THE LIGHT SWITCH TAX

It might be the worst piece of legislation in the history of the world. The great assault on American industry and our free market system continued in June with the narrow passage by the House of Representatives of H.R. 2454, “The American Clean Energy and Security Act,” also known as the Waxman-Markey plan. You know it as “cap and trade.” If it passes the Senate, the devastation on our beleaguered American economy and what’s left of our manufacturing sector will be both permanent and incalculable. It is as though somebody has set out to intentionally destroy our country. Don’t say I didn’t warn you.

The concept of cap and trade is arguably simple: A "cap" is a nationwide limit on emissions to reduce the amount of “pollutants” released into the atmosphere. The "trade" creates a market for carbon allowances, requiring companies to make drastic changes in order meet, or come in under, their government-allocated limit. The less they emit, the less they pay, so it is in their economic incentive to pollute less. At least this is the story we are told. The amazing truth is, government has run out of things to tax – so it has to make a few up. Once the government creates a scarce new commodity - in this case the right to emit carbon - and then mandates that businesses buy it, the costs will inevitably be passed on to all consumers in the form of higher prices – an indirect tax.

Cap and trade is nothing more than a tax which starts accruing the instant you flip on your light switch. The Wall Street Journal calls it “the tax that dare not speak its name.” It is the tax that nobody wants to mention, and Democrats in particular are hoping that no one notices who will be asked to pay for their climate ambitions. You see, Obama is counting on huge carbon revenues – ultimately paid by you – to fund his utopian vision of America. This massive tax keeps moving forward because you are told that it is “polluters” being taxed, while all along, it is you, in the form of higher prices on everything you buy. Hit hardest would be the “95% of working families” Obama promised a tax “cut.” Our good friend, the Congressional Budget Office (CBO) estimates that the price hikes from a mere 15% cut in emissions would cost the average household in the bottom-income quintile about 3.3% of its after-tax income every year. That’s about $680, not including the costs of reduced employment. It will cost consumers $2 trillion in pass-through costs in the five years alone. If you don’t believe all of this is part of a massive rewrite of the country our founding fathers left to us – guess again.

Cap and trade is opposed by just about every business and tax organization in existence. The president himself has said, "Under my plan of a cap and trade system electricity rates would necessarily skyrocket." He has admitted it will destroy an entire industry - coal. And those are just the things he is acknowledging. If passed, every new home in America will have to meet California’s building code. There are so many reasons to oppose cap and trade that it is hard to know where to begin.

It will drastically increase energy costs. Even Obama agrees here. But what he’s not telling you is that according to the Tax Foundation, cap and trade will cost the average U.S. household about 2% of household income. MIT pegs the cost at over $4000 per household. Obama says it will cost the price of a postage stamp. Who do you believe? The cost of every product you buy will climb steeply as every vendor and component manufacturer will be paying a new, steep carbon tax.

Just wait and see how much pork and how many earmarks are going to be added to this bill for Senators’ pet home state projects. Wait and see how much more ACORN gets. The bill is modeled after the UN cap and trade policy which hasn’t reduced CO₂ emissions or worked well at all, according a study by Stanford University. But since when has it been a requirement that something actually work before it passes as a law?

This bill will force manufacturers to move out of the country in record numbers because the pollution restrictions will be so tight that a majority of manufacturers won't be able to afford to stay. Unemployment will reach levels that make today’s post-stimulus unemployment look rosy by comparison and since other countries don't have the same tight “pollution” policy, the whipping boy known as carbon will be emitted at record levels worldwide. A 2007 analysis conducted by Charles River Associates estimates anywhere from 1.2 million to 2.3 million jobs would be lost under a cap and trade scheme. Saying cap and trade is good for jobs is a bit like saying Roundup is good for weeds. Americans for Tax Reform estimates cap and trade will cost 2 ½ million American jobs, while China’s and India’s jobs will be secure. Yet, our president had the nerve to call it a “jobs bill’ – and there are those who blindly believe him.

If you’re a believer in anthropogenic global warming, despite the fact that average temperatures have been dropping since 2001, you might not want to take the aluminum foil off your head just yet. Cap and trade will not help the environment or affect the earth’s climate. Even scientists who support the concept of AGW agree that the maximum drop in the earth’s temperature as a result of cap and trade would be no more than 0.07 degrees Celsius by the year 2050. Just how negligible a measurement is that? Well, we cannot even estimate the absolute mean surface temperature of the earth within 0.07.  What’s worse is that cap and trade actually provides incentives to emit more carbon, not less. You see, by turning carbon emissions into commodities, cap and trade would remove the stigma of producing such emissions.  Just look at Europe where we have seen carbon emissions go up, even though the European Union has had a cap and trade regime in place since 2005. Want more?

Cap and trade will require American industry to do one of two things to comply: (1) manufacture less – which will eliminate jobs as companies lay off people to compensate for a drop in production, or (2) buy carbon offsets in order to keep production up – eliminating jobs as companies have less to spend on wages and benefits. 

Cap and trade is essentially stealth socialism – nothing new for this administration. President Obama promises to return carbon revenues to “vulnerable” communities, families and businesses, but that leaves taxpayers at the whim of the radicals in Washington, who will redistribute income to those they deem worthy, rather than letting taxpayers keep their hard earned dollars. It’s yet another form of “economic justice.”  

The unintended consequences of good intentions seem to be the order of the day for this administration, whose axe is gradually dulling as it chops away at the foundation of a free America. Even those who blindly disagree with my indictment of the well-intentioned cap and trade initiative cannot ignore the one certainty to come out of Washington as a result of any such legislation - all the fraud and corruption that always appears every time we assume that government is the answer, instead of the problem.