Friday, June 26, 2009


CBO: Climate Change Consumer Cost Estimates: Just Wrong

After all these years of carefully observing government data and its continuous revisions, now we are being told by the Congressional Budget Office (CBO) that the climate change legislation before Congress for a vote today, championed by Congressman Henry Waxman of California, will cost consumers pennies a day. Common sense says changing an economy from a carbon dependent economy to a "renewable energy" economy will save Americans money in the "long-term." The old common sense quip my grandmother used to say was "in the long-term we are all dead." Who will be around in the long-term to hold the politicians and environmentalists accountable if they are wrong?

Leaving the conflicting analytics on both sides of the debate out for our purposes, I would like you to consider how such a sea change in energy will occur without totally rupturing our already tenuous economy. I am not talking in the abstract but rather about whether there will be "green" fuel to power our cars, boats, snowmobiles, four wheelers, etc.; energy to cool us in summer and keep us cozy in winter with less oil and coal use at virtually no change in price from our current circumstance. Wow, that is a mouthful.

For myself, I do not trust the politicians and special interests any more than I trust the large private sector banks or the same politicians who promised "affordable housing" for all. The difference is, of course, in the private sector businesses fail, greedy people go to jail, there are lawsuits. Where is the accountability in the public sector? With the uninformed and easily manipulated voter?

Affordable housing, affordable energy, affordable health care...government has never demonstrated taxpayer affordable anything when compared to the ability of uncontrolled market competition. Sure, markets have weaknesses but they also have "creative destruction" to purify themselves when they go awry. What does government have to hold it accountable? Uninformed voters who are easily manipulated by hollow political promises driven by special interests. Remember, I am the guy who supports taking away all business subsidies provided by government. In order for free markets to work, they have to be free of all government attachments.

The cost to consumers and the macro-economy of this Waxman Climate Change legislation will be enormous, beyond the comprehension of most people to adapt to. If not, why did Congressman Peterson demand that agriculture, a major emitter of greenhouse gasses, be exempted from the bill by having the fox guard the chicken coop rather than EPA? Our hope is that the Senate sees the coal/nuclear-provided light before unemployment hits 12-15%!!!

According to the EPA, the cap and trade policy has a relatively modest impact on U.S. consumers assuming the bulk of revenues from the program are returned to households.
– Average household consumption is reduced by 0.03-0.08% in 2015 and 0.10-0.11% in 2020 and 0.31-0.30% in 2030, relative to the no policy case.
– Average household consumption will increase by 8-10% between 2010 and 2015 and 15-19% between 2010 and 2020 in the H.R. 2454 scenario.
– In comparison to the baseline, the 5 and 10 year average household consumption growth under the policy is only 0.1 percentage points lower for 2015 and 2020.
– Average annual household consumption is estimated to decline by $80 to $111 per year* relative to the no policy case. This represents 0.1 to 0.2 percent of household consumption.
– These costs include the effects of higher energy prices, price changes for other goods and services, impacts on wages and returns to capital. Cost estimates also reflect the value of some of the emissions allowances returned to households, which offsets much of the cap and trade program’s effect on household consumption. The cost estimates do not account for the benefits of avoiding the effects of climate change.
– A policy that failed to return revenues from the program to consumers would lead to substantially larger losses in consumption.

Think about this last sentence for a minute. If the climate change legislation (Waxman-Markey) "failed to return revenues from the program to consumers would lead to substantially larger losses to consumption." In common sense speak, this is consumer cost increase. So, please ask yourself, if this program generates billions in revenue, what are its costs to implement? Your job? Your family's economic security?

Do you trust the politicians to continue to return the revenue to you to offset the costs for the next 20-30 years? I do not. All of this ignores the fact that if consumers do not feel the cost of the transition from a carbon-intense economy to a less carbon-intense economy what will force them to change their behavior to a more conservationist mode.

Finally, remember, when Medicare was awaiting Congressional vote in 1965, President Lyndon Johnson and most Congressional leaders promised long-term savings by insuring senior citizens. At that time they used the Social Security surplus to pay for the program. Since then, of course, in the "long-term" the medicare tax was imposed at 3% of income. Now Medicare is on the verge of bankruptcy and rather than fixing it, our leaders are inventing another "critical program" that, we are told will create millions of green jobs in the future and save Americans billions of dollars while "saving the planet." Steelworkers, oil drillers will retrain to become farmers, environmental scientists, and entrepreneurs! You betcha. That will happen shortly after I catch the state record crappie!

Remember the old adage, "Fool me once, shame on you. Fool me twice shame on me."

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