There is a lot of buzz this week about a forthcoming climate bill authored by Senators John Kerry (D-MA), Joe Lieberman (I-CT), and Lindsey Graham (R-SC). The early assessment is that since this compromise measure supposedly "drops" the infamous economy-wide cap and trade system, which was the central element of the House-passed Waxman-Markey bill and the Kerry-Boxer proposal in the Senate, then a Kerry-Lieberman-Graham bill has a chance to win over moderate Democrats and even some Republicans.Senators who previously had major concerns with cap and trade are now warming to this new proposal, saying that it shows "promise" for a path toward a comprehensive energy and climate bill.
But in reality, the new measure is nothing more than smoke and mirrors to disguise the truth: This is simply a fancy attempt to propose another energy tax that will kill jobs, increase energy prices, and further cripple a frail economy.
The Kerry-Lieberman-Graham (KLG) proposal will include a different structure for capping carbon among different sectors of the economy (the bill hasn't been released yet, only hints of its components.) The transportation sector, for instance, would have to comply with a different type of cap than utilities, which would also face a different set of standards than industry.
Early reports indicate that because this new approach is gaining support and the Kerry-Boxer bill has effectively been dropped from consideration, then cap and trade is officially dead (more on that here), making moderates more likely to support the latest proposal.
Sorry, but how dumb do they think we are?
If the federal government uses a market-based system to put a price on carbon emissions, which has been the guiding principle for KLG, then it does not matter if it's a cap and trade system or a carbon tax or some other incarnation like "pollution reduction and investment." Any of these would have the same economic impact, and as numerous studies have pointed out, pricing carbon emissions would lead to higher energy costs and more unemployment, which in turn would hamstring economic recovery.
This conclusion should not be new to lawmakers on Capitol Hill, either. As Dr. Alan Viard noted in his testimony to the Senate Finance Committee last August:
"Because it leads to the same production and emission decisions, cap and trade with free allocation has the same impact on prices and wages as a carbon tax or a cap-and-trade program with auctioned allowances."Viard's argument is fundamental economics. It does not matter what market mechanism is used to achieve a particular level of emissions reduction, the economic impact remains the same. Reducing emissions does not magically become easier just because the method used to tax you for non-compliance changes.
What's more is that the claim about the end of cap and trade is not even credible. As the New York Times reported this week:
In fact, Graham remains committed to putting a price on carbon emissions. And the proposal he is working on with Sens. John Kerry (D-Mass.) and Joe Lieberman (I-Conn.) is likely to utilize the cap-and-trade mechanism when it comes to the electric utility industry, and later to manufacturers.The Times also noted earlier this week that the transportation sector would likely face a carbon tax or "fee," further proof that this latest proposal is nothing more than a conglomeration of different costs to be imposed on American taxpayers and businesses.
As for the rhetorical dancing taking place to sell this energy tax to skeptics, communications professor Matt Nisbet from American University put it best: "Most of the discussion is not on substance, but rather political viability and the game or jockeying in order to win support."
Indeed, the whole charade is an exercise in futility, as the end result, regardless of the semantic shift, is more economic devastation.
Our elected leaders would do well to recognize that simply wordsmithing a catastrophic proposal will not make the measure any less catastrophic. And if they are too incompetent to realize that this magic act is a PR move rather than a substantive policy change, perhaps they would be wise to step aside and let others determine the fate of the American economy.
