That’s how the Wall Street Journal describes the Warner-Lieberman cap-and-trade bill before the Senate this week. Doesn’t sound too rosy, does it? We’ve highlighted the immense projected costs of the bill here on Inkwell. So, why would politicians support a policy with such staggering costs? The WSJ does a good job of laying out the motives:
And for the most part, the politicians favor cap and trade because it is an indirect tax. A direct tax – say, on gasoline – would be far more transparent, but it would also be unpopular. Cap and trade is a tax imposed on business, disguising the true costs and thus making it more politically palatable. In reality, firms will merely pass on these costs to customers, and ultimately down the energy chain to all Americans. Higher prices are what are supposed to motivate the investments and behavioral changes required to use less carbon.
The other reason politicians like cap and trade is because it gives them a cut of the action and the ability to pick winners and losers. Some of the allowances would be given away, at least at the start, while the rest would be auctioned off, with the share of auctions increasing over time. This is a giant revenue grab. The Congressional Budget Office estimates that these auctions would net $304 billion by 2013 and $1.19 trillion over the next decade. Since the government controls the number and distribution of allowances, it is also handing itself the political right to influence the price of every good and service in the economy.
Hat tip: The Chilling Effect