What will cap-and-trade cost us?

20 07 2009

I think it’s a good idea to limit pollution and try to take care of our planet.  That seems to be a popular topic these days.  So while it’s a good idea in general, that doesn’t mean all suggested implementations and methods are good.  What I’m wondering about specifically is Obama’s cap-and-trade proposal that’s currently going through the process of becoming law.  I certainly don’t claim to have all the answers on this, so consider the following info on it something to consider.

How much will cap-and-trade cost the average American household?   There’s a lot of debate on this, and I’m not going to go deep into that.   Some Republican opponents say the average household would pay $3,100 per year in higher energy prices, while some people say the cost would only be $800 per year.  Multiply the difference between those numbers by the number of American households (117 million), and that’s a LOT of money.   So how can the estimates be so far apart?

Here’s an article that explains it, and it’s interesting.  If you divide the numbers out, it is $3,100 per household, but if you consider the value this provides the average household, then it’s $800.  Here’s how someone explained it:

It is not really a matter of returning it or not, no matter what happens this revenue gets recycled into the economy some way. In that regard, whether the money is specifically returned to households with a check that says “your share of [greenhouse gas] auction revenue”, used to cut someone’s taxes, used to pay for some government services that provide benefit to the public, or simply used to offset the deficit […] is largely irrelevant in the calculation of the “average” household. Each of those ways of using the revenue has different implications for specific households but the “average” affect is still the same. […] The only way that money does not get recycled to the “average” household is if it is spent on something that provides no useful service for anyone–that it is true government waste. ~ Reilly, MIT professor

So according to that reasoning, even if your bills increase $3,100 per year, you’re not really out that much money, because the bigger government created by your extra spending provides $2,300 in value (which is $269 billion added back together).   But try explaining that to the “average Joe” who has to pay an additional $258 per month in utility bills.  A lot of people are already having difficulty making ends meet.  Also, the author of the article concludes the $800 is actually in addition to the $3,100, which seems to make sense.   That would make the cost even more.

Also worth considering is how many jobs America will lose, both from jobs in the oil, coal, and other fossil-fuel sectors, and from jobs being outsourced to other countries so the companies won’t have to pay the carbon tax.   Nancy Pelosi says the bill is about “jobs, jobs, jobs, and jobs”.  Yet even if politicians won’t admit it, they know jobs will be lost, because there’s a provision in the bill to cover it.  Adversely affected employees in that sector will qualify for a weekly check worth 70 percent of their current salary for up to three years.  They will also get $1,500 for job-search assistance and $1,500 for moving expenses.   These extra provisions are expected to cost $4.2 billion over the next several years.  ($4.2 billion?!?  That sounds like a LOT of jobs!)  Who is paying for that?

I want to share the last paragraph of the first linked article, for those who didn’t read it:

If proponents of cap and trade want to argue that it is necessary to avert global catastrophe, so be it. But they should be candid with the American people about how costly their scheme will be.

I totally agree with that.   (Isn’t there supposed to be more transparency with this administration?)

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