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November 18 2009

Families Will Suffer Under Cap-and-Trade

Nicole Kurokawa Neily

As the health care battle rages on, pundits are quick to point out the importance of doing reform right - after all, it composes one-sixth of the American economy. Unfortunately, harping on that number seems to have reminded Congress of one thing: there's a whole lot of the economy left to take over!

Enter the Kerry-Boxer cap-and-trade bill, the Senate counterpart to this summer's barely-passed Waxman-Markey House bill. Released on September 30, the "Clean Energy Jobs and American Power Act" has flown largely under the radar, benefiting from the sound and fury over health care. The issue is deserving of far more attention, however, because of the devastating impact it will have on American families.

Chad Stone, chief economist at the Liberal Center for Budget and Policy Priorities, testified this week [10/21/09] that low-income families would bear a "disproportionate burden of the costs associated with effective policies to reduce the use of carbon-based energy because they spend a higher proportion of their budgets on energy and energy-intensive goods and services than higher-income households do."

Stone's concerns were echoed a week earlier by CBO director Doug Elmendorf, who wrote on his blog that "households in the middle fifth would see net losses in purchasing power amounting to 0.6 percent of after-tax income in 2020 and 1.1 percent in 2050."

In other words, these economists are warning that it's not the rich, but average American families and those families who have the least will be hit hardest by the inevitable increase in prices that will result from a bill that's effectively a tax on carbon-and therefore a tax on everything.

Elmendorf also acknowledges that the economy will take a hit, stating that the House bill "would reduce GDP below what it would otherwise have been-by roughly .25 to .75 percent in 2020 and by between 1 and 3.5 percent in 2050." He dismisses that finding by asserting that the economy is predicted to grow "so those changes will be comparatively modest." But given the other tax burdens soon to be placed on the American public (a trillion dollar health care plan and the expiration of the Bush tax cuts, to name just two) it's much less certain that the economy will grow as predicted.

Politicians try to disguise the impact that cap-and-trade legislation will have on American families. After all, it's not a direct tax on individuals. Yet the effect will be the same. The cap-and-trade bills impose additional costs on energy production and use, in order to discourage the use of "dirty" fuels and energy-intensive processes while rewarding industries deemed "green." Businesses that emit carbon - manufacturers, utility companies, and refiners - must buy carbon dioxide permits as a condition of doing business, and those are certain to be passed on to consumers.

A study released by the offices of Sen. Kay Bailey Hutchinson (R-TX) and Sen. Kit Bond (R-MO) calls the Waxman-Markey bill a $3.6 trillion gas tax that will hit Americans many times over. According to the report, "Americans will pay higher gas taxes to drive their families, workers will pay higher gas taxes to get to work, truckers will pay higher diesel taxes to deliver their goods, businesses will pay higher gas and diesel taxes to run their operations, farmers will pay higher diesel prices to grow their crops, and air passengers will pay higher ticket prices to take their trips." The price of everything is going to go up across the board, leaving families with less in their pockets.

Hopefully families will still have jobs, of course, but cap-and-trade will make that less likely too. When faced with higher prices, businesses will be forced to make tough decisions. Simply speaking, the more resources companies have to devote to utilities, the less they will have for employees' salaries and benefits.

At a time of high unemployment and looming inflation, the nation can scarcely afford yet another government tax - yet Congress seems bound and determined to burden struggling families and the struggling economy. Politicians can try to disguise or downplay the real economic consequences of this legislation, but American families can't afford to be fooled: this legislation will drive up costs on everyday items and hit poor families the hardest. Is this really the direction we want Congress to take?

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
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