Cap-and-Trade Costs

Over the last few months I have been finding various statistics or economic estimates that were either wrong or very misleading. But the worst of all is the one I want to talk about today. It’s the oft-repeated statement that the Congressional Budget Office (CBO) predicts that the Waxman-Markey cap-and-trade bill will only cost the average American family $175 a year.

ABC host George Stephanopoulos used the $175 figure to claim that we can save the planet for the price of a postage stamp per day. In USA Today, when Cal Thomas pointed out that the Heritage Foundation estimated the cost would be closer to $3,000 per family, Bob Beckel replied: “I’ll take the non-partisan CBO’s word for it over the conservative Heritage folks anytime.” The $175 figure has been the mantra for proponents of cap-and-trade.

First, let’s get the prediction right. The CBO claimed that in the year 2020, the cost that year would be $175. If you look at a graph of revenue and cost, you will see that is the ONLY year the cost is that low. The costs on both sides of 2020 are significantly higher. People quoting the CBO estimate for 2020 make it seem as if that would be the cost every year. That is not so.

Second, the assumptions made by the CBO even for 2020 are questionable. The price for carbon dioxide that year is supposed to be $28 per ton. Assuming the cap of the legislation, you would have a gross cost of $141 billion. Investor’s Business Daily points out that the CBO estimate for that year is $50 billion lower.

Third, those who use the CBO numbers might also notice the disclaimers in the report. One says the cost “does not include the potential decrease in gross domestic product (GDP) that could result from the cap.” Well, I appreciate the honesty, even if it’s tucked away in the footnote.

So the $175 figure only works if you look just at the year 2020 and somehow fiddle with the math. Oh, and it only works if you ignore the loss in gross domestic product, ignore the loss of jobs that go overseas, and ignore the increase in energy prices and the impact on the price of everything we consume.

The next time you hear someone say cap-and-trade will only cost $175/year don’t believe it. I’m Kerby Anderson, and that’s my point of view.