CBO Finds That Cap And Trade Will Work - In The Long Term
The American Clean Energy and Security Act of 2009, also known as H.R. 2454, was passed on a near party-line vote by the House of Representatives and now awaits a vote in the Senate. As with nearly everything else in Washington, the bill has become a source of rancor and dispute between right and left - and everyone in between. But in its latest examination of the bill's likely impact, the Congressional Budget Office says the domestic cost of reducing greenhouse-gas emissions paints a more nuanced picture.
Projecting likely trend lines through the year 2050, the CBO concludes that the passage of the legislation will slightly dampen long-term GDP growth. But with a much larger economy by the middle of the century - the CBO expectation is that it will be approximately two-and-a-half times as large as it is today, the impact on peoples' everyday lives will be muted. (One caveat: CBO data tend to rely on some very precise assumptions; if they're false the analysis turns out to be meaningless.)
Digging into the numbers, CBO expects H.R. 2454 to cut real GDP by about 0.25% to 0.75% in 2020 and between 1% to 3% in 20505. But because of the presumed growth in the economy over the next four decades, it says that "losses in consumption and overall well-being would probably be smaller than losses in GDP."
Leaving aside the hot potato controversy about the existence of global warming, CBO nonetheless argues that "unchecked increases in greenhouse-gas emissions would also tend to reduce output compared with a situation where climate change did not occur - especially later in this century as emissions accumulated in the atmosphere." For proponents of cap-and-trade, this won't be of much immediate help because CBO goes on to say that the bulk of the presumed benefits of passing the bill would accrue during the second half of the century. Given society's increasing propensity for instant gratification, is the electorate - and its hired help in Washington - willing to take the long view?
That's a hard one. The economy has recovered from the freefall triggered during the latter days of the Bush administration but it's not expected to show job growth until sometime in 2010. What with the Republicans screaming "where are the jobs?", any plan that even remotely smacks of more job losses ahead is likely to get exploited for partisan gain in Washington. And indeed, CBO finds that passage of a cap-and-trade program will result in
a "significant shift" where old-line industries would give way to new, more efficient ones.
But again, CBO suggests that the long-term gain will trump short-term dislocations.
"The experience of the U.S. economy over the past half-century in adjusting to a sustained decline in manufacturing employment strongly suggests that the economy can absorb such long-term changes and maintain high levels of overall employment. As a result, CBO concludes that the cap would probably have only a small effect on total employment in the long run."
A convincing enough argument? All depends on whether CBO can win over politicians running for reelection today, not in the year 2050.