Cap and Tax
A tripartisan trio of senators — John Kerry (D., Mass.), Joe Lieberman (I., Conn.), and the New York Times’s favorite Republican environmentalist, Lindsey Graham (S.C.) — is working overtime to build support for “doing something” about climate change in the upper chamber of Congress.
Their chosen solution for reducing greenhouse-gas emissions, a combination of energy taxes and carbon controls, is politically inexpedient. That means that the Senate’s Green Three will have to buy the votes they need, sweetening the deal with special favors and parochial giveaways.
We’ve seen this before. Early last April, the House of Representatives took up a cap-and-trade scheme, the American Clean Energy and Security (ACES) Act. It was 600 pages long. Two months later, Nancy Pelosi had whipped up enough votes to pass the bill, which by that point was 1,500 pages long. The legislation had been fattened as Henry Waxman (D., Beverly Hills), chairman of the Energy and Commerce Committee and a co-author of the bill, bought off members of the Democratic caucus with the trillion-dollar proceeds of the cap-and-trade tax. Even with all those giveaways, it was a close-run thing, and we were treated to the unseemly spectacle of wavering lawmakers literally lining up on the floor of the House on the day of the vote to demand that Waxman concede more and more special favors. Waxman agreed to practically every one of those demands.
But ACES was dead on arrival in the Senate, so Kerry, Lieberman, and Graham had to start their own vote-buying program from scratch. Manufacturing-state senators want billions of dollars to compensate industry. Farm-state senators want billions of dollars for agricultural producers. Nuclear-state senators want billions of dollars for carbon-free nuclear power. Coal-state senators want billions of dollars for clean-coal technology. Senators from natural-gas states want billions of dollars for fuel-switching. Unfortunately for the American taxpayer, the list goes on and on, and some of the demands are even worse than simple pork expenditures: Democratic Sen. Carl Levin of Michigan has demanded a carbon tariff, or “border adjustment” as it is being called these days, on manufactured goods entering the United States from countries without similar emissions controls, a substantial restriction on free trade that invites retaliatory measures from our trading partners. President Obama, to his credit, has rejected this approach, so far, as protectionist.
In a similar vein, Sen. Sherrod Brown of Ohio has called for “a bill that promotes the competitiveness of U.S. manufacturing through targeted retooling assistance and border-equalization measures. A great risk of a weak bill is that U.S. industries incur increased costs, and as a result, cheaper products would be imported from abroad.”
In their effort to come up with a bill that will satisfy everyone, Graham, Kerry, and Lieberman have met with the industry groups that environmentalists usually vilify, among them the U.S. Chamber of Commerce, the National Association of Manufacturers, the National Electrical Manufacturers Association, Edison Electric Institute, American Petroleum Institute, Alliance of Automobile Manufacturers, National Mining Association, American Farm Bureau, Association of American Railroads, American Forest and Paper Association, and Air Transport Association. But there isn’t enough booty to placate all the rent-seekers. Recently, Conoco-Phillips and British Petroleum expressed their belief that the oil and gas industry was treated unfairly by the House’s cap-and-tax, because it didn’t receive as many freebies as did clean coal. The nuclear-power industry, too, has expressed displeasure with its share.
Which suggests there is a possible silver lining to this unseemly quid pro quo: By trying to satisfy everyone, the Green Three may end up satisfying no one, thereby sparing the United States this legislation and its potentially ruinous consequences, which include trillions of dollars in misspent capital, higher prices on practically every good produced in the United States, and a permanent reduction in our global competitiveness, particularly vis-à-vis Asia and the European Union. And all of this for little or no real environmental benefit.
Rep. Henry Waxman gave away the farm to pass ACES in the House, so there isn’t much left for the senators to use to buy off the remaining special interests. Assuming that the House’s climate legislation represents the upper limit for revenues generated by carbon taxes, and that the industries that stand to profit from ACES won’t accept a less lucrative deal, how will Kerry, Lieberman, and Graham find enough financial grease to keep the political wheels moving? Who knows? But it is certain that the nation will be better off if they don’t.