Cap And Trade Redux: $1,761 Annually Per Family? Or Not?

(CBS/iStockphoto)

An inevitability of writing about controversial political topics is that you're bound to see nastygrams from someone who doesn't especially care for what you've written.

After I wrote an article yesterday reporting on the Obama administration's private estimate of the cost of a cap and trade law, the good folks at the liberal Center for American Progress (John Podesta's group) decided they didn't care for it very much.

My article said: "The Obama administration has privately concluded that a cap and trade law would cost American taxpayers up to $200 billion a year, the equivalent of hiking personal income taxes by about 15 percent... the total in new taxes would be between $100 billion to $200 billion a year. At the upper end of the administration's estimate, the cost per American household would be an extra $1,761 a year." Cap and trade is, of course, the idea of pollution credits, meaning that a pollution limit is established and industries can sell the right to emit carbon to each other.

So the Center for American Progress replied by posting a response alleging I was "promot[ing] another false CEI attack on clean energy reform."

CEI stands for the Competitive Enterprise Institute, a free-market think tank in Washington, D.C. that obtained some internal Treasury Department documents through the Freedom of Information Act. The Center for American Progress and CEI are -- approximately -- on the opposite sides of many policy debates, and have been sniping at each other for as long as I can remember. The center has claimed CEI wants to "destroy the climate for centuries" and is staffed by "pathological disinformers," while CEI has says the center wants to grow "young statists" and, besides, is just wrong on general principles.

(An aside: the Center for American Progress incorrectly calls CEI "right-wing," while in truth the group is libertarian and not conservative. CEI, for instance, opposes held-by-many-Republican ideas like video game "violence" regulations and censoring sexually explicit Web sites.)

In response to my article, the Treasury Department's Alan Krueger, assistant secretary for economic policy, said on Wednesday in an e-mail message: "Treasury's analysis is consistent with public analyses by the EIA, EPA, and CBO, and the reporting and blogging on this issue ignores the fact that the revenue raised from emission permits would be returned to consumers under both administration and legislative proposals."

I've asked the Treasury Department to explain why key portions were redacted from the internal report (PDF), which includes this line: "It will raise energy prices and impose annual costs on the order of XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX."

I still haven't received a response.

Sen. Lamar Alexander, a Tennessee Republican, has picked up on this unusual secrecy. His spokesman sent me this statement from his boss on Wednesday: "The current administration claims to be the most transparent in American history, yet it's been hiding a report showing its cap-and-trade energy plan would cost up to $200 billion every year. American families can't afford a new $1,761 yearly energy tax, and our economy surely cannot afford the 1-percent drop in productivity this big-government bill would cause. The best step we can take right now to lower energy costs, boost the economy, and clean our air would be to rely on a technology we created: nuclear power."

Anyway, back to the Center's response. As far as I can tell, it raises these points: a) the cost of President Obama's cap and trade proposal was already well-known; b) the House of Representatives legislation went in a slightly different direction anyway; and c) the tax revenue collected will be dispersed to good causes; and d) the overall benefits outweigh the costs.

Let's take them one by one. First, the Center for American Progress implies that Obama mentioned the $100 billion to $200 billion figure in his State of the Union speech, which is not true (CBS News has posted the transcript). Nor have I ever seen a press release from the White House with that figure, and it's substantially higher than what the president's public budget included; CEI had to pry these documents out of the Treasury Department through the Freedom of Information Act.

Second, it's true that the House bill is not the same as what Obama had proposed, but the final version has yet to be written, and my article explicitly noted this by saying: "Obviously, any final cap-and-trade system may be different from what Obama had proposed, and could yield higher or lower taxes."

As for the third objection, the tax revenue might end up being directed at income tax cuts (or rescuing kittens and feeding orphans, for that matter), or it could end up being wasted on boondoggles. As any D.C. think tank should know, that's no rare occurrence in our nation's capital.

If it is returned to American citizens, it's unlikely to be a wash: some people will end up paying much more in taxes, some will pay a little more, and some will see a net benefit. The reason it's not a wash is that some of that money will be diverted to pay for the overhead of managing this system -- and, in the future, whatever other purposes Congress mandates.

A variant of this is the argument that even if American households will pay $1,761 in new taxes on the average, nobody's really average. We use more or less energy than our neighbors do. Regions that burn coal for electricity will see energy bills go up faster than hydro-powered ones do.

So it's misleading to talk about per-household and per-family costs, right? The Center for American Progress talks about "per household" costs when the numbers are low -- and invoked "per household" numbers when criticizing the Bush tax cuts -- so it seems fair to talk about "per household" costs when the numbers are higher.

The fourth objection is the most compelling. The Center for American Progress writes: "The potential benefits of clean energy legislation far outweigh the modest costs." That's a reasonable cost vs. benefit calculation, and it includes the claim that even with the extra taxes, cap and trade is so vital to America, it's still worth it.

That's the right approach to take: it would be a very good thing if all federal regulation were subject to a cost vs. benefit analysis. For example, if rising temperatures are significantly harming the planet, and cap and trade would reduce greenhouse gases enough to slow the rise, that would be a real benefit. But the Center for American Progress never actually makes that argument, and as CEI senior fellow Christopher Horner says: "Nobody has ever said this will change the temperature. It won't."

Cap and trade's justification would be stronger if U.S. industries cut their greenhouse gas emissions enough to matter -- rather than the other possibility, which is jobs shifting offshore to countries like China, India and Vietnam that have decided not to levy new greenhouse gas taxes. If that happens, the law's effect would be to make foreign countries more competitive at the expense of American firms.

"The concern about cap-and-trade in today's economic climate," Energy Secretary Steven Chu told the New York Times earlier this year, "is that a lot of money might flow to developing countries in a way that might not be completely politically sellable."

That could lead to carbon tariffs (which Chu and French President Nicolas Sarkozy seem to like), and the possibility of trade wars during an unusually serious recession. Who seriously thinks China, which has already warned that carbon tariffs violate trade agreements, is about to change its manufacturing processes? Or would refrain from retaliation if slapped with carbon tariffs?

Is cap and trade still worthwhile? Yes, if the demonstrable benefits outweigh the costs. So in addition to considering its benefits, let's also look for a full and complete accounting of exactly how much Americans are being asked to pay.

---

Declan McCullagh is a correspondent for CBSNews.com. He can be reached at [e-mail]. You can bookmark the Taking Liberties site here, or subscribe to the RSS feed.

[arkieguy]

We have wasted many years by not building nuclear energy plants. My understanding as to why we have done this is that they can blow up or leak and decimate populated areas,and that the waste is toxic for many years and we don't have any place to dump it.
The first reason for not building them I can understand, but we have one here in Arkansas for a least 30 years and there has been no problems of a major nature.
As to the second reason, I have traveled the American West extensively and there are millions and millions of acres of scrub and waste land that could be used for burial sites without causing any undue hazard.

[hologram5]

I work at Microsoft and the CEO has already stated that if the company gets heavily taxed with this then he will be moving most of the jobs overseas. We are already dying because our economy is trashed and we don't produce enough goods to recover and this is going to nail down the lid of the coffin. We are done.

[mpfigaro]

If the Obama administration's conclusions were "private" then had did this journalist get such complete access to them? It doesn't sound like there has been very much progress with "changing the way that Washington works". Floating controversial trial balloons through friendlies is an old and dishonest trick for communicating a message without being accountable for it.

[jschmidt27]

The 1700 figure was out before the house passed the bill but it was ignored. Now the thought is it is accurate. The House just wanted the bill passed and didn;t want facts in the way.

[DillaRoo]

One more thing: Declan, why did you truncate the Treasury Dept.'s official response? It should read:

"The reporting on the Treasury analysis is FLAT OUT WRONG. Treasury's analysis is consistent with public analyses by the EIA, EPA, and CBO, and the reporting and blogging on this issue ignores the fact that the revenue raised from emission permits would be returned to consumers under both administration and legislative proposals.

It is time for an honest debate about how to solve a long-term challenge and deliver comprehensive energy reform - not for misrepresentations of the facts."

(ALL CAPS added to emphasize the relevant portion of the Treasury statement you left out.)

[mandc05]

I really don't like the Cap and Trade proposal. I'm an independent and while I do feel that going green and promoting green industry is a good thing I don't think this is the correct route in these uncertain economic times. I would like to point out to the person who noted "it will do nothing to reduce global temperatures (we are currently cooling)" that just because your summer was cooler doesn't mean the overall mean temperature of the planet isn't shifting. Seriously the main thing that stops me from choosing a single party is the blind ignorance show by both of them when it comes to logical thinking.

[cbs4111]

Sorry, the whole planet has stopped warming. See

http://www.cru.uea.ac.uk/cru/info/warming/

Please note 1) the 1990's were the hottest decade; since 1998, the hottest year, warming has stopped and 2) The warming from 1970 to 2000 was no different than the warming from 1910 to 1940, before CO2 increased. Therefore, there's nothing in the historical record that suggests that CO2 is driving the climate in any way, shape, or form.

[mrj0hn50n]

Your link says the 90's were "the warmest COMPLETE decade in the series." Note that the graph was last updated in February 2009. It also lists the hottest years on record. Eight out of ten occured in the last decade.

Also, comparing 1910-40 and 1970-2000 obviously proves nothing. We've been burning fossil fuels since the industrial revolution, and the increase in global temperature matches up pretty well to our industrial expansion. Man-made global warming provides powerful and compelling explanation for the rise in global temperature.

[ibsteve2u]

I note that "conservative" now means that "Anything that makes me wealthier is OK no matter who it hurts or what it destroys.", while "libertarian" now means "Anything that I want to do is OK, no matter who it hurts or what it destroys.".

They seem to differ only upon motive.

[smac761]

Oh that is soo sad. Liberal still means tax & spend into oblivion. See I care for others so much that I'm going to spend my children's, children's, childrens money. Guess what- your fun is going to end when your daddy takes your t-bird away.

[Dana_H]

The cost-benefit analysis is easy. There is zero benefit, and a cost in the hundreds of billions. Green energy is a fantasy, and to the extent global warming is real and man-made, it is a minor problem. (Also, even if the global warming models are right, the draconian emissions reductions imposed by cap-and-trade will have no effect on the climate.) Check out this article by Keith Lockitch: http://www.capmag.com/article.asp?ID=5439

[jt92202]

Sorry your wrong it will be a benefit to Al Gore, he is and will be making more money than Bill Gate ever thought of making but the difference is we buy product from Bill Gates because we want to and we have to buy carbon offsets from Al Gore because the Governments is starting to make us.

VOTE all these polititicans out of office and elect people to do the Amercian peoples business! All these people think about is how they are going to line their and their friends pockets!!! Tell you Representives NO to CAP AND TRADE!

[mrj0hn50n]

If y'all don't get your heads out of the clouds, then some of the most important legislation in US history will be written entirely by the Democratic Party. It's possible to have a climate change policy that reflects what's best about American conservatism.

The politics of "environmentalists-suck" and "don't-trust-science" might win a few elections in the sticks, but if you don't start bringing some serious ideas to the table, Pelosi will be writing our national energy policy.

I'm a Democrat, and I like Pelosi. But a healthy and sensible opposition party is an important part of a functioning democracy.

[nazdackster]

"Yes, if the demonstrable benefits outweigh the costs". There are benefits? Name ONE. Then support it with evidence.

(Oh my, that was a dirty trick. Now don't go off on a wild goose chase and try to find benefits for cap & trade, I WAS ONLY KIDDING!!!)

[Changein2012]

"Is cap and trade still worthwhile? Yes, if the demonstrable benefits outweigh the costs." Well, they do not, unless you are the likes of Al Gore or GE. This is legalized theft. Cap and Tax will do nothing to reduce co2 (which does not need regulation), it will do nothing to reduce global temperatures (we are currently cooling) and it will criple our economy. Please inform your neighbors, especially if they watch the propaganda networks. It is time for the citizens of this great country to take control and abolish the corrupt culture in DC. Had enough yet?