Cap and Burn  

The strange death of this year's cap-and-trade movement was so unexpected that some are already predicting a shift in the politics of global warming. That's premature. Still, the postmortem holds lessons for the next time this issue emerges.

Until last week, the Democratic M.O. on climate change was to lash the Bush Administration for its supposed inaction and then pass responsibility onto regulators and the courts. Proponents thought they had the whip hand. Yet this time they had to defend an actual piece of legislation – and once it was subjected to even preliminary scrutiny, the Democrats crumpled faster than you can say $4 gas.

Bad timing was the least of it. Republicans methodically dismantled the cost and complexity of "cap and trade," which sounds harmless but would inflict collateral damage on the wider economy in lost GDP and higher prices up and down the energy chain. Conveniently, the Democrats would also bestow unto Congress (read: themselves) some $6.7 trillion in new tax revenues and carbon welfare handouts over the next four decades. Some of the most effective opponents – like freshman GOP Senator Bob Corker – support climate regulation but view the current scheme as frivolous, dishonest or both.

Their task was helped along by the incompetence of the Democrats, especially floor manager Barbara Boxer. Environmentalists deemed it blasphemy that anyone would oppose their grand ambitions, instead of trying to persuade. "I resent the Senator from Tennessee saying our bill is a slush fund," Ms. Boxer said at one point, apparently serious.

After Mr. Corker called the bill "the mother of all earmarks" and "a huge unnecessary transference of wealth," Ms. Boxer was reduced to arguing that it's really "a huge tax cut for the American people" and "will not increase gas prices." These are delusions, or worse. Cap and trade is designed to raise energy prices, which are supposed to spur the investments and behavior changes needed for a less carbon-intensive economy.

Such realities are beginning to seep into liberal precincts. After the bill bottomed out, no fewer than 10 Democrats from the Midwest and South – whose economies rely on coal-fired power or heavy industry and thus will be disproportionately affected – registered their displeasure with Mr. Reid and Ms. Boxer. Including Sherrod Brown (Ohio), Carl Levin (Michigan), Jay Rockefeller (West Virginia) and Jim Webb (Virginia), the Senators said they could not support cap and trade "in its current form" because it would cause "undue hardship on our states, key industrial sectors and consumers."

Even Barack Obama and John McCain backed away from a bill they claim to favor. Mr. McCain said he opposed it because it didn't do enough for nuclear power, while Mr. Obama blamed the failure on Republicans. But the word on Capitol Hill is that both Presidential candidates urged Mr. Reid to yank the bill, lest they get trapped into voting for higher energy prices.

Maybe a vast reordering of the American economy in the name of solving a speculative problem isn't as popular as the greens believe. And perhaps President Bush's approach to climate change – voluntary reductions and subsidies for alternative technology – will seem a lot more realistic once the partisan fevers of the moment have passed.

That's not to say that cap and trade won't return in a more politically potent form next year. The greens will regroup and try to do a better job of buying off their adversaries, especially businesses that could profit from carbon regulation. Nonetheless, this past week has shown that the more transparent any cap and trade debate is, the less chance this tax and spend idea will become law.

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Related Links:

Letter Reveals 10 Democratic Senators Opposed Climate Tax Bill   

‘Global Warming Mad House’ – ‘Agenda in Collapse’ – ‘Foibles and Follies’ Exposed

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Largest Tax Increase in History

“$6.7 Trillion in the form of Higher Gasoline and Electricity Bills” 

 ·        The Congressional Budget Office (CBO) says the Climate Tax bill would effectively raise taxes on Americans by over a trillion dollars just over the next 10 years.  

·        Sponsors of the bill and its substitute estimate it will generate over $6.7 trillion in revenues through 2050 from the sale and auction of carbon allowance to energy users.  

·        Unfortunately, that $6.7 trillion cost will be passed on to families and workers across the country in the form of higher gas prices, higher electricity and heating/cooling bills, more expensive consumer goods and higher workplace costs.  

·        In fact, new funding for government programs, minus any set asides for transition assistance or tax relief to states, industry, or consumers under the Act is a staggering $4.2 trillion.  

·        In my state of Oklahoma, according to various economic models, this bill will cost $3,298 to Oklahoma families in 2020 and cut over 51,000 jobs through the life of the bill. 

·        Carbon caps will have an especially harmful impact on low-income Americans and those with fixed incomes.  

·        A recent CBO report found: "Most of the cost of meeting a cap on CO2 emissions would be borne by consumers, who would face persistently higher prices for products such as electricity and gasoline. 

·        Those price increases would be regressive in that poorer households would bear a larger burden relative to their income than wealthier households."  

·        The poor already face energy costs as a much higher percentage of their income than wealthier Americans. While most Americans spend about 4% of their monthly budget on heating their homes or other energy needs, the poorest fifth of Americans spend 19%.  

·        A 2006 survey of Colorado homeless families with children found that high energy bills were cited as one of the two main reasons they became homeless.  

·        In March, Roy Innis, chairman of the Congress of Racial Equality, warned that mandated carbon controls would disproportionately impact minorities. "We are harming our poorest families; we are rolling back the civil rights we struggled so long and hard to achieve; and we are sending many minorities to the back of the energy and economic bus. This must not, and cannot continue," Innis said.

·        One thing is certain: the full brunt of the new taxes in this bill will be born by American consumers.  As CBO says, “most of that cost would ultimately be passed on to consumers in the form of higher prices for energy and energy-intensive goods and services.”  

·        The Wall Street Journal said on May 27 that the bill “would impose the most extensive government reorganization of the American economy since the 1930s.”  

·        The Cleveland Plain Dealer said the bill “will just bore new holes into an already battered economy. It also doesn't have a prayer of becoming law.”  

·        A June 2, Wall Street Journal further opined: “This is easily the largest income redistribution scheme since the income tax.”  

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Posted by Matt Dempsey (4:25pm ET)