Obama's $646 Billion Cap-And-Trade Green Tax

Here are the realities behind this ambitious plan to remake the U.S. economy.


As I see it, the most important single item in President Obama's budget is his commitment to a cap-and-trade plan (to limit and reduce carbon emissions). It represents nothing less than an absolutely breath-taking attempt at reengineering the entire American economy. The White House expects the system will begin generating revenue for the government in 2012. By auctioning off carbon permits, the White expects the plan to bring some $80 billion a year between from 2012 to 2019. 

1) What this is, of course, is a de facto business tax that will get passed along to workers and consumers. (Not to mention the impact on economic growth.) And not a small tax, at that. Over that same period, the White House expects regular corporate taxes to bring in some $3.8 trillion dollars. So the cap-and-trade auction impose an additional 20 percent tax or cost above that level. And remember that we already have the second highest corporate tax rate in the world.

2) Of that $80 billion, $15 billion would go toward "clean" energy investment. The rest would pay for his Making Work Pay tax credits. So what we have is, in essence, an enormous wealth transfer from job creators to consumers.

3) Let me also go back to something I wrote last summer:

Here is what William Pizer, an economist at Resources for the Future and a lead author on the most recent report from the U.N.'s Intergovernmental Panel on Climate Change, said at a symposium earlier this week here in Washington: "As an economist, I am skeptical that [dealing with climate change] is going to make money. You'll have new industries, but they'll be doing what old industries did but a higher net cost.... You'll be depleting other industries."

Of course, many economists will recognize "the green is good for growth" trap that Obama and Clinton have stumbled into. It's just a modern iteration of the famous " broken windows fallacy" where people mistake the shifting of wealth and resources for the creation of new wealth and resources.

Pizer went on to say that calls for dramatic reductions in carbon emissions—the Democrats want 80 percent, John McCain 65 percent—were also unrealistic unless there was"some event"that really galvanized public opinion. Instead, what he predicted was a modest price on carbon via a cap-and-trade plan, a greater push for efficiency, and more regulation of energy-intensive industries.