creation. Heritage Senior Policy Analyst Ben Lieberman points out that many of the small businesses lost out on the cap and trade lobbying battle: “Electric utilities and some other big businesses have cut special deals that allow them to comply for much less. Waxman-Markey allows for such deals by giving these companies free rights to emit carbon dioxide and other regulated greenhouse gases. But small businesses have largely been left out of this special interest game. They will instead face the same higher costs for energy and other products as homeowners. According to a 2008 National Federation of Independent Business poll, energy costs are the second biggest problem facing small business: Waxman-Markey would only exacerbate those concerns.” While all small businesses would be hart hit, those in the Midwest, where a large percentage of electricity comes from coal, would be hurt the most.

Two bills, one in the Senate and one in the House, were crafted by politicians from California and Massachusetts. No state is going to escape the economic pain of cap and trade, but the Midwest is right to be concerned as they will bear much of the brunt.

And to visit our work on Copenhagen, check out our Copenhagen Rapid Response  page.