Applying dynamic scoring to cap and trade

Nicolas Loris and Ben Lieberman:

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A commonly quoted cost estimate of Waxman-Markey comes from the Congressional Budget Office (CBO), which claims that cap and trade will cost the equivalent of a postage stamp per day--$175 per household in 2020.[1]

But CBO admittedly ignores economic costs such as the decrease in gross domestic product (GDP) as a result of the bill[2] and the fact that consumers and business will change their behavior as a result of higher energy prices. This is a serious oversight that has significant economic consequences.

In The Heritage Foundation's economic analysis of the Waxman-Markey climate change legislation, the GDP loss in 2020 was $161 billion (in 2009 dollars).[3] For a family of four, that translates into $1,870--more than 10 times the size of the $175 CBO claim.Furthermore, the Heritage analysis found that for all years, the average GDP loss was $393 billion, or more than double the 2020 loss. In 2035 (the last year analyzed by Heritage), the inflation-adjusted GDP loss works out to $6,790 per family of four.

Energy-intensive industries will also suffer significant losses. For instance, farming is very energy-intensive, with fuel, chemical, electricity, and fertilizer costs; since cap and trade drives up the cost of energy prices, farmers' losses will undoubtedly outweigh any money they collect from offsets (the money businesses would pay farmers to reduce carbon emissions by either not farming or using more efficient technologies). The Heritage Foundation's Center for Data Analysis found that farm income (or the amount left over after paying all expenses) is expected to drop $8 billion in 2012, $25 billion in 2024, and over $50 billion in 2035. These are decreases of 28 percent, 60 percent, and 94 percent, respectively. The average net income lost over the 2010-2035 timeline is $23 billion--a 57 percent decrease from the baseline.

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Green projects do not pay for themselves; it is the taxpayers who fund the research and development of renewable energy and the cost of the subsidies that are required to make renewables competitive. Yet renewable energy still only provides a small fraction of America's energy needs, and it is more expensive per kilowatt hour than traditional, reliable sources of energy. Consumers lose doubly, paying more as taxpayers and as ratepayers.

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There is much more and it is worth reading in full.

Democrats have been trying to cook the books to get voters to buy into a bad deal for the economy and one that polls show voters do not want. They have always had an aversion to dynamic scoring for things like tax cuts and now they are applying that aversion to selling their anti energy program.