Monday, March 2, 2009

The coming cap-and-trade tax

posted at 4:00 pm on March 2, 2009 by Ed Morrissey
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Barack Obama insists that his new tax increases will not affect 95% of Americans, who will not pay even a dime more. He may be right about that, at least directly, but Obama has another plan that will hit every single American with a massive cost burden. The George C. Marshall Institute analyzes the potential impact of the cap-and-trade energy system that Obama espouses and finds a big price tag that only gets bigger as we go along.

First, it will depress growth, which almost everyone predicts (page 3):

Estimated GDP losses vary widely, from a 0.3%-0.5% to 3% drop in GDP below the business-as-usual projections in 2015 and a 1% to 10% drop in 2050. The timeframes of new technology development and growth in existing clean sources of energy, availability of offsets (domestic, international), and banking of allowances are likely to account for most of these differences in GDP costs estimates.

Loss of GDP means a retracting economy, less opportunity, fewer jobs, and a decline in living standards. The Marshall Institute offers the question of whether the US wants that as a tradeoff for the questionable effects of limiting carbon-dioxide emissions into the atmosphere. Unfortunately, the present administration and its backers won’t acknowledge that as the choice before us, preferring to paint rosy pictures of increased living standards and prosperity while the government chokes off energy production, a contradiction they claim to solve with an explosion of “green energy” from sources that don’t exist at the moment.

How do we know that? Even Europe, which led the “green” movement, has discovered that stopping conventional energy production doesn’t magically produce realistic, mass-production alternatives.

But the bad news gets worse. Not only will the GDP drop over both the short and long terms, but the increased price of energy will result in substantial costs to all Americans — not just Obama’s 5% at the top (page 9):

We find that a mitigation path consistent with Lieberman-Warner’s provisions is equivalent to a permanent tax increase for the average American household. This increase is projected to amount to an additional $1100 in taxes in 2008. Moreover, this cap-and-trade “tax” increases over time in real terms from about $1400 to $2000 during 2015-2030 and approximately $2000 to $3000 in 2030-2050. The de facto tax increase becomes quite significant when one considers the average American household spends about $2500 on food annually, or approximately $208 monthly. The decrease in consumption per capita of $277 annually is equivalent to more than one month’s food budget for the average American household, keeping other consumption levels constant.

Another way to gauge this cap-and-trade tax impact is comparing it to auto-loan payments. For example, a new 2009 C-Class Mercedes can be leased for around $429 per month. A decrease in consumption by $1110 amounts is equivalent to 2.5 monthly payments on this luxury car. This tax amounts to aboutlmost three and a half monthly payments in 2015 and almost seven payments in 2050.

Great. So we make less, get less, and pay more — or do without. I can’t afford two Mercedes autos now, and given the way the markets are heading at the moment, I may not be able to afford two Schwinns by 2015.

A nation looking to boost growth has to first rely on cheap and plentiful energy. Without that, investment disappears and so do jobs, production, and consumer confidence. John McCain’s Lexington Plan addressed that, even if it took Paris Hilton to explain it properly. It addressed short- and medium-range energy needs by expanding domestic oil and natural gas production and boosting nuclear power while using the proceeds of those industries to develop alternatives for the long term. Without that, all we have is energy rationing … and look how well that worked for us in the 1970s.

Read the entire Marshall analysis, and start letting your friends know that the tax on the other 95% is coming. Soon.

That Was Then, This Is Now

It's no secret that there is no intellectual integrity on the Left, but it's still hard not to be a bit shocked by liberals' reaction to the budget proposal that Barack Obama unleashed yesterday. Let's take the example of the New York Times, probably the most prominent voice of the Far Left in the U.S. Throughout the George W. Bush administration, the Times' editorial board waxed eloquent about the terrible consequences to be expected from the Bush deficits. Let's cite just a few examples.

April 16, 2003:

It is incredible to see a wartime president demanding a tax cut that would, in an instant, require a record $984 billion increase in the national debt, to $7.384 trillion, with annual deficits of $400 billion and more under a Republican Party that once bragged of budgetary rectitude.

Obama's budget contemplates a $1.75 trillion deficit in its first year, and does not even aspire to a deficit as small as $400 billion at any time in the future.

May 2, 2003:

[T]he detaxation mania continues apace as House and Senate leaders press toward a Memorial Day deadline that will be a rendezvous with foolhardiness. By then, they hope to enact a Bush tax cut and spending plan adding $2.7 trillion in deficits to a coming decade of red ink....

Barack Obama's budget added a $1.7 trillion deficit in his first year in office.

May 22, 2003:

This version of the president's ''growth'' plan will increase the deficit by hundreds of billions of dollars across the next decade. [Ed.: Those were the good old days.] To help pay for it, the G.O.P. budget hawks of yore, born again now as deficit spenders of record proportions, will soon have to raise the national debt limit by almost a trillion dollars from the current $6.4 trillion. ... ''Deficits do matter,'' the Federal Reserve chairman, Alan Greenspan, warned Congress, sounding like a Dickensian wraith ominously foreseeing a future of red-ink borrowing and rising interest rates. But the Republicans appear set to party on now and roll the tab over the far horizon.

So, do deficits "still matter?" And if so, with their grotesquely multiplied deficits, are today's Democrats "partying on now and rolling the tab over the far horizon?"

September 2, 2003:

The White House serenely brushed off a detailed caution from the Congressional Budget Office last week that the growth in the deficit is more likely to roar than retreat across the next decade, fed by the three Bush tax cuts and other debt-fattening indulgences. If that warning was not enough, how about the concern reported at the International Monetary Fund that the administration has no credible plan to restore budget balance? Yes, the I.M.F., which must lecture the profligates of the globe, is worried that a structural deficit will push up interest rates and restrain growth as America ceaselessly borrows to steer red ink from imbalanced budgets onto future taxpayers.

Now that his planned deficits are four times larger, does Obama's budget contain "debt-fattening indulgences?" Has the Times denounced them? Does the Obama administration have a "credible plan to restore budget balance?" Given that Obama's intended budgets--put aside how optimistic his numbers may be--far exceed the actual deficits during the Bush administration, is the Times still "worried that a structural deficit will push up interest rates and restrain growth as America ceaselessly borrows to steer red ink from imbalanced budgets onto future taxpayers?" If not, why not?

November 25, 2003:

The Wall Street investment bank Goldman Sachs, not given to hyperbole, warned in its most recent newsletter that the ''U.S. budget is out of control.'' This sentiment was echoed by the bipartisan Concord Coalition, which monitors federal spending, and which called 2003 ''the most irresponsible year ever'' in terms of fiscal discipline. ...

these Republicans have presided over an orgy of tax cuts and benefit increases that, according to the Concord group, will not only boost this year's projected deficit but also add as much as $800 billion to the national debt over the next 10 years.

Barack Obama has added more than twice that much to the national debt in his first 30 days in office. May 23, 2004:

A few weeks before the fall election, President Bush is likely to claim a victory, of sorts, over the budget deficit. The good news will be based on October data from the Office of Management and Budget in the executive branch, which, according to widespread estimates, will show red ink of $420 billion to $450 billion at the end of the 2004 fiscal year. When the year started, the budget office had conveniently projected a deficit of $521 billion. Hence, a bookkeeping triumph.

The deficits they're talking about here are around one quarter of what Obama projects for his first year in office.

The administration would like to turn the budget deficit into a nonissue in the presidential campaign. But it deserves to be one of the central talking points, even more than it was in 1992, when Ross Perot rightly convinced the nation that deficits were threatening American prosperity. ...

Though the Bush deficit of 2003 was already a record in pure numbers, the administration's defenders often point out that it amounted to only 3.5 percent of gross domestic product. That doesn't sound too bad compared with the modern record of 6 percent set by President Ronald Reagan in 1983. But the size of the deficit now is masked by the Social Security Trust Fund surplus. If you believe that the Social Security surplus would be put to better use by being preserved for future retirees, the Bush deficit should really amount to 5 percent of G.D.P.

Obama's first deficit will amount to more than 12 percent of G.D.P.

President Reagan's deficit binge occurred decades before the baby boomers' retirement. This one is taking place on the eve. To use an analogy, President Bush's deficits are putting the nation in the position of a couple who take out a long-term mortgage just before retirement.

That's a travesty, because reducing the buildup of government debt is the key to strengthening Social Security. ... Clearly, we could not have picked a worse demographic moment to be borrowing money on the next generation's credit.

We're still waiting for the Times to point out that the Democrats' vastly greater deficits are so ill-timed as to constitute a "travesty." More fundamentally, is reducing federal debt the "key to strengthening Social Security?" If so, has the Obama administration threatened the viability of Social Security by exploding federal debt? If not, why not?

A greater reliance on foreign creditors creates further economic instability, as nations like Argentina have found out the hard way. Debt is debt, to be sure, leading ultimately to a smaller economy than would otherwise be the case.

But debt owed to foreigners is more likely to affect the value of the dollar, and foreign capital is more nomadic, leaving the United States vulnerable to the whims of central bankers in Beijing and Tokyo.

But even if a sudden catastrophe never materializes, a slower one is already in the making. It is important that voters talk seriously about deficits in this political season.

I agree with that last observation. Now that the deficits are four times greater than the ones the Times was so worried about, do the paper's editorialists hold to the same view? Do they still think that debt--far greater debt--will "[lead] ultimately to a smaller economy than would otherwise be the case?" If not, what's changed in such a short time?

April 5, 2004:

From the grim evidence of his deficit-stoking tax cuts, Mr. Bush hardly loses sleep over unbalanced books. Yet now comes his rare veto threat, a nod to the voters' growing anxiety over the crushing national debt.

Are the voters still anxious over the "crushing national debt," now slated to burgeon far beyond what it was during the Bush administration? Should they be anxious over the "crushing national debt?" In this editorial, the Times ridiculed President Bush because he proposed to veto such small spending bills. Should Barack Obama veto much more spending than Bush did?

July 1, 2004:

Central to low interest rates -- particularly long-term rates -- is keeping down federal borrowing. All the debt that Washington incurs to finance our federal budget deficit pushes interest rates higher than they otherwise would be. ...

When adjusted for the minimal inflation of recent years, interest rates have not been as low as they were during some other periods of slow growth. And although they were low, they would have been lower still with less borrowing. It's basic economics: When we want more of something, the price goes up. To deny that is to believe that the market for borrowing money is somehow different from all other markets.

I think that's true, too. Does the Times still believe what it wrote in 2004, now that federal borrowing has exploded in a Democratic administration?

[T]he president has yet to veto his first bill or to publicly pressure or scold his fellow Republicans on Capitol Hill for their lack of fiscal restraint. By contrast, conservative policy organizations have been pummeling the Bush administration for what the Heritage Foundation calls ''a spending spree.'' Congress has been larding up legislation with local projects -- for trails, visitors centers, marina repairs and planning grants by the dozen.

So, how does the Times feel about the salt marsh harvest mouse?

Some who are relaxed about the deficit say that we will ''grow into it,'' that a faster rate of growth will lead to more tax receipts and close the gap, thereby taking pressure off interest rates. But assuming current policies are continued, the government will need to borrow $5 trillion more over the next 10 years. Even one percentage point more in economic growth than is now expected -- a hugely ambitious goal -- would cut the $5 trillion only in half.

Under Obama's budget, the government will have to borrow a lot more than that. Is it still a problem?

There are many reasons that we need to find a national consensus to reduce the budget deficit -- bankrupting Medicare and Social Security, burdening our children with debt and the like -- but now that we have entered a period of rising interest rates, a higher cost of borrowing for both business and consumers is perhaps the most immediate.

Now that the deficit is growing so much faster under a Democratic administration whose election the Times enthusiastically supported, are we still in danger of bankrupting Medicare and Social Security, and is the Times still worried about "burdening our children" with far greater debt than was contemplated when this editorial was written?

The answers to all of the questions we've posed are unclear. The Times editorialists have addressed the question of Obama's deficits--sort of--only once, here. The editorialists' main theme is glee that the Obama administration plans to raise taxes. But what about the horrors of deficit spending, that were so ubiquitous during the Bush administration? The Times can respond only with dishonesty:

Mr. Obama's blueprint, released on Thursday, commits to cutting by more than two-thirds, by 2013, the $1.75 trillion budget deficit that Mr. Bush dumped on the nation.

In fact, the $1.75 trillion, by Obama's own account, is his budget, not President Bush's: on no scenario did Bush "dump" anything like that deficit on the nation. What Obama has done, as he has acknowledged, is to increase the deficit he was bequeathed, not decrease it. So it is absurd for the Times to retrospectively blame Bush for Obama's policy choices.

Further, even if Obama succeeded in reducing the federal deficit by two-thirds from the astonishing, unprecedented $1.75 trillion figure that he intends to ring up in his first fiscal year, his deficits would still exceed those that he "inherited" from President Bush. But the Times has no integrity, and it assumes that those who read its editorials--a pathetically small, but no doubt loyal, number--won't notice how its tune has changed. So it offers this absurdity:

The Obama administration has acknowledged the need for deficit spending to stimulate the economy but has vowed that unpaid-for government will not become the norm. Judging from the blueprint, Mr. Obama is not just talking the talk.

The Times editors apparently haven't tried to do the math. Here is a chart of federal spending and revenues through 2019--three years after Obama leaves office, assuming a second term--under Obama's rosy budget projections; click to enlarge:

"Unpaid-for government," to a greater extent than that which the Times denounced during George Bush's administration, is, in fact, "the norm" as far as the eye can see. But that's what you expect from the Times: either deliberate falsehood or impenetrable ignorance; it's often hard to tell which. The Times' editors are in the bag for the Left, and there is little pretense of consistency or intellectual integrity; in fact, the editors are not very bright--to be a Times editor is to be a full-time shill.


House Passes $410-Billion Spending Bill

Just a couple of weeks after passing the $792-billion “stimulus” spending bill, the U.S. House of Representatives has passed a $410-billion omnibus appropriations bill to fund government programs through September 30, 2009.

Regrettably, the bill – which was littered with about 9,000 earmarks and included funding for 162 federal programs that had just received hundreds of billions in the “stimulus” package – again missed the mark and I had to vote against it. Here is my statement from debate on this spending bill:

“Last night, President Obama repeatedly expressed a desire to pass fiscally responsible legislation, his fear of passing a mountain of debt to future generations, and his intention to greatly reduce the federal deficit.

“All sentiments with which I couldn’t agree more.”

“However, only two weeks after passing a $1.1-trillion economic “stimulus” package and a week after presenting a $275-billion plan to address less than 8% of American mortgages, Washington Democrats today are bringing to the floor an appropriations bill that represents the largest discretionary spending increase, aside from legislation after the 9/11 terrorist attacks, since the Carter Administration.

“If we look back on the last 19 months, you’ll find that the U.S. government has pledged more than $11.6 trillion on behalf of American taxpayers to dig our nation out of the recession – and that doesn’t even include the $410 billion we are about to spend in this latest spending bill.

“Where is the fiscal responsibility?

“Even more incredulous is the fact that this omnibus appropriations bill contains funding for many of the same agencies and programs that already received funds in the so-called “stimulus” bill—162 programs in fact. For instance, it provides $2.9 billion for the 2010 census even though $1 billion was already allocated for this project in the “stimulus” package. We also have funding for the National Endowment for the Arts, which, fresh off receiving $50 million from the “stimulus,” is now in line to receive $138 million in this latest proposal.

“The combined fiscal year 2009 funding for these “double-dipping” programs is $680 billion—a whopping 80% increase in spending.

“Furthermore, the Democrat majority is once again using a massive spending bill to shove sweeping national policy changes through Congress without public scrutiny and without proper debate. This bill contains language to terminate the District of Columbia’s successful school voucher program; it eliminates the “Reading First” program within the Department of Education; and it drastically undercuts construction and design funding for Yucca Mountain, a key component to any plan that puts America on the path to energy independence. The merit of these programs aside, a sweeping spending bill—especially one with no opportunity to amend—is not the appropriate place for any of these measures to be considered.

“Enough is enough. The American taxpayer is already struggling in this weakened economy and it is time Congress started to show respect to the American people and stop increasing the weight of their financial burdens. The spending spree has to stop now.”

Bachmann Supports Workers' Right to Secret Ballot

Last year, the House of Representatives passed legislation that would deny workers the right to a secret ballot when deciding whether to unionize. Along with the Chamber of Commerce, NFIB, and a variety of organizations that represent union members (including the Fraternal Order of Police and the American Hospital Association), I strongly oppose this legislation, which is commonly known as Card Check, and have cosponsored legislation which would instead protect the right to a secret ballot, one of our most cherished rights as Americans.

The Employee Free Choice Act, which imposes Card Check on all workers is supported by the Administration and labor unions. It would force employees to make a decision about whether or not to support union organization right in front of their co-workers and right in front of the organizers. If union organizers collect enough cards from employees indicating interest in a union, the union would be certified. And, there’s more than ample anecdotal evidence about the use of coercion and intimidation in collecting those cards.

The Secret Ballot Protection Act, which I have cosponsored, would ensure that unionization will never come about as a result of force or threats.

The right to a secret ballot is one of the most cherished of American freedoms and it should always be protected. At a time when our government spends billions of dollars to advance and support free elections around the world, it makes no sense to abolish federally protected private ballots in our own workplace.