New Threats to Economic Liberty: Cap-and-Trade, Spending Bills

 

Updated Dec. 14, 2009

Businesses face new threats to their economic liberty and their ability to create jobs.

This is the result of two developments: The U.S. Senate passed a $1.1 trillion spending bill last Sunday; and it is now considering yet another cap-and-trade measure.

The massive spending bill, in funding federal agencies, exceeds the rate of inflation by more than 700 percent. Critics also contend it has $3.9 billion in pork spending. I’ll have more on that later.

The cap-and-trade measure was introduced by Sen. Maria Cantwell (D-WA).

Reasonable people agree going green is healthy for all stakeholders. Indeed, Sen. Cantwell’s cap-and-trade bill seems better for consumers than the current legislation being debated in Congress, but it still threatens businesses and their ability to create jobs.

In essence, her bill would fund rebates to consumers via emission credits by requiring manufacturers and other companies to buy credits in conjunction with government auctions. She contends an average household of four would receive $1,100 a year for 18 years from 2012 to 2030 – a total of $21,000.

The government auctions would keep the Wall Street investment banks out of the process.

Cap-and-trade is a controversial, complex subject and I’ve already voiced my opposition to the current House-passed bill (http://bit.ly/8E7Hs2). So I turned to a highly respected business spokesperson, Don Brunell, who is the president of AWB, the Association of Washington Business. AWB and he are known for moderate views on behalf of business. I managed to reach him while vacationing out-of-state with his family. He says he has not seen Sen. Cantwell’s bill, but he graciously responds.

“Generally, cap and trade proposals have created winners and losers which public policy and politicians should not do,” says Mr. Brunell. “That has been the experience in Europe, Australia and California where the government has passed and implemented cap and trade.”

He argues for a positive approach, incentives, to reducing greenhouse gases.

“For example, we brought a little home in Vancouver, WA, 1700 sq. ft., and replaced out water heater with a tankless heater which has dramatically cut our consumption of natural gas because we are only there on weekends. To offset the higher costs for the tankless system, we got a $1,500 federal tax credit,” he explains.

Mr. Brunell points out the progress already made by companies:

“Because of energy costs, many businesses and industries have dramatically cut consumption and thereby greenhouse gases.”

How serious is the problem of greenhouse gases in Washington state?

“Washington state produces less than .01 of 1 percent of the greenhouse gases but Gov. Gregoire wants us to sign on to the Western Climate Initiative along with California that would put us at a competitive disadvantage with Idaho which is not a cosigner of the Western Climate Initiative,” explains Mr. Brunell. “Apply that to a national level where the U.S. may be put at a competitive disadvantage with China, India and other countries which will ignore the Copenhagen agreements on climate change and greenhouse gas restrictions unilaterally by a government – such as the U.S. under either the Waxman-Markey bill passed last August by the House and proposals we’ve seen in the Senate.”

Spending Bill

The U.S. Senate’s massive $1 trillion-plus measure is a compilation of several spending bills and contains more than 1,000-plus pages. It dotes big money on such agencies as the Education Department, the State Department, the Department of Health and Human Services.

With a 10-percent increase, it spends far above the rate of inflation. Inflation was only 1.4 percent in August, according to Bloomberg on Dec. 8 (http://bit.ly/4ZzpNU).

Taxpayers for Common Cause, a watchdog organization, complained the bill has 5,224 pet-lawmaker projects costing $3.9 billion.

A published report indicates the pork includes a farmer’s market in Kentucky and rehabilitation of a theater in New York.

“You are spending money like a drunken sailor, and the bar is still open,” Sen. John McCain (R-AZ) was quoted to say in response to his colleagues regarding their earmarks.

Just so the U.S. Treasury can continue to borrow, also planned is raising the federal debt limit by $1.8 trillion to $14 trillion.

Ouch.

So, yes, in conclusion, my sense is that the cap-and-trade concept and heavy spending, which increases the national debt, constitute silent but ominous threats to the nation and business. They must have economic liberty if they are to succeed and create jobs.

From the Coach’s Corner, for Washington businesses, here’s the link to AWB:  www.awb.org.

It contains a wealth of information. If you’re not a member, you might wish to consider joining. The folks at AWB know what they’re doing.

(Disclosure: I’ve worked with AWB on projects in the past.)

Green Is Good, but Government Nearly Caused a Nightmare



A green environment is good, but in retrospect the U.S. government hurt the cause and very nearly created other problems.

In concert with the Obama Administration, Congressional legislation in 2009 that would have capped greenhouse gas emissions and allow trading for emission rights would have further damaged the nation’s economic climate. The bill also raised the specter of massive climate fraud.

In fact, some lawmakers suggested that sealed documents in a multi-million dollar California climate-fraud case hold secrets showing vulnerabilities in potential cap-and-trade scams. More on the potential for Bernie Madoff-type fraud later.

Cap and trade stemmed from bogus reasons.

“There is no scientific proof that human emissions of carbon dioxide are the dominant cause of the minor warming of the earth’s atmosphere over the past 100 years,” Dr. Patrick Moore, co-founder of Greenpeace, later said in testimony before a U.S. Senate Subcommittee.


Adding up the costs

On its surface, the cap and trade bill to reduce greenhouse-causing carbon dioxide emissions looked like a promising idea. It has passed the House and failed in the Senate.

Admittedly, America consumed about 21 billion barrels of oil daily – more than half was purchased from abroad – many of the nations are not considered loyal allies. Therefore, the environment would benefit from our using renewable, cleaner energy, which means it is a desirable idea.

However, it’s clear that a cap-and-trade system would have increased prices to American businesses and the end user – consumers who were already suffering to the brink from the Great Recession. The cost to business would have been astronomical.

Power companies would have been forced to generate and market electricity from renewable sources. Businesses would have been commanded to trim down their carbon dioxide emissions or buy credits – pollution permits – if they needed to surpass the limits set by Congress. A business could sell or trade unused allowances to other companies.

Progress – energy efficiency

Undoubtedly, the debate warranted examining America’s progress in energy efficiency.

In October 2009, the American Council for an Energy-Efficient Economy (ACEEE) released a study of what it calls a scorecard of how the states were faring in energy policies, practices and programs. That included utility-sector and public benefits programs and policies; transportation policies; building energy codes; combined heat and power; state government initiatives; and appliance-efficiency standards.

In saluting frontrunners in energy efficiency, the ACEEE study named 10 states:

  1. California
  2. Massachusetts
  3. Connecticut
  4. Oregon
  5. New York
  6. Vermont
  7. Washington
  8. Minnesota
  9. Rhode Island
  10. Maine

ACEEE gave five states and the District of Columbia high marks for showing the most improvement; they included:

  1. Maine
  2. Colorado
  3. Delaware
  4. District of Columbia
  5. South Dakota
  6. Tennessee

ACEEE also lauded manufacturers, energy efficiency groups and California’s Pacific Gas & Electric Company for agreeing to new efficiency standards for outdoor lights. ACEE hoped Congress would pass a law that will lower energy use by lights up to 42 billion kilowatt hours a year. ACEEE estimated it would affect at least 3.6 million households.

OK, so progress is being made in energy efficiency.

But businesspeople and consumers had a right to be concerned about such legislation. It would have imposed more government regulation and heavy mandated costs. Not to mention some of the world’s major players are not in the game.

In July 2009, Environmental Protection Agency Administrator Lisa Jackson admitted to Congress that America’s efforts to reduce greenhouse gas emissions would not have made a difference unless China, India and third-world countries implement such green policies.

China had vowed to cut “carbon intensity” by 40 to 45 percent in 10 years, but critics said the promise was inadequate.

Three coalitions – comprised of 23 states with 50 percent of the U.S. population and responsible for more than a third of gas emissions – were working in the cap-and-trade arena. Each state would be autonomous but only one coalition showed any progress, at all.

The coalitions were formed after former President George Bush opposed such controls.

A group in the Northeast, the Northeast Regional Greenhouse Gas Coalition, commenced its efforts affecting electric utilities, but was not able to benchmark success.

A second group, the Midwest Greenhouse Gas Accord, reportedly couldn’t even design its program.

The third group, the Western Climate Initiative, comprised of seven Western states and four Canadian provinces has worked since 2007. But was in a quandary over whether to proceed ahead of the federal government.

One of ACEEE’s highly ranked energy-efficient states, Washington, considered a cap-and-trade proposal supported by then-Gov. Chris Gregoire but it died under heavy criticism in the 2009 legislative session. There were concerns over the burdens on energy-intensive companies that complained they would suffer from high costs. They also warned that prices for pollution permits would not be transparent and could be manipulated.

Only California and the Canadian provinces have passed legislation in the Western coalition.

So many consumers and businesses saw a cap-and-trade system as terrible for the economic climate. They have been too stressed over poor cash flow, layoffs, credit issues and foreclosures.

Climate fraud case

Meantime, two members of Congress demanded that sealed documents in a California multi-million dollar climate fraud case be opened. They said the documents were evidence that would affect the cap-and-trade legislation because a new trillion-dollar commodities market would have evolved as a result of the carbon dioxide emissions credits.

The lawmakers suggested the climate-change legislation might create an environment for more Wall Street deception – this time, in trading cap-and-trade pollution rights.

Rep. Joe Barton (R-TX), ranking member of the Energy and Commerce Committee, and Rep. Greg Walden (R-OR), ranking member of an oversight and investigations panel, were represented by the House Office of General Counsel in asking a California federal district court to release sealed records in the fraud conviction of Anne Masters Sholtz, a former economist at California Institute of Technology.

The 2005-Sholtz case entailed a climate trading system called Reclaim. She participated in the design of Reclaim and was convicted of fraud in selling phony emission allowances to the tune of $12 million. It is believed the sealed documents would show how climate fraud could remain under the radar screen and lead to another multi-billion dollar Bernie Madoff-type scandal.

Such schemes make it difficult to connect the dots in massive financial losses.

You might recall the Wall Street firms that received bailouts, in part, after the commodity and housing markets collapsed in the current financial disaster. Well, some reportedly have been already involved in the Northeastern coalition’s cap-and-trade system. They include Barclays, Goldman Sachs, JP Morgan, Merrill Lynch (now a subsidiary of Bank of America) and Morgan Stanley.

In conclusion, there were two questions: Did the dubious cap-and-trade benefits outweigh the financial risk to businesses and consumers? Was the likely pain from more Wall Street chicanery worth the risk?

The answer to both questions is a resounding no. When will we learn our lessons? With great difficulty we recovered from Enronitis, and it is not clear we will ever really succeed over the Wall Street chicanery that exacerbated the Great Recession.

From the Coach’s Corner, editor’s pick:

Checklist for Branding, Selling Your Biz as Green — Consumers love environmentally sensitive businesses. You might think it’s a slam dunk for businesses to market themselves as green. Well, yes and no. There are precautions to take. They include educating your audience on your eco practices.

“Much of the debate over global warming is predicated on fear, rather than science.”

-James Inhofe

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Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.


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Seattle business consultant Terry Corbell provides high-performance management services and strategies.