Thursday, June 25, 2009

Cap And Trade Vote Looms

What is Cap and Trade?

The purported goal of "Cap and Trade" legislation is to reduce carbon dioxide and other greenhouse gas emissions.

First is the Cap part - Each company that emits greenhouse gas would be subject to a cap on the amount of Carbon Dioxide (CO2) that it can emit. They would have to obtain an “emissions permit” for every ton of CO2 that it releases into the atmosphere, and those permits would be based on some sort of enforceable limit, which of course will over time become increasingly stricter until an ultimate reduction goal is met.

Second is the Trade part - Companies will be able to sell/trade permits to those other companies who can't reduce their emissions as easily. More efficient companies, who emit less than their permitted allowance, can sell their extra permits and allowances to companies that are not able to make reductions as easily. So overall, the emissions goals may be met and companies can trade-off among themselves as to who will be pulling the weight on the burden of reduction.

In the end the federal government gets revenue from the permits - and companies can trade permits, and emissions are theoretically reduced. Yes - I said theoretically....

Sounds good right?

Nah ...

It's really just more taxation. It's also being disguised as some sort of noble "market-based approach".

Justin Williams writes
Cap and trade would allow the industries that produce pollution to have a government-granted cartel over their respective industries. Just like other infamous cartels, including OPEC on oil and the AMA on doctors, this is bad news for the American people since it all drastically increases the cost of energy. This means that new companies that want to enter the market will have to buy credits that have already been auctioned off.

Each of these cartels creates high barriers to entry for new competitors. For example, "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," as Obama stated on the campaign trail.

Even though it will be hard for a new company to set up shop in the energy industry, after this, the profits from this exclusive cartel will be given to Congress and not to the companies to reinvest into possible innovative efficiencies. This will only add more money to the congressional budget that will undoubtedly be handed out to special interests, undoubtedly in the form of ever-burgeoning "entitlements."

For the average American, that means higher prices on energy, higher unemployment due to increased costs upon these companies, and even reduced economic output for the whole country causing a decrease in the average American's income.

One Tax Foundation study found that cap and trade would eliminate at least 965,000 jobs, cause a $37.8 billion decrease in household earnings, and a decrease of $136.8 billion decrease in economic output. Proving that this policy is wrong for America and anti-market in nature. As Economist Robert Murphy said, "The number of permits is an arbitrary scarcity imposed by government fiat."

Making it obvious, cap and trade is not a real market based solution—but, rather, a market-biased problem.

... when Los Angeles tried their own local version of cap and trade they wound up issuing more permits than there was pollution. This effectively did nothing and the city had to wait for five years before the pollution would reach the cap level. When it finally hit the cap, the prices exploded.

Because of the complexity of any and all industries in America's economy, it is impossible for the Obama administration to attempt to centrally plan the nation's energy sector. As Austrian Economist F.A. Hayek once said, it is impossible for one individual "to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know."

While these bumbling bureaucrats play around with one of the most important sectors of the economy, the prices will continue to rise upon individual consumers. As anytime the government imposes a higher cost upon a business, the costs trickle down into higher prices. The American people will be forced to spend more of their hard-earned income on energy and less on other items even more basic to the "Hierarchy of Needs."

Not to mention that the poor on average already spend more of a percentage of their income on energy, causing the effect of these new costs on them to be the highest.

Central planning was wrong for the Soviet Union. In fact, it is wrong for America. Unfortunately, some—at the very highest levels of political power—seem unable to learn the lessons of history. Hence, we will all be forced to repeat its mistake.
The Heritage Foundation says that this legislation will:
1. Reduce aggregate gross domestic product (GDP) by $9.6 trillion
2. Destroy an average of 1-3 million jobs, every year
3. Raise electricity rates 90 percent after adjusting for inflation
4. Raise inflation-adjusted gasoline prices by 74 percent
5. Raise residential natural gas prices by 55 percent
6. Raise an average family's annual energy bill by $1,500 annually
7. Increase the federal debt by 26 percent, which is $29,150 per person

It's going to cost us big time.
This national energy tax would possibly be the largest tax increase in American history, it would cause gas and electricity prices to skyrocket, and add to our already spiraling federal deficit. We simply cannot afford this.

Call your congressman today and tell them to vote NO on this tax increase.
The vote is supposed to take place on Friday June 26.