Last Friday, I gave you the original Heritage Foundation estimates of the economic effects of the Waxman-Markey Cap-and-
Trade-Tax plan. Because it couldn’t get enough support from rank-and-file ‘Rats, it went back to the drawing board. The Heritage Foundation found that the effects are even worse the second time around:
- The cumulative GDP reduction through 2035 increases from $7.4 trillion to $9.6 trillion
- The average yearly job loss increases from 844,000 lost jobs per year to 1,105,000 lost jobs per year
- The peak yearly job losses increases from 2,000,000 to 2,500,000
- Our original economic analysis had the government auctioning off the allowances (rights to emit) carbon dioxide. The auction revenue, the equivalent of tax revenue, went into the hands of the government, which in turn created more government jobs. In the second version of the bill, the government distributed allowances to various businesses in an attempt to mitigate the near-term economic damage done by the bill. As a result, jobs in the private sector fell less than the original but the government jobs decreased more because the government did not receive the allowance revenue from the auction. Overall employment fell.
- Think of the allowances given away as subsidies to businesses. When these subsidies stop and allowances begin to be auctioned off, the economy is again “shocked” with higher indirect taxes and businesses must make costly adjustments to this new economic condition.
- Real GDP losses increase an additional $2 trillion from the bill because investment for businesses is worse under the new bill. Again, the government is not auctioning off the rights for businesses to emit carbon dioxide; they are giving them away in the near-term. These giveaways add to the national debt, crowd out private sector investment and drive up interest rates. Increased interest rates further drive up the debt. This creates a vicious cycle in which businesses significantly reduce their investment. The lack of investment (that drives the overall economy) produces higher real GDP losses and lowers the potential of the overall economy.
But wait, it gets even worse. Rep. John Shadegg (R-AZ) reports that the ‘Rats added, on a party line vote, mandates that all home sales include an energy-efficiency inspection and a study be made in preparation for every product sold in the United States to be labeled as to their CO2 “content” (i.e. how much CO2 is emitted in the manufacture of each product).
Somehow, I think the fine folks at Heritage understated the damage to the economy.
Revisions/extensions (7:42 am 5/21/2009) - (H/T – McQ) I’m suddenly feeling like Billy Mays here. But wait, that’s not all! As part of their Top Ten list, Heritage included this handy graphic showing just how big a bite Cap-and-
Trade-Tax will take.
For those of you who missed it, it handily beats food, clothing, furniture, the current cost of household energy, and the average property tax. Of course, those of us in Wisconsin pay a lot more in property tax, but $3,900 even beats that.