Howard Rich's Blog

August 11, 2008

Capping Growth, Trading Principles

Filed under: Uncategorized — howierich @ 2:49 pm

When John McCain joined Democrats Barack Obama and Hillary Clinton in jumping on the “cap-and-trade” bandwagon for carbon emissions earlier this month, he claimed that the proposal “will create jobs, improve livelihoods, and strengthen futures across our country.”

How politically-astute of him.

In addition to appeasing the energy and environmental lobbies in Washington – both of which favor cap-and-trade for equally self-serving purposes – Mr. McCain is also throwing a bone to the fiscal conservatives whose votes he needs in November if he is to have any chance of winning the White House.

There’s only one problem with Mr. McCain’s ingenious plan – his economic arguments are pure fiction.

Will cap-and-trade “create jobs?” Sure – but only if you’re talking about new government regulators.

Will cap-and-trade “improve livelihoods?” Of course it will – for energy and environmental lobbyists.

Will cap-and-trade “strengthen futures across our country?” Absolutely – but only if you own shares in one of the Fortune 100 companies positioned to profit from a government-imposed energy freeze.

Perhaps in his centrist rush to endorse this “bipartisan solution,” Mr. McCain neglected to read the U.S. Department of Energy’s report showing how cap-and-trade could blow a $1.3 trillion hole in our nation’s GDP.

That’s trillion with a “T,” by the way.

Perhaps Mr. McCain also neglected to consider testimony from conservative economists showing that cap-and-trade would raise America’s unemployment rate by 2.7% – or 4 million jobs, and would cost the average American family more than $10,000 over the course of its implementation.

Does that sound like creating jobs and improving livelihoods to you?

Mr. McCain obviously didn’t listen to Republican leaders like Rep. George Voinovich, either, who have pointed out that resorting to this sort of Soviet-style marketplace intervention does absolutely nothing to curtail emissions abuse in other industrializing nations.

Take China, for example, where two new coal-fired plants are coming online each week – with none of them subjected to anything even resembling our EPA’s strict standards for emissions.

Additionally, by agreeing to cap-and-trade Mr. McCain is in effect removing any incentive for industrializing nations to limit their emissions, thus defeating the whole “global purpose” of the bill.

Apparently, Mr. McCain didn’t factor the necessity of global cooperation into his plan – nor did he consider the impact it would have on domestic coal prices, which the Department of Energy says could soar by as much as 413% under cap-and-trade.

That’s what happens when companies not only have to pay for new energy, but also for the right to use that new energy.

Frankly, this is not the time to be injecting additional volatility into our marketplace. If anything, we need to be crafting our energy policy to reduce price volatility and stabilize supply.

So what was Mr. McCain thinking when he endorsed such an economically short-sighted proposal?

Well, as mentioned cap-and-trade is supported not only by the environmental lobby, but also by big energy lobbyists. In fact, the latter group has been guiding the development of the new regulations to ensure maximum benefit to their clients.

The end result is a “compromise” in which special interests on both sides of the debate win a victory at the expense of American taxpayers and consumers – hardly the sort of outcome a self-proclaimed “maverick” should be endorsing.

Cap-and-trade is a classic example of what happens when we let political expediency – not market realities – dictate policy. Its implementation would be disastrous for America’s economy, and would utterly fail to achieve the objective its supporters are seeking.

Mr. McCain deserves criticism for supporting such a flawed and short-sighted “solution,” but he deserves outright contempt for his attempts to portray it as something it’s not.

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