Capping and Trading Away Our Jobs

[thedrifter]

July 03, 2009
Capping and Trading Away Our Jobs
By Howard Richman, Raymond Richman, and Jesse Richman

In his weekly radio address on June 27, President Barack Obama praised the House of Representatives for just passing the American Clean Energy and Security Act of 2009, more commonly known as the cap and trade climate bill. He said:

This historic piece of legislation will not just lessen our dependence on foreign oil, but also spark a clean energy transformation in our economy that will create millions of new American jobs that pay well and cannot be outsourced. Clean energy and the jobs it creates are critical to building a new foundation for our economy.

House Speaker Nancy Pelosi says this is a jobs bill, "Jobs, jobs, jobs." Unfortunately, the jobs created in alternative energy sources will be more than offset by job losses; and the "millions" of jobs that the bill is supposed to create can indeed be outsourced. In fact, GE is already importing wind turbines from its plants in China, Germany and Spain to supply wind farms in the United States.

America's commitment to unilateral free trade assures GE and other investors who build new factories in China, or anywhere else, that they can expect to import wind and solar machinery into the US without any duties whatsoever. The Chinese government uses currency manipulations, VAT duties and rebates, tariffs, export-subsidies, and non-tariff barriers to guarantee that China is a better place for new factories than the United States. Meanwhile, we punish American producers with the second highest corporate income tax in the world. Is it any wonder that net investment in American manufacturing has been close to zero in recent years?

Even worse is the loss of jobs that the rising cost that cap and trade will cause to our mining, agriculture, and manufacturing sectors. Yet Obama even objects to the weak measures that the House included in the bill in an attempt to stem the predictable job outflow. In Sunday's New York Times, John Broder reported:

President Obama on Sunday praised the energy bill passed by the House late last week as an "extraordinary first step," but he spoke out against a provision that would impose trade penalties on countries that do not accept limits on global warming pollution.

"At a time when the economy worldwide is still deep in recession and we've seen a significant drop in global trade," Mr. Obama said, "I think we have to be very careful about sending any protectionist signals out there."


He added, "I think there may be other ways of doing it than with a tariff approach."

Obama's criticism of the bill is economically and environmentally incoherent. Even Paul Krugman, left-leaning New York Times economist in residence, criticized the President's statement noting, "border adjustments here are entirely legitimate in terms of basic economics."

Unilateral environmental regulation has had pernicious effects on American industry for some time. If trading partners do not have similar legislation, the regulations have the effect of raising the costs of producing in the US relative to other countries. If you can make widgets in China without paying any of the costs associated with cleaning waste, then China has an advantage in widget production even though THE POLLUTION STILL GETS EMITTED! All we have done is shift pollution to someone else's back yard. Which raises ethical as well as economic issues.

If the goal is to reduce global CO2 emissions, then the main effect of making emissions in the US costly will be to force industry to move to countries with cheaper carbon. When it comes to carbon there is only one global backyard. Doesn't the president understand this?

There are three possibilities.

Maliciousness. Obama understands the issue but he doesn't care about US industry. He may be among the leftists who hope to weaken American capitalism so that the Communist Party of China can dominate the world's future.
Fantasy World. Obama lives in a fantasy world in which, if the United States doesn't resort to protectionism, other countries will not either. But, China has already been practicing protectionism. The Chinese government has been steadily hiking its export subsidies, just raising subsidies on textiles, for example, from 15% to 16%. They have continued to maintain a dollar peg to keep their products artificially cheap and American products artificially expensive. Their 25% tariffs on foreign-made vehicles and auto parts continue to keep Detroit products out of their growing markets. They are so effective with their non-tariff barriers to foreign products that, according to the World Bank, their imports are expected to decrease this year even while their economy grows at a 7.2% clip.
Incompetence. Obama and his economic advisors are incompetent. The case that he makes for unilateral free trade is economically and environmentally unjustifiable. It not only harms the US economically, but (if carbon reductions can reduce global warming) it harms the entire world.
So which is it? We believe that incompetence is the most likely explanation. After all, President Obama's approach to the Great Recession was to spend hundreds of billions of dollars in an attempt to blow up a tire without patching its trade deficit leak. He has been piling on massive governmental debt, even though America's primary economic problem is excessive debt. He has been following John Maynard Keynes' economic advice for trade surplus countries while ignoring Keynes' warning that trade deficit countries risk "persistent depression."

When Speaker Pelosi said this was a jobs bill, she neglected to point out that the "jobs, jobs, jobs" will probably be located in China.

The authors maintain a blog at tradeandtaxes.blogspot.com, and co-authored the 2008 book Trading Away Our Future: How to Fix Our Government-Driven Trade Deficits and Faulty Tax System Before it's Too Late, published by Ideal Taxes Association.

Ellie

[thedrifter]

July 03, 2009
Cap and Trade: The Big Con
By John Griffing
Masquerading as an instrument of environmental salvation, the Waxman-Markey cap-and-trade bill will result in one of the largest seizures of wealth in human history. The legislation will wreak havoc on American manufacturing and industry, and coerce the conformity of an already economically squeezed populace. The bill is a transparent power grab, based on a fictional crisis-the left's ever-dependable threat of global warming.

But global warming is finally coming under the scrutiny it deserves. Not only are NASA satellites showing a cooling trend, but 700 scientists-to the UN's 50-have come out in opposition to the patently false claims of the global warming lobby.

Most damning, Harvard meteorologists have been unable to replicate the findings of the UN's International Panel on Climate Change (IPCC) without the use of a technique called "data-padding."[1] The IPCC actually admitted to engaging in this deceptive practice. Without this padding, the infamous warming trend falls by several degrees. In essence, the IPCC and its primary source manipulated data (dare we say "lied"?) to produce a desired result.

If global warming is a scientific hoax, a fact that now seems incontrovertible, then why have President Obama and Congress advanced such drastic and costly legislation to address this nonexistent crisis? One might conclude that HR 2454, The American Clean Energy and Security Act, exists for no other purpose than to destroy the American economy as we know it and bring it all under government control.

It's not like we don't know any better. We've been through something like this before, narrowly escaping the Kyoto Protocol's threats to US security. In its non-partisan report to study the implications of implementing Kyoto, the US Environmental Information Agency predicted a loss of between $100-400 billion in US GDP and skyrocketing energy prices. Moreover, the Kyoto Treaty's effect on our national security due to reductions in military training and operational tempo would have been staggering.

But Kyoto will seem like a walk in the park compared to the Obama plan, which will result in cumulative losses in GDP of an astounding $9.4 trillion. To put this in perspective, that's over half current US GDP. In other words, half our economy. By 2035, unemployment losses will average 1.1 million peaking at 2.4 million some years. Families will see energy prices rise $1,200 per year. Electricity prices will rise 90 percent. Gasoline will be up 58 percent.

The new policy would establish a carbon-ceiling and levy a devastating "carbon tax" on businesses. Any emissions over and above the established ceiling would require businesses of all types to trade a finite number of government emission allowances. Obama describes his program thus:

What I've said is that we would put a cap and trade system in place that is as aggressive, if not more aggressive, than anybody else's out there. I was the first to call for a 100 percent auction on the cap and trade system, which means that every unit of carbon or greenhouse gases emitted would be charged to the polluter. That will create a market in which whatever technologies are out there that are being presented, whatever power plants that are being built, that they would have to meet the rigors of that market and the ratcheted down caps that are being placed, imposed every year.

Ultimately, the costs to business in the form of emissions-purchases will be passed on to the consumer. Obama knows this, and has said, "If you say to a power plant, you have to produce energy in a different way, and that costs them money, then they want to pass that cost on to consumers, which means everybody's electricity prices go up -- and that is something that is not very popular." This from an individual who thinks energy prices can be controlled through better inflation of tires.

Costs will also translate into across-the-board layoffs, as more and more money will have to be devoted to purchases of emissions permits. This is because the Obama policy gradually decreases the allowable emissions annually ("ratcheting down"), in effect dictating allowable production for the year, which will have a residual impact on employment. But don't worry-"green jobs" will supposedly replace the energy sector as a source of employment.

Cap-and-trade also achieves the age-old Marxist goal of wealth redistribution through the back door. It does this by creating two classes: those with carbon permits, and those without. Companies like GE, which has positioned itself to take advantage of a cap-and-trade system, bidding for billions of dollars in federal contracts, will dominate the new America. On a side note, evidence has surfaced that GE misused its ownership of NBC to catapult Obama into the Presidency for financial gain. Is it any coincidence that GE execs went to CNBC headquarters to silence criticism of the President's economic policies? What's good for Obama is good for GE. Is what's good for GE still good for America?

Cap-and-trade amounts to an artificial constriction of an abundant resource. Refineries are especially targeted by this bill, which is significant because it was the sweeping reduction in refinery capacity due to onerous environmental regulations and voracious legal lobbies that caused the spike in energy prices during 2008. Further strain on refineries will be another nail in the coffin of US energy independence. We should view with suspicion any legislation that attempts to artificially recreate the circumstances of the 2008 gas crisis.

Besides, many of the bill's provisions are superfluous, since the Clean Air Act has already put America well on the way to being pollution-free without stealth taxes, mandatory technology shifts, or the apocalyptic deindustrialization of the west. Power plant nitrogen oxides (NOx) emissions fell 28 percent from 1998 to 2003. Eastern coal-fired energy plants saw a drop of 25 percent over the same period. Power plant sulfur dioxide (SO2) emissions fell 31 percent between 1990 and 2003. The Bush-inspired Clean Air Act requires emissions to be reduced an additional 53 percent by 2010 and 70 percent by 2020. If clean air is really the goal of the Obama team, they would be wise to leave well enough alone.

But cap-and-trade is about economic control, not about fixing the environment. President Obama will proudly destroy an American industry if it serves his ends, something that has gone unnoticed in present cap-and-trade discussions:

So if somebody wants to build a coal-powered plant, they can; it's just that it will bankrupt them because they're going to be charged a huge sum for all that greenhouse gas that's being emitted.

The coal industry employs 80,000 people. So much for Obama's reputation for "saving" jobs.

If Obama has his way, manufacturing, refining, chemical, coal, steel, metallurgical, and other energy-driven sectors will come increasingly under government control or be completely replaced by imports. In the wake of this deindustrialization, people will look to government for provision, an expectation which is at the core of all of Obama's economic policies. Obama has "reluctantly" accepted the breathtaking and unprecedented power of managing our nation's businesses and dictating wages. Now he wants to control a free nation's energy consumption.

Cap-and-trade is Marxism clothed in environmental righteousness. If Obama's plan goes forward, America will be doomed to economic ruin. When the President of the United States is appointing czars with impunity and openly bragging about "bankrupting" the coal industry, it's time to take a step back and evaluate how we got here. Because of the lightning speed with which Obama is brazenly enacting these destructive policies, he is positioned to do what America's enemies could only dream of doing.

Americans need to wake up. If Obama and the Democrats in Congress really want clean air, there already exist laws to achieve it. But there is one thing that HR 2454 does better than any other piece of legislation: it destroys American economic strength for future generations, capping the American Dream, and trading away prosperity for a scientific hoax. Whatever their real agenda, it is not consistent with the economic well-being of the American people. Let's stop treating bald-faced lies like topics for polite discussion.

[1] Willie H. Soon, David R. Legates, and Sallie L. Baliunas, "Estimation and representation of long-term (>40 year) trends of Northern-Hemisphere-gridded surface temperature: A note of caution," Geophysical Research Letters, vol. 31, 14 February 2004, 2.

Ellie