NYC Letter: Obamanomics 105

Day 43 of CHOPE

Obamanomics, an energy-poor economy promotes the fond notion of a more just society.

Corollary, the positive relationship between abundant energy and economic opportunity, job creation, growth, and elevation of living standards is an expendable fact.

Mr. Obama intends soon to announce a domestic cap-and-trade energy policy. Cap-and-trade is an administrative scheme that circumscribes allowable levels of pollutants (scil., the cap) and requires companies to purchase at auction permits to pollute up to those levels (scil., the trade).* [Pause.] This scheme has already failed in Europa.

This cap-and-trade scheme will desolate the energy sector where 49% of output is from coal. Here is Mr. Obama in an interview with the San Francisco Chronicle, January 17, 2008:

Let me sort of describe my overall policy. What I've said is that we would put a cap-and-trade system in place that is as aggressive, if not more aggressive, than anybody else's out there.

I was the first to call for a 100% auction on the cap-and-trade system, which means that every unit of carbon or greenhouse gases emitted would be charged to the polluter. That will create a market in which whatever technologies are out there that are being presented, whatever power plants that are being built, that they would have to meet the rigors of that market and the ratcheted down caps that are being placed, imposed every year.

So if somebody wants to build a coal-powered plant, they can; it's just that it will bankrupt them because they're going to be charged a huge sum for all that greenhouse gas that's being emitted.

The only thing I've said with respect to coal, I haven't been some coal booster.** What I have said is that for us to take coal off the table as a (sic) ideological matter as opposed to saying if technology allows us to use coal in a clean way, we should pursue it.

So if somebody wants to build a coal-powered plant, they can.

It's just that it will bankrupt them.

There are no ready candidates to replace the 49% energy output from coal. So coal energy will not disappear, energy companies will simply pass on the enormous cap-and-trade costs to consumers. In the interview above, Mr. Obama also admits:

Under my plan of a cap-and-trade system electricity rates would necessarily skyrocket. Businesses would have to retrofit their operations. That will cost money. They will pass that cost onto consumers.

The government may be at one remove, but this is an energy tax. A hefty regressive energy tax. Energy analyst Margo Thorning estimates the costs at $700 to $1,400 dollars per family per year starting around 2012. Hot Air glosses an analysis by the George C. Marshall Institute and remarks:

Not only will the GDP drop over both the short- and long-terms, but the increased price of energy will result in substantial costs to all Americans — not just Obama’s 5% at the top.

But taxes are a tool of justice.

TOP OBAMA OFFICIALS DEFEND TAX HIKES AS NECESSARY

WASHINGTON March 3, 2009 (Breitbart/AP) - President Barack Obama's top economic officials on Tuesday vigorously defended the administration's $3.6 trillion budget against Republican claims that it contained overly optimistic economic assumptions and included stealthy tax increases that could end up hitting most Americans. David Camp (R-MI, 4th), the top Republican on the Ways and Means Committee:

The president's budget increases taxes on every American, and does so during a recession.

But [Treasury Secretary Timothy] Geithner defended the overall proposal, saying far more people would benefit from lower taxes under the plan. He said the budget reflects what Obama viewed as:

...a deep moral imperative to make our society more just. But it's very good economic policy too.

It will mean there is again a fairer, more equitably shared tax burden on the vast majority of Americans.

We are not sure what this mush means. A regressive tax is not a "more equitably shared tax burden" because energy purchases by low earners are a higher percentage of their income than high earners. We question whether any tax is the correct instrument for "a deep moral imperative to make our society more just". Taxes, even progressive taxes, have no moral content. Also baffling is how "far more people would benefit from lower taxes under the plan" while at the same time the plan results in "a fairer, more equitably shared tax burden on the vast majority of Americans". How can "more people" benefit while the "vast majority" shares? Complete horse hockey.

Again, Mr. Camp addressing Budget Director Peter Orszag:

This massive hidden energy tax is going to work its way through every aspect of American life. How we light our homes, heat our homes and pay for the gas in our cars, in every phase of our daily lives, we will be paying higher costs.

Orszag acknowledged that the energy proposal would increase costs for consumers, but argued that the vast majority of consumers will get tax breaks elsewhere in Obama's budget package.

Elsewhere Mr. Orszag cites Pell Grants as a benefit. A Pell Grant is a post-secondary educational federal grant for low-income families demonstrating a high level of need. Oh, yes, that's a fair trade-off for the vast majority of consumers. Donkey.

CHOPE.

Tax rich. Energy poor. And just.

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* It's not clear to us whether the Obama plan requires a permit to pollute up to allowable limits or to pollute beyond the limits. In the Kyoto model, an underpolluter is allowed to sell the differential of its ledger entry and the permit's allowance. Stay tuned.

** Soon-to-be VP Joe Biden later enlarged the Obama policy to be both for and against coal technologies.

Posted by Damian at March 3, 2009 11:45 PM