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American Energy Alliance Alert

Senators Force Open and Transparent Debate on Cap and Trade Tax

28 Say No To Carol Browner’s Plans To Regulate the Means of Production Through Cap and Tax Proposal

The American Energy Alliance is pleased to report that attempts to bypass regular-order procedures and enact the largest (and most regressive) tax in American history by White House Climate Czar Carol Browner have been met with aggressive bipartisan resistance on the steps of Capitol Hill. Browner secretly sought commitments from key lawmakers that would have allowed the Obama Administration to slip its proposed cap and tax plan into the 2010 federal budget, without having to meet the normal 60 vote standard necessary to reshape and reorder the nation’s economy for decades to come. As the Washington Post describes the proposal in today’s newspaper, “Either way, climate legislation will aim to reduce emissions by putting a price on carbon, raising the cost of everything from gasoline to plastics to electricity.”

The bipartisan group of 28 senators, led by West Virginia’s Robert Byrd and Nebraska’s Mike Johanns, are saying no to this budgetary sleight of hand, and are to be commended for standing up for Americans who believe that affordable, reliable, and abundant supplies of energy must be central to any plan for economic growth and stability in the future.

Spring is coming, and hope springs eternal that this budding movement to resist Big Government and a weaker America will gather momentum. Americans must convey their growing concerns about the negative consequences of energy policies based upon faulty intelligence to their elected leaders. AEA posts the letter below:

March 12, 2009

Dear Chairman Conrad and Ranking Member Gregg:

We oppose using the budget reconciliation process to expedite passage of climate legislation. Enactment of a cap‐and‐trade regime is likely to influence nearly every feature of the U.S. economy. Legislation so far‐reaching should be fully vetted and given appropriate time for debate, something the budget reconciliation process does not allow. Using this procedure would circumvent normal Senate practice and would be inconsistent with the Administration’s stated goals of bipartisanship, cooperation, and openness.

We commend you for holding the recent hearing, entitled “Procedures for Consideration of the Budget Resolution/Reconciliation,” which discussed important recommendations for the upcoming budget debate. Maintaining integrity in the budget process is critical to safeguarding the fiscal health of the United States in these challenging times.

The American people have consistently voiced their support for affordable energy and the production of domestic energy resources. Polling shows that 52 percent of Democrats, 65 percent of independents, and 89 percent of Republicans support increased offshore energy exploration and development. But just a few short weeks into his administration, President Obama has sent Americans a clear message: the demands of a majority of Americans will be thwarted by a tiny minority opposed to economic growth.

In 45 days, the Obama Administration terminated 77 legitimate oil and gas leases in Utah, scrapped leases to develop America’s two trillion barrel oil shale resource, and kicked the can down the road on a plan to begin developing our abundant offshore energy supplies after 3 decades of moratorium. If observers remained confused about the President’s plans for domestic energy after he unveiled that aggressive and restrictive agenda, he cleared it up when he released his budget proposal last week.

In addition to $989 billion in new taxes, many on affordable energy, the President’s budget includes a $646 billion tax on gasoline, diesel, natural gas, and coal. Washington’s spin doctors dubbed this massive new tax “cap and trade”. Cap and trade amounts to a tax on 85 percent of the energy we use. It will result in higher gasoline prices, higher electricity prices, and higher costs for American businesses—many of which are already struggling to keep the lights on. In short, the President’s budget proposal is an outline of his plan to force Americans to pay more money to buy less energy.

Increasing the cost of gasoline, diesel, natural gas, and coal isn’t an unintended side-effect of President’s plan—it is the point of the President’s plan. Treasury Secretary Timothy Geithner recently told Congress, “Cap and trade will increase the cost of energy on those fuels that are high in carbon [oil, natural gas, and coal]. For people whose behavior in energy use doesn’t change, their costs will go up.”

China, Brazil, and our other competitors around the globe are aggressively seeking and securing the abundant supplies of affordable energy they know they need to grow their economies. Meanwhile, our government passed laws and regulations to keep us away from most of our own domestic energy resources and make the rest more expensive.

In effect, this budget increases the cost of doing business in America at a time when we face unprecedented economic challenges. Instead, the government should work to create conditions that will attract businesses and economic investment—that means low taxes, low fees, and minimal regulatory burdens.

Much of the discussion on President Obama’s budget has focused on his $989 billion tax hike. These provisions overwhelmingly target domestic energy access, including:

• $61 billion – repeal LIFO accounting
• $4 billion – information reporting for rental payments
• $5.3 billion – excise tax on Gulf of Mexico oil and gas
• $3.4 billion – repeal expensing of tangible drilling costs
• $62 million – repeal deduction for tertiary injectants
• $49 million – repeal passive loss exception for working interests in oil and natural gas properties
• $13 billion – repeal manufacturing tax deduction for oil and natural gas companies
• $1 billion – increase to seven years geological and geophysical amortization period for independent producers
• $882 million – eliminate advanced earned income tax credit

The government initially floated the $13 billion “repeal of manufacturing tax deduction for oil and natural gas companies” proposal last year. AEA’s independent affiliate, the Institute for Energy Research, produced a report that examined that plan’s economic impact. IER found that over 10 years, these taxes would lead to:

• 637,000 jobs lost
• $34.9 billion reduction in household income
• $13.6 billion of taxes paid by pension fund holders
• $185.9 billion decrease in total economic output
• Increased U.S. reliance on unstable regimes for oil

Instead of reducing access to our abundant domestic energy resources and increasing taxes on affordable sources of energy President Obama has a job-creating alternative—increasing access to America’s offshore energy resources. AEA recent released a study that found increased offshore production would produce:

• $8 trillion in additional economic output (GDP)
• $2.2 trillion in total tax receipts
• 1.2 million new, well-paying jobs annually across the country
• $70 billion in additional wages each year

Bottom Line: The Obama Administration has a simple choice to make. They can choose policies that increase energy prices and destroy American jobs, or they can allow Americans to access the vast taxpayer-owned energy resources, creating thousands of jobs and trillions of dollars of economic stimulus. One has to wonder if the Administration’s plan is designed to restore the economy or to punish American consumers, evict American businesses, and make us less competitive in the world.

President-elect Obama recently gave a speech detailing his plan to spend nearly $1 trillion on a stimulus package that would add 600,000 new employees to the government payroll while doing nothing to provide for America’s energy future.

Yesterday, Congressional Democrats followed the President elect’s lead and released their own $825 billion plan to juice the economy. Like the President-elect’s plan, the Congressional plan does nothing to lower energy prices or provide real long-term prosperity.

The road back to economic recovery and long-term prosperity will be built by an active, job-creating private-sector, paved by reliable, affordable energy, and financed by the revenues and royalties generated as a result of it. Expanding the government’s payroll in times of unemployment is no different than printing out more money in times of recession—both may change the short-term perception of the economy, but neither will improve the actual performance of it.

You can create all the new government jobs you want, but if those jobs can’t survive the night without the constant nourishment of subsidies, mandates and distorted tax treatment, you haven’t created any new wealth—only re-distributed it. A national policy that requires consumers to pay more for their energy will only price American goods above foreign ones, and contribute to economic decline.

Instead of working to create real prosperity, the President-elect and Congressional Democrats want to increase government spending, subsidies, and increased mandates. This will harm, not help the economy in the long run.

The Institute for Energy Research, AEA’s sister organization, has been hard at work debunking the studies upon which the Obama stimulus plan relies:

• Green Jobs: Fact or Fiction–An Assessment of the Literature
• Job Mirage: Obama “Green Jobs” Plan Requires Expanding Government Payroll with 600K Bureaucrats
• Green Jobs: Robbing Peter to Subsidize Paul
• It Takes a Lot of Government Green to Create a Green Job
• “Stealth Stimulus” Shouldn’t Fly Under Congress’ Radar
• The Obama Energy Agenda

AEA knows that the real solutions to America’s economic challenges will come from real Americans, not from Washington.

How would you stimulate the economy? Join the conversation and comment down below in our comment section.

President-electObama recently announced a 21st Century New Deal. He plans to quicklyspend billions on make-work projects in an effort to stimulate theeconomy. As we have reported earlier, his nominee for Director of theOffice of Management and Budget apparently disagrees with this kind ofattempt to stimulate the economy. But Obama is undaunted in recklesslyspending taxpayer dollars. For example, here’s what he said aboutenergy:

Do you feel replacing light bulbs in federal buildings is theright kind of stimulus the economy needs right now? 

Thefederal government should spend money to "replace old heating systemsand install efficient light bulbs" only if the projects make economicsense and not merely as make-work projects. When families andsuccessful companies consider upgrading heating and lighting systems,they are forced to compare the costs to the energy-savings benefits.This cost-benefit analysis is key to funding these projects. Before anObama administration spends money on make-work projects, it should makesure that there are net benefits.

If the Obama Administration spends billions of dollars replacing lightbulbs in federal buildings, this will certainly create jobs inparticular sectors, especially for fluorescent light bulb producers andthe workers who install them.

Butat the same time, Obama’s proposals would destroy jobs in otherindustries because the money has to come from somewhere. Obama’s "NewDeal" will raise its money through one ofthree methods: (a) increased taxes, (b) increased deficit spending,and/or (c) printing new money through the Federal Reserve. No matterwhich method is used, the result will be reduced output and fewer jobsin the private sector.

Do you feel replacing light bulbs in federal buildings is theright kind of stimulus the economy needs right now?  What should the newadministration be concentrating on?

Let us know what you think by commenting down below.

California’s Air Resources Board (ARB) is voting today on their plan to reduce California’s greenhouse gas emissions to 1990 levels by 2020 (about a 25% reduction). Sadly, ARB is ignoring the glaring flaws in its economic analysis.

One thing that is obvious about California’s plan is that it will be very expensive. The only way to reduce greenhouse gas emissions is either to use less coal, oil, and natural gas, or to switch to more expensive and less reliable technologies. Any plan to reduce emissions will be very expensive.

But in their zeal to push this plan, ARB released an “economic analysis” that argued that their plan to reduce carbon dioxide emissions will actually save California’s money. As soon as people outside of the ARB looked at the analysis the flaws were obvious.

First, the California’s non-partisan Legislative Analyst’s Office looked at the report. Unsurprisingly they found that ARB “failed to demonstrate the analytical rigor of its findings” and that “economic analysis played a limited role in development of the scoping plan.”

Then a peer review group of respected economists examined ARB’s economic analysis. Their report also found ARB’s report to be severely lacking. For example, Robert Stavins, the Director of Harvard’s Environmental Economics Program wrote, “I have come to the inescapable conclusion that the economic analysis is terribly deficient in critical ways and should not be used by the state government or the public for the purpose of assessing the likely costs of CARB’s plans.”

Further adding evidence of the large net costs of California’s plan is a recent report commissioned by the Electric Power Research Institute. They estimate that California’s greenhouse gas regulations will cost between 0.2 and 1.2% gross state product.

It is beyond doubt that California’s plan is costly and ARB’s economic analysis is severely flawed. But ARB has a few backers. One is the Environmental Defense Fund. EDF argues that economic analyses do not matter. This is amazing given that EDF, unlike most environmental groups, promote economic incentives to achieve conservation. But in this case, EDF merely tells us that “it’s the right thing to do” and cap and trade takes on a near religious quality because it transcends economic analysis. According to Climate Wire:

EDF’s report concedes that the state’s analysis was flawed, but makes the case that it shouldn’t have been expected to be accurate. Carbon cap-and-trade programs are so overarching that they transcend economic analyses, economist Jamie Fine said in an interview.”

"What ARB [the state Air Resources Board] has done with their economic analysis has been appropriate, to get some sense of the magnitude," Fine said. "We’re confident it’s not going to be a big effect on the economy."

"We don’t have to keep returning to these models to see whether we should be going forward with A.B. 32, because we should," Fine added. "It was a rigorous analysis that got us beyond analysis paralysis."

According to EDF, who cares that people will lose their jobs? Who cares that California’s scheme will make life more difficult in California? EDF takes it as an article of faith, without evidence, that the regulations will not “have a big effect on the economy.”

Professor Stavins of Harvard is perplexed by EDF’s analysis. He writes, “The EDF analysis seems to be saying the state’s economic analysis is limited and flawed, and hence that the state ought to go forward with its proposed policies and simply ignore its flawed analysis.”

Economic analysis matters because jobs matter. People’s livelihoods matter. But the economic livelihood of Californians does not matter to California’s Air Resources Board or the Environmental Defense Fund. If the economic livelihood of Californians matter, ARB and EDF would support real economic analyses instead of living in the land of make believe.