New Threats to Economic Liberty: Cap-and-Trade, Spending Bills
Updated 11:30 a.m. PT Monday, 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 Cap and Trade Is a Nightmare
Congressional legislation that would cap greenhouse gas emissions and allow trading for emission rights would further damage the nation’s economic climate. It also raises the specter of massive climate fraud.
In fact, some lawmakers suggest that sealed documents in a multi-million dollar California climate-fraud case hold secrets showing vulnerabilities in potential cap-and-trade scams.
But I’ll have more on the potential for Bernie Madoff-type fraud later.
On its surface, the premise to reduce greenhouse-causing carbon dioxide emissions looks like a promising idea. It has passed the House and is mired in the Senate. Admittedly, America consumes about 21 billion barrels of oil daily – more than half is 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 increase prices to American businesses and the end user – consumers already suffering to the brink by the downturn. The cost to business would be astronomical.
Power companies would be forced to generate and market electricity from renewable sources. Businesses would be commanded to trim down their carbon dioxide emissions or buy credits – pollution permits – if they need to surpass the limits set by Congress. A business could sell or trade unused allowances to other companies.
Progress – energy efficiency
Undoubtedly, this debate warrants examining America’s progress in energy efficiency.
In Oct. 2009, the American Council for an Energy-Efficient Economy (ACEEE) released a study of what it calls a scorecard of how the states are faring in energy policies, practices and programs. That includes 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 names 10 states:
- California
- Massachusetts
- Connecticut
- Oregon
- New York
- Vermont
- Washington
- Minnesota
- Rhode Island
- Maine
ACEEE gives five states and the District of Columbia high marks for showing the most improvement; they include:
- Maine
- Colorado
- Delaware
- District of Columbia
- South Dakota
- Tennessee
ACEEE is also lauding manufacturers, energy efficiency groups and California’s Pacific Gas & Electric Company for agreeing to new efficiency standards for outdoor lights. They hope Congress will pass a law that will lower energy use by lights up to 42 billion kilowatt hours a year. ACEEE estimates it would affect at least 3.6 million households.
So progress is being made in energy efficiency.
Businesspeople and consumers have a right to be concerned about such legislation. It would impose 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 will not make a difference unless China, India and third-world countries implement such green policies.
China has vowed to cut “carbon intensity” by 40 to 45 percent in 10 years, but critics say the promise is 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 – are working in the cap-and-trade arena. Each state would be autonomous but only one coalition shows 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, has commenced its efforts affecting electric utilities, but has not been able to benchmark success.
A second group, the Midwest Greenhouse Gas Accord, reportedly cannot 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 it is still is 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 Gov. Chris Gregoire but it died under heavy criticism in the 2009 legislative session. There were concerns over the burdens on energy-intensive companies. They 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 see a cap-and-trade system as terrible for the economic climate. They are too stressed over cash flow, layoffs, credit issues and foreclosures.
Climate fraud case
Meantime, two members of Congress are demanding that sealed documents in a California multi-million dollar climate fraud case be opened. They say the documents are evidence that would affect the cap-and-trade legislation because a new trillion-dollar commodities market would evolve as a result of the carbon dioxide emissions credits.
The lawmakers suggest 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) is the ranking member of the Energy and Commerce Committee. Rep. Greg Walden, (R-OR) is ranking member of an oversight and investigations panel. They are 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 those 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, here are two questions: do dubious cap-and-trade benefits outweigh the financial risk to businesses and consumers? Is 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 nearly a decade ago, and it is not clear we will soon succeed over the Wall Street chicanery and the Great Recession.
