Friday, October 30, 2009

The Heritage Foundation

The Morning Bell

FRIDAY, OCT 30, 2009

The Pelosi Blueprint for Government Run Health Care
The new House health care bill (H.R. 3962) unveiled by Speaker Nancy Pelosi (D-CA) yesterday clocks in at 1,990 pages and about 400,000 words. As written, the bill purports to cost only $1.05 trillion over the first ten years and is paid for by over $700 billion in tax increases and cuts to Medicare Advantage and Medicare prescription drug payments. But as troubling as those numbers are, the scariest thing about the bill is the solid foundation it lays for a complete government take over of the health care sector of our economy.

The Washington Post describes the bill as “creating an expensive new entitlement program (subsidies to purchase health insurance) and dramatically expanding an existing one (Medicaid).” This is true by itself, but the Post later dismissively adds: “If you’ve noticed that we haven’t talked about the public option in the House bill, that’s not an oversight. For all the fury over the issue, it doesn’t matter that much; the CBO estimates that the government-run plan would actually have slightly higher premiums.” This is a breathtakingly naive statement by the Post and demonstrates that they have not yet fully grasped how all the different elements of the bill are designed to interact to produce President Barack Obama’s desired outcome.

The Medicaid Expansion: Under current law the CBO projects that only 35 million Americans would be on Medicaid by 2019. The House bill massively expands the Medicaid program by raising the upper income cutoff to 150 percent of the federal poverty line (FPL). As a result, the CBO now estimates some 50 million Americans will be enrolled in the program at a ten year cost to the federal government of $425 billion. This does not include the $34 billion in increased Medicaid costs that state governments will have to spend.

The Insurance Subsidies: The House bill also creates a Health Insurance Exchange through which individuals without employer based coverage could purchase insurance. The bill also provides “affordability credits” to people who are below 400% FPL. However, the bill also denies access to the credit for all people who are “eligible” for Medicaid. In essence, therefore, the House bill forces all Americans below 150% FPL to enroll in Medicaid or pay the individual mandate fine. The CBO explains why the Democrats chose this route: “The estimated costs of providing subsidies through the new insurance exchanges are now lower for several reasons: the larger expansion of Medicaid means that fewer people would be eligible for coverage through the exchanges.” In other words, it’s cheaper to force people into Medicaid then to give them subsidies high enough to buy private insurance. Furthermore, individuals are only allowed to enroll in the cheapest (”basic”) plans for the first two years. After that, they can only choose more expensive plans or the government run plan.

The Employer Mandate: The bill imposes a new 8% payroll tax on employers who don’t cover specified percentages of their employees’ health insurance. In the short term this will only result in job losses and lower wages. But further down the road, the health plans would have to meet new requirements to be specified later by Obama’s new Health Czar (“Health Choices Commissioner”). If your employer’s health plan doesn’t meet those requirements (which are all but guaranteed to drive up the cost of your health plan), you couldn’t keep it.

The Public Option: As health insurance premiums keep rising thanks to all the new requirements in the current bill and the Health Czar’s future regulations, more and more people will have no choice but to depend on the government plan or face a fine. At first, only individuals and employers with 25 employees or fewer would be eligible for the government run plan. But in year two (2014) individuals and employers with 50 employees or fewer become eligible, in year three (2015) employers with at least 100 employees become eligible but starting that year, the Health Czar permitted from this year forward to expand employer participation as appropriate, “with the goal of allowing all employers access to the Exchange.” In effect, the bill makes larger sized employers explicitly eligible and still turns over authority to the Health Czar to further open it up. The goal has been, and still clearly is, to open the exchange and the public plan to everyone. As the Post notes, the CBO now projects that the government run premiums will actually be higher than private plans. The Democrats will not allow this to continue. History shows that entitlement programs like this quickly devolve into price control central planning. A less “robust” public option today will almost certainly be a more robust public option tomorrow. Look no further than the history of Medicare. Medicare was initially designed to pay private rates, but now the program has a complex formula for administered pricing.

So that’s the plan: force all Americans to buy health insurance, regulate the private plans till they are too expensive, and then slowly expand the power and size of the public option as Americans are left with no choice but to turn to government run health care. That is how Pelosi aims to achieve Obama’s goal of “Everybody in, Nobody out” government run health care. The costs are going to be staggering. Not only will health care quality and choice suffer as more and more Americans are forced onto a government plan that reimburses providers at low government set rates, but the price tag is guaranteed to skyrocket. The only way the House managed to keep their price tag as low as $1.05 trillion is by pretending that Congress would cut Medicare reimbursement rates by 20% in 2010. The full ten-year cost of being honest about the Medicare reimbursement rates would be $250 billion. Less choice, lower quality health care, and trillion dollar deficits for years to come: that is the House’s prescription for health reform.

Thursday, October 29, 2009

The Heritage Foundation

The Morning Bell

THURSDAY, OCT 29, 2009

The Cap and Trade Threat to Our National Security

In poll, after poll, after poll, the American people have clearly expressed their preference for prioritizing economic growth over global warming. This is a major problem for those on the left who want to reorganize our entire economy under the guise of cap and trade climate change legislation. Tacitly admitting they have lost this argument, the left has shifted gears and is trying a new tack: global warming is a threat to national security. So Sen. John Kerry (D-MA) recently blogged at the Center for American Progress:

[C]limate change injects a major new source of chaos, tension, and human insecurity into an already volatile world. It threatens to bring more famine and drought, worse pandemics, more natural disasters, more resource scarcity, and human displacement on a staggering scale. We risk fanning the flames of failed-statism, and offering glaring opportunities to the worst actors in our international system. In an interconnected world, that endangers all of us.

Kerry is 100% wrong. Heritage fellow Lieutenant Colonel James Jay Carafano (Ret.) explained why in his testimony before the Senate’s Environment and Public Works Committee yesterday:

Climate Change is a Permanent Feature of Human Reality: While it might feel intuitively appropriate to directly connect the dots between the changing global environment and the human response to global warming, an appropriate complex system analysis would warn against such an approach. Indeed, there are many variables other the climate that affect how humans respond to climate change and, in turn, alter their behaviors to try to impact climate change and its consequences. For example, while the emission of greenhouse gases has been increasing across the globe for the last decade, political violence has been in decline. Furthermore, any changes in the climate, for better or for worse, will occur gradually over decades. Thus, there will be ample time to adjust national security and humanitarian assistance instruments to accommodate future demands. The global climate has always been changing. Adapting to these changes and human efforts to manage their surrounding environment is a permanent feature of human competition. The environment does not cause wars; it is how humans respond to their environment that causes conflicts.

Cap and Trade Would Do Nothing to Stop Climate Change: Even if you assume climate change is a threat to national security, proponents of cap and trade must first show that their solution would actually solve the problem. They can’t. According to climatologist Chip Knappenberger, similar legislation proposed in the House would moderate temperatures by only hundredths of a degree after being in effect for the next 40 years and no more than two-tenths of a degree at the end of the century. EPA Administrator Lisa Jackson concurred, recently saying, “US action alone will not impact world CO2 levels.”

Cap and Trade Would Cripple the U.S. Economy: While there is no evidence that cap and trade legislation will halt climate change, there is strong evidence it will hurt the U.S. economy. A study by The Heritage Foundation’s Center for Data Analysis on a similar companion bill proposed in the House finds that the law would make the United States about $9.4 trillion poorer by 2035. Much of this decline would be from reduced economic productivity and job loss. In particular, under the House legislation there would be 1.15 million fewer jobs on average than without a cap-and-trade bill. A collapse in U.S. economic growth would result in even more draconian cuts to the defense budget, leaving America with a military much less prepared to deal with future threats. Indeed, if America’s military power declines, there would probably be more wars, not fewer.

Inflicting cap and trade on the U.S. economy may well create the world we want to avoid. The law would ensure a steep decline in U.S. economic competitiveness and military preparedness. The consequences of a weak America would inevitably lead to a string of national security crises and an undermining of the nation’s capacity to deal with natural disasters here and abroad. At yesterday’s hearing, Sen. Barbara Boxer (D-CA) told Carafano she appreciated his testimony but that it was “misguided” since her cap and trade bill would create jobs, not cost them. Senator Boxer may want to read the testimony of Congressional Budget Office Director Doug Elmendorff who told Congress earlier this month that cap and trade would cause “significant” job loss and slow the U.S. economy. Our national security depends on it.


John Boehner: Let America Read the Bill

Dallas Morning News

Wednesday, October 28, 2009

Special-interest deals forged in secret behind closed doors. Massive bills unveiled in the dark of night and rushed to a vote before anyone in America could possibly know the details. Wasteful pork projects stuffed into giant bills passed without scrutiny or debate.

This is what passes for business as usual in Congress today. It is the way Washington has done business for generations, under majorities Republican and Democratic alike.

This year, under the Obama administration and a Democratic Congress, things have gotten out of hand. Beginning with the trillion-dollar "stimulus," a number of massive and consequential bills have been rammed through without any member of Congress having read them. These sad spectacles have sparked a public backlash, with millions of Americans demanding that Congress stop the nonsense and "read the bill!"

It's time for Congress to change.

Did the Republican Party miss an opportunity to do away with these broken congressional rituals when it held the majority in Congress? Yes.

As a result of the 1994 Contract with America, which I helped write, important reforms were implemented, such as subjecting the House to audits by a private independent auditor, requiring Congress to live under the same laws as the rest of America and banning the practice of "proxy voting" or "ghost voting" by lawmakers who hadn't actually shown up to vote at all. These were meaningful changes, but unfortunately, things stagnated, and Republicans were subsequently turned out of office.

This is why every day I challenge my Republican colleagues to consider one simple question: If we suddenly found ourselves back in the majority tomorrow, what would we do differently?

When it comes to the issue of congressional transparency, House Republicans are providing a clear answer. We've listened to the American people, and we're united in our support for common-sense changes such as "read the bill" reform that would require all bills to be posted online for a minimum of 72 hours before they are brought to a vote. We also believe:

Members' committee votes should be posted online within 48 hours so the American people can see how their representatives voted.

Committees should be required to post the text of adopted bills online within 24 hours of adoption to end the practice of "phantom amendments" being added to bills secretly after they pass at the committee level.

Major negotiations on sweeping bills that would dramatically expand the reach of the federal government – such as the current government takeover of health care – should be open to the public and subject to a full and honest debate when bills reach the floor.

Cameras should be allowed in the secretive House Rules Committee, the panel that decides which bills and amendments come to a vote.

These initiatives, which House Republicans will be officially unveiling in the coming days, enjoy bipartisan support at the rank-and-file level, and all stand ready for adoption by the full House.

What's more, 176 Republicans in the House, including me, have already signed a petition circulated by Rep. Greg Walden, R-Oregon, that would force a vote on "read the bill" reform. Only six Democrats have signed the petition to date. Why just six? Because the leaders of the Democratic majority, seeking to protect the status quo and preserve their ability to rush bills through the House without scrutiny, have forbidden their caucus members from signing the petition. They won't even allow a hearing on the matter.

It's past time for Speaker Nancy Pelosi and Democratic leaders in Congress to rethink their opposition to these common-sense reforms. Rebuilding trust between the American people and their elected representatives starts with changing Congress itself. Americans deserve a government that is open, transparent and accountable to the people it serves.

John Boehner is minority leader in the U.S. House and may be reached through

Cap And Trade Calamities

Senate Finance Chairman Max Baucus made headlines this week for something other than healthcare. On October 27 Senator Baucus said he has “serious reservations” about the cap and trade bill, especially the increased near-term target of 20 percent carbon dioxide reduction below 2005 levels by 2020 – up from 17 percent in the passed House bill.

No changes can be made within the cap and trade approach can alleviate his concerns. Changing the targeted emissions reductions for 2020 from 20 percent to 17 percent might reduce the near-tem economic impact, but the reduction targets from there on out mirror the Waxman-Markey bill. The steeper the reduction targets in subsequent years, the higher energy prices will have to go to meet those targets.
The scariest numbers from The Heritage Foundation CDA analysis of Waxman-Markey were in 2035, when job losses reach 2.5 million, gasoline prices will rise by 58 percent ($1.38 more per gallon) and average household electric rates will increase by 90 percent. The Heritage model only goes out to the year 2035 but carbon dioxide reduction cuts are most stringent in 2050.

This is just one of many concerns the Senate has with the cap and trade. In June of last year 10 Democrats sent a letter to Senator Barbara Boxer and Senator Harry Reid stating their concerns over a cap and trade bill, the biggest being that it contain costs and prevent harm to the U.S. economy.

The Heritage Foundation analysis of Waxman-Markey found that implementing the bill would reduce aggregate gross domestic product (GDP) by $9.4 trillion from 2012-2035. Even the Congressional Budget Office acknowledged that “such legislation would also reduce economic activity through a number of different channels.”

Senators in coal producing states rightly have their own reservations. For instance, Senator Sherrod Brown (D-OH) said one of his top concerns was “a spike in energy prices” saying, “I don’t think we’re entirely there, for coal states.”

And we’ll never get there for coal states. President Obama’s infamous line when it comes to cap in trade is that electricity prices will “necessarily skyrocket”, but his message on coal was just as alarming. Although the President did talk about the possibility of clean coal, he also said, “So, if somebody wants to build a coal-fired plant, they can. It’s just that it will bankrupt them because they are going to be charged a huge sum for all that greenhouse gas that’s being emitted. That will also generate billions of dollars that we can invest in solar, wind, biodiesel and other alternative energy approaches.” (At the 2:16 mark of the video)

So we’re going to tax cheap, reliable energy (costs that will be passed on to the consumers) to invest in expensive, inefficient energy sources that cannot survive without government support.

Despite Boxer’s repeated attempts to promote cap and trade as a jobs bill, Senator Debbie Stabenow (D-MI) still has concerns: “My message over all is that for us to support what needs to be done in addressing global warming we need to demonstrate that, in fact, jobs are created.”

They won’t be; they will be destroyed. It’s important to stress that of the organizations that modeled cap and trade, not one scenario, including the EPA’s after generous assumptions, projected a net increase in income or employment from cap and trade. The entire debate was over the magnitude of income, consumption and job losses.
The Senate has a lot of problems with cap and trade. But there aren’t any solutions

Wednesday, October 28, 2009


Citizens disarmed for their own safety.
“He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our people and eat out their substance.”

The Declaration of Independence

Rest assured, your government overlords are working hard to keep you safe.

Last week, officials from TSA and several other government agencies swarmed the Orlando, Florida Greyhound bus station. Their ostensible goal was to keep passengers safe from “terrorists and [those] who mean harm.”

Violating the Fourth Amendment in an attempt to violate the Second, government thugs proceeded to search and disarm every passenger without cause, leaving a whole bus of defenseless and violated citizens.

The only weapons they actually found were a few knives and a single bullet. Yes, a single bullet, and all this, again, without any probably cause or warrants issued.

The Bill of Rights does not expire when you step onto a bus. Unfortunately, some government bureaucrats don't seem to understand.

In Liberty,

Dudley Brown

Executive Director

National Association for Gun Rights

The Heritage Foundation

The Morning Bell

Is Government Run Health Care Inevitable?

Americans who like making their own health care choices received welcome news yesterday when Sen. Joe Lieberman (I-CT) said he would be willing to block final passage of Obamacare if the government run health insurance program Majority Leader Harry Reid (D-NV) announced Monday survives the amendment process during the Senate debate. Lieberman explained: “I think that a lot of people may think that the public option is free. It’s not. It’s going to cost the taxpayers and people that have health insurance now, and if it doesn’t, it’s going to add terribly to our national debt.”

In the Green Room: Dr. Norm Thurston, Utah’s Free Market Health Reform Architect

Lieberman is dead on. A government run insurance company will be massively more expensive than its proponents claim. Pressed by the leftist news organization Talking Points Memo to respond to “experts” who say the government run plan will actually save money, Lieberman responded: “Well all the history we have of health entitlement programs, including the two big ones that I dearly support, Medicare and Medicaid, is that they end up costing more than we’re prepared to pay, and they add to the debt, and then they add to the burden on taxpayers.” Again, the facts back Lieberman up here 100%.

In 1967, the experts predicted that the new Medicare program would cost about $12 billion in 1990. Actual Medicare spending in 1990 was $110 billion—off by nearly a factor of 100. The leftist TPM shot back noting that the government run health company is supposed to be “financed by premiums, and unable to draw on federal funds.” The statement would be comically naive if the stakes weren’t so high. Does the left really expect the American people to believe that the same government that bailed out General Motors, Chrysler, and scores of highly unpopular banks, would not bailout the already-government-run insurance company they fought so hard to create?

Addressing the “opt out” clause in Reid’s proposal, Lieberman commented: “I would vote against a public option plan even with an opt-out because it still creates a whole new government entitlement program for which taxpayers will be on the line.” This is also true. A government run health insurance program would create a new entitlement program designed to do nothing more than force every American into government run health care. This is not a bug of the plan, it is a feature. Just ask proponents of the plan like Michael Moore who told Rolling Stone this summer: “If a true public option is enacted — and Obama knows this — it will eventually bring about a single payer system, because the profit-making insurance companies won’t be able to compete with a government run plan and make the profits they want to make.” Candidate Barack Obama’s own campaign website back up Moore’s claim, quoting Obama at a 2008 speech in Ames, Iowa: “If I were designing a system from scratch I would probably set up a single-payer system. … So what I believe is we should set up a series of choices. … Over time it may be that we end up transitioning to such a system.”

But the scariest part of Obamacare is that it does not even need a “whole new government entitlement program” to push more and more Americans into government run health care. As Heritage scholar Dennis Smith has documented, even in the Senate Finance Committee version of Obamacare, which does not include a new government run insurance program, almost half of the newly insured Americans would get their new insurance through Medicaid. The House version of Obamacare, with the new government program, is no different.
The point is that no matter how the government run health insurance debate works out, Obamacare will move us closer towards government run health care. The only question is how fast it will do so. But there is still hope. Heritage Vice President for Government Relations Michael Franc explains:

But don’t lose heart. Conservatives will be in a position to prevail because, ultimately, America remains a right-of-center nation. And ultimately this debate will not just be one about our health system.

Rather, it will be a complex and layered debate about many other issues, issues where conservative values carry the day. Lawmakers will be hearing from their constituents on issues as varied and important as the individual’s relationship to government, the size and scope of that government, debt and deficits, our responsibilities to future generations, life (both at its beginning and its end), the level of taxation on individuals and work, job security, and privacy.

We’ll win because there is no other option.

The Heritage Foundation

The Morning Bell

TUESDAY, OCT 27, 2009
No Matter What You Call It, It’s Still Just Government-Run Health Care

Yesterday, Senate Majority Leader Harry Reid (D-NV) announced that the health care legislation he is drafting will include a government-run health insurance plan, or as many on the left like to call it “the public option.” The new wrinkle that Reid has thrown into the proposal is an “opt out” clause which would require states to pass legislation by 2014 rejecting participation in the federal government run plan. None of the committees in the House or Senate ever even voted on this new opt out scheme. But that does not really matter. Whether it is first implemented through a co-op, or a trigger, or an opt out, the end goal is the same: government-run health care for all Americans.

Hotel Harry Reid: Reid provided very few details for his “opt out” proposal, but here is what we do know: the government run plan would be available on the first day that major provisions of Obamacare would take effect in 2013, and states would have until 2014 to pass legislation declining participation in the program. This means that a one-vote majority of obstructionists in one chamber of a state legislature, by refusing to act, can consign a state’s residents to an eternity of government-run health care. In 17 states Democrats control both houses of the legislature and the state house. In another 24, Democrats control at least one legislative chamber or the governor’s mansion. That leaves a total of only 9 states where Republicans run the entire show — Texas, Utah, South Carolina, South Dakota, North Dakota, Missouri, Idaho, Florida, and Georgia. That means Americans in 41 states are all but guaranteed to have no choice but to endure the government run health plan. What opt out really means is: You’re already checked in, and if you don’t do so by 2014, you can never leave.

The Co-op Co-opt: Sens. Chuck Schumer (D-NY) and Kent Conrad (D-ND) have both pushed slightly different plans they both call co-ops. However, they both share the same fundamental flaws: advantageous federal funding and regulation designed to tilt the playing field in their direction. Heritage fellows Edmund Haislmaier, Dennis Smith, and Nina Owcharenko have explained why this model is guaranteed to fail: “Simply calling some form of a government-sponsored enterprise (GSE) a “cooperative,” for instance, would be only another type of public plan in disguise. … One need look no further than Fannie Mae and Freddie Mac to see how GSEs can distort the market and leave taxpayers with huge liabilities. Decades of market distortions generated by their implicit government backing, compounded by the effects of repeated political meddling by Congress, put those GSEs at the very epicenter of the mortgage market collapse that triggered the current financial crisis and recession.”

The Trigger Trap: A trigger is a legislative tool that would put in place automatic benchmarks that if not met, would immediately unleash the government-run system into the market. For example, if 95% of Americans as defined by the bill, don’t have adequate health coverage by a certain date, the public option would be “triggered.” What a trigger does is hold off the tough decision until future, uncertain circumstances. The public option would essentially become law today, but not go into effect until an undetermined time when economic conditions could be even worse. Had Congress enacted a trigger to save Clintoncare, the trigger would have forced states to implement HMOs at exactly the time everyone was moving away from that overly rigid version of managed care. We don’t want to repeat that mistake. It is a travesty of democracy because it allows legislators to vote for a plan now, but passes the blame for the catastrophic consequences onto their successors.

Throughout the legislative process the White House has coyly denied that the establishment of a government run health plan was essential to their health care plan. But in 2003, President Barack Obama told the AFL-CIO: “I happen to be a proponent of a single-payer universal health care program. … And that’s what Jim is talking about when he says everybody in, nobody out. A single-payer health care plan, a universal health care plan. And that’s what I’d like to see. But as all of you know, we may not get there immediately.” Opt out, the trigger, and co ops will not get to government run health care immediately. They will all take time to develop. But no matter what road they try and bring Americans down, the destination is always the same: everybody in out, nobody out; that is, was, and always will be Obama’s ultimate goal.

Cap And Trade Calamities

The EPA's Economic Analysis of Boxer-Kerry Cap and trade proposes a new national tax of historic proportions

“Second verse same as the first, a little bit louder and a little bit worse.” This is the basic theme of the EPA’s analysis of the shrouded Boxer-Kerry Bill (S. 1733).

Given just 12 days to analyze the Boxer-Kerry climate bill (that others were not allowed to review), the EPA relied on previous analysis and the similarities between Boxer-Kerry and previous climate bills, most notably Waxman-Markey (H.R. 2454). Comparing S. 1733 to H.R. 2454 they conclude (page 28):

“While there are some minor differences in the bills in several areas that will likely result in slightly higher costs for S. 1733, these differences are overshadowed by the fundamental similarities in approach, caps, offsets, and other critical design parameters that affect the costs.”

Preliminary analysis by the Heritage’s Center for Data Analysis comes to the same basic conclusion: Though we disagree on the magnitudes, we agree that the Senate bill is very similar and a little worse than the House version.

The numbers most likely to be repeated from the EPA analysis are the same misleading numbers repeated from the analysis of Waxman-Markey. However, before reviewing the analysis, one point needs to be made crystal clear—there is no green stimulus here.

Even the most generous scenario in this EPA report shows that there will be costs forced on the economy—higher energy prices and lost income. For every year reported, household consumption drops compared to a world without Boxer-Kerry. This is a climate bill and, even according to the EPA, it will reduce economic activity. Spinning this as a job-creating, green stimulus bill is an act of fraud.

What will be the real costs? The Heritage analysis finds aggregate GDP losses (adjusted for inflation to 2009) grow to $9.6 trillion—an average loss of about $400 billion per year. Note that Heritage only projects impacts for the first 24 years of the 40-year program. The full 40-year cost will obviously be much higher.

The legislation pushes more than 1.8 million onto the unemployment rolls in 2012 and ultimately raises unemployment by over 2.7 million. This is net of any green jobs.

Energy costs rise. Even after adjusting for the purchase of more expensive energy-saving appliances, even after consumers drive less and adjust their thermostats, family energy expenditure rises by nearly $900 dollars per year—a total of more than $21,000 for the 24 years analyzed. Again, these figures have already been adjusted for inflation.

The EPA on the other hand reports results that amount to tens of billions of dollars per year. As with their analysis of Waxman-Markey, the EPA analyzed the economic impacts of several scenarios for Boxer-Kerry—from extremely unrealistic on one end to much more realist on the other. However, in the current report they present the economic cost of only one unrealistic scenario.

This particular scenario depends on three extreme assumptions. First, nuclear power generation must nearly double in the first 25 years. This is the equivalent of about 100 additional nuclear power plants. In the past 30 years, not one new nuclear power plant has been licensed and Boxer-Kerry (like Waxman-Markey) makes little to no provision for eliminating the legal and political barriers to the nuclear renaissance necessary for this EPA analysis.

Second, the EPA assumes that technology for capturing and storing the carbon dioxide emitted from coal-fired power plants will be fully commercialized in the next 15 years. Pilot projects are still on the drawing boards. Further, even after the extraordinary technological and economic hurdles have been cleared, the political and environmental obstacles to storing tens or hundreds of millions of gallons of liquid CO2 each day must be overcome.
Third, the EPA assumes nearly two billion tons of CO2 can be emitted beyond the caps set by the legislation because we will pay others to cut their CO2 emissions. Known as offsets, some of these cuts are to be made in the U.S., while many more are expected to be provided abroad. The results from current offset programs elsewhere are so unsatisfactory, that Boxer-Kerry devotes 90 pages to specifying the structure for establishing the stultifying regulations for offset certification, verification and trading. The theoretical availability as outlined in the earlier part of the bill is a long way from the actual availability of the offsets necessary for the EPA’s analysis. On page 20 of their report, the EPA makes clear that offsets are not a done deal:

“There are many institutional design issues, including the measurement, monitoring, reporting and verification requirements, surrounding estimates of offset availability. These issues must be addressed to ensure that the offset reductions are truly incremental, and represent real reductions.”

On the same page, the EPA acknowledges the great uncertainty of offsets and their projected economic impacts:

“Additionally, the cost and availability of offsets, particularly international offsets, is one of the greatest uncertainties in forecasting the cost of climate legislation.”

Gambling trillions of dollars in family income and millions of jobs on any of these strained assumptions would be a great risk. Relying on all three seems unconscionable.

Monday, October 26, 2009

The Heritage Foundation

The Morning Bell

MONDAY, OCT 26, 2009

The Transparent Costs of Cap and Trade

On June 26th of this year, the House of Representatives narrowly passed H.R. 2454, the American Clean Energy and Security Act. More commonly known as the Waxman-Markey bill (named after bill sponsors Reps. Henry Waxman (D-CA) and Ed Markey (D-MA), the 1,427-page bill tries to control global temperatures by creating a “cap” on greenhouse gas emissions, and then hoping that greenhouse emitters would “trade” emissions permits meet the cap. Under the scheme, the government would issue fewer allowances each year, causing the cost of the permits to rise. The cost of these allowances is a tax, and under Waxman-Markey, the tax would rise each year. As with any tax, it will ultimately be passed on to consumers in the form of higher energy and product prices.

On August 6th, the Heritage Foundation’s Center for Data Analysis released a report detailing the economic costs of the Waxman-Markey. Since energy is the lifeblood of the American economy, 85 percent of which comes from CO2-emitting fossil fuels, the Waxman-Markey bill’s arbitrary and severe restrictions on the current energy supply and infrastructure will not only have direct impact on consumers’ budgets through higher electric bills and gasoline prices, but also cause unnecessary inefficiencies at virtually every stage of production. CDA estimates that Waxman-Markey legislation would cost the average family-of-four almost $3,000 per year, cause 2.5 million net job losses by 2035, and a produce a cumulative gross domestic product (GDP) loss of $9.4 trillion between 2012 and 2035.

Surely our study did not produce the results Waxman and Markey expected. Earlier this month Reps. Waxman and Markey sent us, and a number of other institutions, a letter asking us to answer 33 methodological questions about the analytical techniques used in our study. We were delighted by Waxman and Markey’s letter since it is just the kind of thoughtful investigative work our lawmakers should do more often. For example, they asked if our model took into account an increase in private sector investments in research and development that would be sparked by the legislation and a new carbon market. Answer: It did. Our model incorporates both short and long-run responses to higher energy prices.

Waxman also asked if our model quantified any benefits of avoided climate change. Answer: It didn’t. Because according to estimates based on IPCC data, the Waxman-Markey bill would only impact global temperatures by .044 degrees C (about .09 degrees F) by 2050. There simply are no economic benefits from such a minuscule impact.

Waxman-Markey did not send their questions to some notable organizations that have conducted analysis of their bill like the Congressional Budget Office and the Brooking Institution. After we requested they do so, we have since received word that Waxman and Markey sent the same letter to the CBO. They had previously included the Environmental Protection Agency (EPA), Energy Information Administration (EIA), Massachusetts Institute of Technology (MIT), CRA International, the American Council for Capital Formation (ACCF), and the Natural Resource Defense Council (NRDC).

In the interests of an honest and transparent debate about the costs of cap and trade the Heritage Foundation has devoted a space on our website,, where we have posted our answers in their entirety. We have formally invited the other organizations who were asked these questions to allow us to post their responses as well, in the interest of full transparency.

Let’s hope the Waxman-Markey questionnaire signals that a serious debate can now take place. American families deserve to be kept fully apprised of how Congress intends to act, and how those actions will most likely affect their pocketbooks, their jobs, and their lives.