6.28.2009

Historic, or Historically Bad


First, the stimulus bill, and now this: "Houses Passes Energy Overhaul Bill 219-212." Known as the "cap and trade" bill (although, importantly, in his press conference the day before, President Obama never used that phrase, nor did he call it a "climate change" bill), it would create a market for pollution via permits, thus giving producers an incentive to either figure out the best ways to reduce emissions, buy from other producers who can do better, or sell to others who can't do better.

Unfortunately, in order to get the legislation passed, most of the permits are going to be given away for many, many years. This was intended not only to buy off needed votes but also to tell the American public that producers won't raise our prices as a result. Only they will anyway: Producer A may not have to pay more for polluting when it is making widgets, and therefore have to jack up prices as a result, but its free permit could be sold to Producer B instead, so making widgets carries an opportunity cost that will have an effect on prices.

As stated above, first the stimulus bill, and now the cap and trade bill: two actions intended to do overall good, but are they anything more than a clever way to transfer resources to key interest groups? I'm not so naive as to think this sort of stuff hasn't happened all along - what is the joke about making sausage and passing laws? - but these two pieces of legislation are historically large in size in terms of taking taxpayer dollars and funneling them to various end recipients.

Even worse, the mechanisms they put into place may in fact exacerbate the very problems they're trying to fix. Even if you assume that the stimulus bill will in fact stimulate in the short-term, it's quite possible the long-term impact is higher taxes and a downgraded dollar, certainly not what's good for our future economic prospects. Meanwhile, even if you accept the need to take drastic action on CO2 emissions (and, let's hope there is healthy discussion on the science here rather than skeptics being labeled as haters), the cap and trade bill has so much top-down regulation that it is just as likely to stifle market innovation as stimulate it.

Yet another troubling trend that ties these two pieces of legislation together is the mantra that they are both "jobs bills." It is ignorant at best and disingenuous at worst to take taxpayer dollars that otherwise could be spent, saved, or invested by American people and businesses and fund projects that may or may not be the best use of funds and call that "jobs created." And, it doesn't take much thought to realize that a solution to rising unemployment that is just about creating jobs, with no regard as to whether in the process other jobs are being destroyed and still others are being prevented from being created, is not the best way out of the mess we're in now.

There many idealists out there who laud the Obama team for throwing the kitchen sink at our recession and for taking the mightiest swing yet at climate change. The sentiments of the Obama team I applaud as right; however, I cannot help but cynically wonder if there wasn't also (instead?) a licking of the chops as folks realized this crisis was the best opportunity (cover?) possible to put into motion unprecedented transfers of resources that will, unintendedly, impair our economic competitiveness and our environmental efforts for decades to come.

Historic, or historically bad? As with the stimulus bill, count me among those fearing the worst with the cap and trade bill. Or, as Jack Welch puts it on his Twitter page: "Climate bill passes House..filled with holes..will create more bureaucratic jobs than real jobs..Senate only hope for common sense." Indeed.
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