Waxman-Markey and the Great Depression II?

“With the passage of Cap and Trade there is a good chance that unemployment will be worse than 1933 by the end of 2010.”

So writes an Econbrowser reader. Well, anything can happen, but that is not the outcome I predict. Nor the CBO, EPA, and other informed analysts.

From the CBO:

The incidence of the gains and losses associated with the cap-and-trade program
in H.R. 2454 would vary from year to year because the distribution of the
allowance value would change over the life of the program. In the initial years of
the program, the bulk of allowances would be distributed at no cost to various
entities that would be affected by the constraint on emissions. Most of those free
allocations would be phased out over time, and by 2035, roughly 70 percent of the
allowances would be sold by the federal government, with a large share of
revenues returned to households on a per capita basis. This analysis focuses on the effect of the legislation in the year 2020, a point at which the cap would have
been in effect for eight years (giving the economy time to adjust) and at which the
allocation of allowances would be representative of the situation prior to the
phase-down of free allowances. The incidence of gains and losses would be
considerably different once the free allocation of allowances had mostly ended.
Although the analysis examines the effects of the bill as it would apply in 2020,
those effects are described in the context of the current economy –that is, the
costs that would result if the policies set for 2020 were in effect in 2010.
On that basis, the Congressional Budget Office (CBO) estimates that the net
annual economywide cost of the cap-and-trade program in 2020 would be
$22 billion — or about $175 per household. That figure includes the cost of
restructuring the production and use of energy and of payments made to foreign
entities under the program, but it does not include the economic benefits and other benefits of the reduction in GHG emissions and the associated slowing of climate change. CBO could not determine the incidence of certain pieces (including both costs and benefits) that represent, on net, about 8 percent of the total. For the remaining portion of the net cost, households in the lowest income quintile would see an average net benefit of about $40 in 2020, while households in the highest income quintile would see a net cost of $245. Added costs for households in the second lowest quintile would be about $40 that year; in the middle quintile, about $235; and in the fourth quintile, about $340. Overall net costs would average 0.2 percent of households’ after-tax income.

From the EPA Analysis of the American Clean Energy and Security Act of 2009 H.R. 2454 in the 111th Congress (6/23/09):

The cap & trade policy has a relatively modest impact on U.S. consumers assuming the bulk of revenues from the program are returned to households.

  • Average household consumption is reduced by 0.03-0.08% in 2015 and 0.10-0.11% in 2020 and 0.31-0.30% in 2030, relative to the no policy case.
  • Average household consumption will increase by 8-10% between 2010 and 2015 and 15-19% between 2010 and 2020 in the H.R. 2454 scenario.
  • In comparison to the baseline, the 5 and 10 year average household consumption growth under the policy is only 0.1 percentage points lower for 2015 and 2020.
  • Average annual household consumption is estimated to decline by $80 to $111 dollars per year* relative to the no policy case. This represents 0.1 to 0.2 percent of household consumption.
  • These costs include the effects of higher energy prices, price changes for other goods and services, impacts on wages and returns to capital. Cost estimates also reflect the value of some of the emissions allowances returned to households, which offsets much of the cap and trade program’s effect on household consumption. The cost estimates do not account for the benefits of avoiding the effects of climate change.
  • A policy that failed to return revenues from the program to consumers would lead to substantially larger losses in consumption.

While this analysis contains a set of scenarios that cover some of the important uncertainties when modeling the economic impacts of a comprehensive climate policy, there are still remaining uncertainties that could significantly affect the results.

*Annual net present value cost per household (discount rate = 5%) averaged over 2010-2050 under the core scenario

Here’s a set of graphs and figures detailing these results.
epahr2454.gif

Slide 13 from EPA Analysis of the American Clean Energy and Security Act of 2009 H.R. 2454 in the 111th Congress (6/23/09).

Of course, this tabulation only includes the costs. In order to do a benefit-cost analysis, one would need to know the benefits of avoiding global climate change associated with green house gas emissions. CBO has its recent analysis Potential Impacts of Climate Change in the United States (May 2009).

Despite the wide range of projected impacts of climate change over the course of the 21st century, published estimates of the economic costs of direct impacts in the United States tend to be modest.110 Most of the economy involves activities that are not likely to be directly affected by changes in climate. Moreover, researchers generally expect the U.S. economy to grow dramatically over the coming century, mainly in sectors (such as information technology and medical care) that are relatively insulated from climate effects. Damages are therefore likely to be a smaller share of the future economy than they would be if they occurred today. As a consequence, a relatively pessimistic estimate for the loss in projected real (inflation-adjusted) U.S. gross domestic product is about 3 percent for warming of about 7 degrees F by 2100. 111
However, such estimates tend to mask larger losses in subsectors of the economy. Some sectors in certain regions are likely to bear sizable costs requiring significant adjustments and adaptations, and a few sectors in a few regions may be eliminated altogether. Even at the low end of the projected range of warming, for example, changing winter conditions would cut the Western ski season by up to four months and would virtually eliminate the Eastern snowmobiling season.112

The most comprehensive published study includes estimates of nonmarket damages as well as costs arising from the risk of catastrophic outcomes associated with about 11 degrees F of warming by 2100. That study projects a loss equivalent to about 5 percent of U.S. output and, with substantially larger losses in a number of other countries, a loss of about 10 percent of global output.116

CBO has many of its analyses compiled here; EPA here. EIA has collected its analyses of previous climate change and other legislation here.

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43 thoughts on “Waxman-Markey and the Great Depression II?

  1. brian

    While your post is very interesting and informative, it was not needed to disprove the statement that “With the passage of Cap and Trade there is a good chance that unemployment will be worse than 1933 by the end of 2010.”
    This is because of the simple fact that under HR.2454 the cap-and-trade system wouldn’t go into effect until 2012. This was only tangentially referred to in the CBO clip, where it reads “This analysis focuses on the effect of the legislation in the year 2020, a point at which the cap would have been in effect for eight years”
    Some provisions of HR. 2454 would go into effect before 2012, but those are tiny (the cap-and-trade program accounts for about 83% of the costs and outlays of the program according to CBO) and are stimulative since they are pretty much all outlays.

  2. Milton Recht

    EPA assumes growth in nuclear energy as source of electricity to offset costs of carbon based production.
    CBO assumes that Congress will pass tax rebates and tax credits to offset costs of cap and trade.
    Would be more realistic to see the cost analysis without these two assumptions.
    Also, if more more nuclear energy were allowed without passage of cap and trade, some electricity production would shift from carbon to nuclear and would get some benefits w/o need for cap and trade. Would be nice to see this analysis so as to compare benefit of extra burden of cap and trade to see how much is coming from shift to nuclear.

  3. Yossarian

    When did we suddenly have such faith that government studies are correct? Certainly not from the unemployment predictions that accompanied the stimulus bill.

  4. Dean

    “of course this tabulation only includes the costs”
    This statement is a somewhat disingenuous since it only captures some of the costs. Marc Sheppard reported “That the Congressional Budget Office (CBO) estimates climate legislation would cost the average household only $175 a year by 2020. But the CBO estimate focuses primarily on the cost of administering the trading markets rather than on its overall economic impacts. A Heritage study suggests that when all such economic impacts are considered, the true annual household cost may be has high as $6,800.”
    http://www.americanthinker.com/blog/2009/06/a_desperate_obama_tries_to_sel.html

  5. Steve Bannister

    As a contribution on the benefit side of the equation, we note that Waxman-Markey has provisions encouraging renewables.
    The impact of renewables on reducing, yes reducing, energy costs can be considerable, even stunning. From 1999 to July 2008 (low gas price to high gas price), the effective annual tax on the US consumer was on the order of 450 Billion USD. If renewables keep the cost of substitutes for fossils under 4.11 per gallon (and that may be a conservative price going forward), then some part of that will be a SAVINGS to US consumers. E.g., Since the July 2008 gas price high, US consumers have SAVED the annual equivalent of about 200 Billion USD with the temporary crash in oil prices. This is real money for the US consumer’s budget.
    Further, following Jim (Prof. Hamilton), to the degree this decession was started by the impact of high energy prices on the consumer budget, then using renewables to eliminate this source of negative business cycle variation going forward will eliminate some portion of the 7% GDP gap, which is about 1 Trillion USD annualized.
    So, how much of these savings do you feel comfortable claiming? I am a fossil fuel price pessimist…so I am willing to claim a conservatively large chunk. At least a half trillion USD if I am running the spreadsheets (roughly, 3.00 gas equivalent price and half of the negative GDP gap gets you to more than 500 billion savings), some of that permanent, and the GDP gap part hopefully temporary, though with the energy luddites lurking out there thats a close call.
    I think I can put forward a logical scenario to offset whatever Heritage tries to demagogue. Before any savings from offsetting climate change.

  6. Dean

    Putting the cost-benefit analysis aside for a moment, are you intimating that increased mandates, regulation, and taxes would not reduce GDP or jobs in some way? Why shouldnt these opportunity costs be included?

  7. steve from virginia

    I can’t believe anyone would take this greenwashing nonsense seriously. It’s not that much different from the stimulus package. All show and no go …

    OF COURSE:

    It’s not a law and by the time it is regurgitated from the Senate it will likely be the ‘Cap- and- Trade- and- Doorstop Act’ or something similarly useless. Obama will rush to sign it then proclaim to all how great he is like some boob on World Championship Wrestling.

    Meanwhile, CO2 and CH4 accumulate in the atmosphere, rendering all the nonsense moot.

    Next, James Hamilton and reader Steve Bannister miss the all important point; the effects of oil prices on business not the end users. People whine about pump prices but oil is embedded in all products and services and the increases in price from 1998′s low is a business killer.

    The reason trade is declining is it isn’t really trade but looping various supply chains overseas so as to substitute cheap labor (plus expensive fuel) for expensive labor plus expensive fuel. It’s a time buyer but nothing else, not a substitute for meerchantile trade. The US has exported our jobs to China, what would be surplus US wages are then converted to surplus Chinese currency reserves. These don’t benefit China who cannot figure out how to put them to use other than to self- destructively buy oil futures and run up the price.

    I don’t know for sure and it really doesn’t matter … oil over a certain price is what is unraveling our industrial/commercial economy. That includes trade; that price is a lot lower than people who should know better think.

    Cap and trade? What a joke!

  8. steve from virginia

    Here’s more about trade, Nader dot org

    Here is how Ross Perot described the scene behind the boasting of Washington, DC, and corporations about the large increase in trade after NAFTA:

    Most of the goods produced in the maquiladoras are shipped into the U.S. market. Consequently, most of the so-called trade between the U.S. and Mexico is not trade as trade is commonly understood. Rather, it is primarily U.S. companies shipping their own machinery, components, and raw materials across the border into their Mexican factories and then shipping their finished or semi-finished goods back over the border into the U.S.

    Substitute China for Mexico and you have what is called ‘trade’.

  9. Keating Willcox

    1. Cap and trade is pointless. There is no CO2 pollution crisis. The science is starting to show that CO2 is something that helps plants grow, more food for everyone, the warming effect is minimal, and likely caused by sun spot activity.
    2. Cap and Trade is an enormous tax on everyone, an energy tax. Nothing more, nothing less. It just goes to feed Washington from taxpayers dollars.
    3. The good news that in 2010 or 2012, it can be removed in the first week of the new president’s office.

  10. Roger from Solar Power Facts

    There are more factors at work than just the Waxman – Markey bill. The collapse of the economy due to the subprime crisis occurred before the bill was introduced, and that disaster was a long time in the making.
    I think any short term losses felt by the bill will be outweighed by future benefits, but we’ll have to wait and see.

  11. Heterosexual

    The problem is, leftists think they have godlike powers. They truly believe it.
    Environuts think they can control the climate with laws.
    Feminists think they can make younger men date older women just by making TV shows that try to normalize this, despite milliennia of biological reality against their fantasies.
    Gays think they can make homosexuality just as legitimate as heterosexuality, despite, you know, the fact that nature created two genders for the purpose of reproduction.
    This is just another example of the god complex the left has.
    Every year, the leaves that fall from trees and decay on the ground release more CO2 into the atmosphere than anything that humans do. So I suppose the left will ban trees next.

  12. Babinich

    Professor Iam Plimer wrote a great book of Climate Change (formally know as the fear tactic called Global Warming): http://anhonestclimatedebate.wordpress.com/2009/04/10/heaven-and-earth-ian-plimers-new-book/

    In April, the Polish Academy of Sciences published a document challenging man-made global warming. In the Czech Republic, where President Vaclav Klaus remains a leading skeptic, today only eleven percent of the population believes humans play a role. In France, President Nicolas Sarkozy wants to tap Claude Allegre to lead the country’s new ministry of industry and innovation. Twenty years ago Mr. Allegre was among the first to sound the alarm about man-made global warming, but the geochemist has since changed his opinion. New Zealand last year elected a new government, which immediately suspended the country’s weeks old cap-and-trade program.

    Peter Huber wrote a great piece on the absurdity of it all: http://www.city-journal.org/2009/19_2_carbon.html

    The Energy Czar (check the dollar amount of her contribution to team Tabula Rasa) didn’t read the bill.

    http://www.youtube.com/watch?v=rbtEjj1MPiY&eurl=http%3A%2F%2Fbeltwayblips.dailyradar.com
    %2Fvideo%2Fcarol_browner_hasn_t_read_the_
    highly_contested_climate%2F&feature=player_
    embedded

    She was blindsided… Queue the violins…

    There was only one copy of the 1,201-page bill that all 435 members of Congress had to share. If the Energy Czar had a copy and didn’t read the entire bill how many of the House members bothered to read it?

    The night before the vote, a three hundred page amendment was added to the bill.

    The whole point of cap and trade is to hike the price of electricity and gas so that Americans will use less.

    There is the possibility that these higher prices will show up not just in electricity bills but the gas station, manufactured goods, food staples and autos. Consumers may very well cut back on spending. More inventories; less production. Less production; fewer jobs created (or saved hahaha).

  13. Terry

    Like Yossarian above, you will not convince me of the positive impact of the cap&trade bill by presenting a series of USG assessments.
    Lately, USG assessments have consistently understated the downward course of the US economy on about every dimension as they have been driven by faulty assumptions about multipliers, downsizing, the fabled employment birth/death model (which has added 800K jobs this year! Right!) etc.. And, in this particular instance, they have even less legitimacy because they are clearly driven by the White House’s and Democratic Congress’ agenda to show that cap&trade is a good thing for the economy.
    I happen to think the cap&trade is a good thing for the environment (weak as the current legislation is), but I would make no claims that it is good for the economy. Still, we must do it–and more–to preserve our climate.

  14. Jim Glass

    Obama and Orszag all of three months ago:
    ~~~
    Obama:”Now, the experience of a cap and trade system thus far is that if youre giving away carbon permits for free, then basically youre not really pricing the thing and it doesnt work — or people can game the system in so many ways that its not creating the incentive structures that were looking for.”
    Orszag: “If you didn’t auction the permits, it would represent the largest corporate welfare program that has ever been enacted in the history of the United States.
    “In particular, all of the evidence suggests that what would occur is the corporate profits would increase by approximately the value of the permits.
    “So that — whatever that is, $600 billion, $800 billion, whatever the value is, would go in a sense almost directly into corporate profits rather than being available to fund energy efficiency investments and to provide a cushion or some compensation to American households.
    “That is why the president, I think, has made absolutely the right choice in saying that the permits should be auctioned”.
    ~~~
    Well, that analysis sure didn’t last long.
    But OK, maybe creating “the largest corporate welfare program in history” is worth the cost if it reduces carbon emissions by enough — and we have cost-benefit analysis saying it will, right?
    Wait, we don’t. How could we? The 1,000+ page bill wasn’t even fully printed when it was passed, so nobody even in Congress could read it (supposing anyone would have) plus there was another 300-page rider whipped up at the last second sitting on the side somewhere.
    ~~
    Brooks: Utilities and agribusiness would be rolling in government-generated profits. Thousands of goodies were thrown into the 1,201-page bill to win votes.
    “The bill passed the House, but would it actually reduce emissions? Its impossible to know. It contains so many complex market interventions that only a fantasist could confidently predict its effects. A few years ago the European Union passed a cap-and-trade system, but because it was so shot through with special interest caveats, emissions actually rose.”
    ~~
    Isn’t it odd that so many (including economists, of all people) are lauding this bill with no cost-benefit analysis? For $80 billion a year or whatever, “the largest corporate welfare program in history”, wouldn’t we want some solid analysis of some pretty solidly quantified benefits first?
    As to distribution effects, it’s interesting to compare the CBO study cited with a prior one that reached rather different conclusions — including that replacing the original “auction-tax” plan with a scheme that remitted/gave the value of the permits to the corporate polluters would be significantly regressive (while reducing consumer income by about 3% overall) moving income from the bottom four income quintiles into the top income quintile. CBO 2007 (figure 1) [.pdf].
    Which is logical enough. After all, the beneficiaries of corporate welfare are the owners of corporate profits who reside in that top quintile.
    Whereas an auction model where the gov’t kept the auction revenue would be net costly for household but also progressive, moving income from the top quintile to the bottom four.
    (A note from the study: “Researchers generally conclude that less than 15 percent of the allowance value would be necessary to offset net losses in stock values in both upstream industries (such as suppliers of coal, natural gas, and petroleum) and energy-intensive downstream industries …” But hey, let’s give them 85%!)
    Of course there are differences in the assumptions of the two studies — among them, the latter assumes significant reductions in carbon emissions right away, that the program is effective. And “effective” = “cost for households”, as the paper makes clear.
    With the actual W-M having a 300-page unread rider on top of a base 1,000+ unread pages so nobody even knows what the program is, and no cost-benefit analysis of its effects (and none possible with the programs terms unknown) … who knows??

  15. Joe

    The cap-and-trade program is premised on the idea that we will reduce carbon emissions through dissuading producers by increasing costs. Yet, I am expected to believe that it won’t be costly? Precisely the mechanism by which the politicians are to achieve their aim is said to have no impact. You should think when listening these fools in DC.
    Further, I believe a negative job impact will happen immediately as investments are valued in terms of future profits. Clearly, investment value in current energy will be reduced as costs increase arbitraily over time. A sharp reduction in investment will lead to a loss of jobs. Will an increase in investment in alternative energy offset? Not a chance, to invest in technologies that have shown no promise relative to carbon based energy would be incredibly risky. I really don’t like the Dems betting my future and generations to come all on Red 34.

  16. GK

    Obama is making a startling amount of progress towards his goal of destroying the US economy.
    Socialized medicine, TARP, Cap and Trade, upcoming tax increases, and appeasement towards the world’s worst regimes. All in just 6 months.
    It will be interesting to see if America can survive this onslaught, or succumb to Obama’s goals.

  17. Phillip Huggan

    “Every year, the leaves that fall from trees and decay on the ground release more CO2 into the atmosphere than anything that humans do. So I suppose the left will ban trees next.”
    But then the leaves resequester carbon next spring. Try harder.

  18. Bob_in_MA

    Let’s assume things wosen and this begins to resemble a GD II. I think a good plan woud be for an international war on global warming, spending on the scale of WWII. But instead of spending huge amounts of weapons which are either destroyed or useless at war’s end, the money is spent creating EFFICIENT, low-carbon energy technologies, both production and conservation.
    We’d end up with a crapload of debt, but at least the future generation stuck with the debt would have something to show for it.

  19. Johnson

    Socialized medicine, TARP, Cap and Trade, upcoming tax increases, and appeasement towards the world’s worst regimes. All in just 6 months.
    What?
    Socialized medicine? Where. Not from any of the ideas being floated that have a chance. I would take “socialized” medicine 10/10 over Oligarchal medicine we have now.
    TARP: Your in the wrong year
    Increasing taxes? Eh, what. Guess what Pal, the idiot laymen have been getting their taxes raised for years for the Oligarch.
    Appeasement? What you like Corporate globalism while it pumps money from America’s shores?
    Listen, America’s problems are Corporations and the oligarchal reign. Destroy the Corporate state, watch America rebuild. My grandfather was just talking today how America seemed to peak in the post-war era and it has been going downhill since the early 70′s. People like GK represent the decline of America in a nutshell. Worship the corporate state, serve the corporate state, protest the corporate state. America is a disaster because of corporate domination, just as Madison feared 200 years ago. They took a thriving people in the Post-WWII era and have crushed it since the early 70′s.

  20. GK

    “But then the leaves resequester carbon next spring. Try harder.”
    Yes, and within the natural fall/regrowth process, what man emits is negligible.
    You are the one that needs to try harder to get more sycophants brainwashed into your religion of Algorism.

  21. GK

    Johnson wrote :
    “I would take “socialized” medicine 10/10 over Oligarchal medicine we have now.”
    You would take socialized anything over a merit-based concept any day.
    “I would take “socialized” medicine 10/10 over Oligarchal medicine we have now.”
    More left-wing isolationism, which is merely a desire to avoid meritocracy (since you would occupy the bottom in such a system).
    People like Johnson are fat, lazy, and entitled, and thus represent the decline of America in a nutsack. Corporations = bad. Deification of left-wing gods like Obama = good. America is a disaster because of left-wing statism choking the private sector. They took a thriving people in the Post WWII era and have since crushed it with effete leftism since the early 70s.

  22. George Robertson

    It is very curious how the tax revenue raised from cap and trade which was originally outlined by Obama as being well over 500 bil in 4 years has suddenly disappeared. This was the bulwark of the income requyired to bring some balance to the budget post-stimulus. Well, if that is no longer the case, that cap and trade was intended to be the largets corporate tax raise in USA history, then where will this hole be filled now? How is the cap and trade income has been reduced by well over 90%?

  23. DickF

    I guess we all use the writings from organizations that support our positions. CBO certainly would never be accused of being political, right? That right wing Heritage Foundation must be lying when their paper points out:
    Overall, there are a number of basic problems with CBOs analysis:
    Their allowance cost numbers dont add up. They say the allowance price will be $28. Since there are 5.056 billion tons of CO2 equivalent in the cap that year, that implies a $141 billion gross cost. They list 91.4 (see table one). In the CBOs June 5 analysis of Waxman-Markey, they projected allowance revenues of $119.7 billion, 129.7 billion, $136 billion, $145.6 billion, and $152.9 billion for the years 2015 to 2019. Its hard to believe that the next number in that series would be $91.4 billion.
    They assume that spending/distribution of allowance revenue is dollar-for-dollar equivalent to a direct cash rebate to energy consumers. That is, the carbon tax isnt a tax if the government spends the money. When have Americans ever seen all of a tax returned to them? Its like suggesting your tax rebate will be as large as the amount taken from your paycheck every year.
    Most problematic is their complete omission of economic damage from restricting energy use. Footnote three on page four reads, The resource cost does not indicate the potential decrease in gross domestic product (GDP) that could result from the cap. The reduction in GDP would also include indirect general equilibrium effects, such as changes in the labor supply resulting from reductions in real wages and potential reductions in the productivity of capital and labor. Thats a pretty big chunk of change to ignore. In The Heritage Foundations analysis of the Waxman-Markey climate change legislation, the GDP hit in 2020 was $161 billion (2009 dollars). For a family of four, that is $1,870 that they ignore.
    But then that right wing organization Greenpeace – uh, Greenpeace is right wing isn’t it? – states:
    As it comes to the floor, the Waxman-Markey bill sets emission reduction targets far lower than science demands, then undermines even those targets with massive offsets. The giveaways and preferences in the bill will actually spur a new generation of nuclear and coal-fired power plants to the detriment of real energy solutions. To support such a bill is to abandon the real leadership that is called for at this pivotal moment in history. We simply no longer have the time for legislation this weak.
    But what about the paper from that right wing organization the Environmental Protection Agency that was supressed (politics anyone).
    http://cei.org/cei_files/fm/active/0/DOC062509-004.pdf
    But Al Gore loves the bill, and that couldn’t have anything to do with the fact that he is in the business of selling carbon credits. Naw, how could I be so cynical? No one would try to get rich off government policy implemented by misleading the electorate.

  24. libtard

    How much would this bill add in terms of $/MWh? Its less than $2 on a coal unit, which is nothing (its less than the SO2 and NOx costs on the same unit). Go look at RGGI and see if those markets were destroyed…because they weren’t and RGGI for 12 is trading 2 bucks.

  25. Menzie Chinn

    DickF: Well, I don’t think I’ve ever quoted from Greenpeace, but please feel free.

    You should have mentioned that the “proposed comments” piece you link to is the infamous “Carlin” piece, written not by a climatologist, but an economist. And much as I respect a PhD in economics, I don’t look to economists to write about global climate change. Anyway, to say the piece was suppressed is akin to saying I wrote a paper on my own initiative on say ballistic missile defense, and being peeved when my bosses in my agency decided it wasn’t of interest, despite having no training in military strategy, physics, etc. (that’s a hypothetical, just so you know for sure).

  26. aaron

    “assuming the bulk of revenues from the program are returned to households.”
    That’s one hell of an assumption.

  27. ThePlainsman

    “You would take socialized anything over a merit-based concept any day” GK.
    Are you saying that medical care is now or should be merit-based? Wow.

  28. DickF

    Menzie,
    Thanks. Since you are economist I assume you will no longer write on environmental issues. Just for grins here is a petition signed by 31,000 scientists.
    We urge the United States government to reject the global warming agreement that was written in Kyoto, Japan in December, 1997, and any other similar proposals. The proposed limits on greenhouse gases would harm the environment, hinder the advance of science and technology, and damage the health and welfare of mankind.
    There is no convincing scientific evidence that human release of carbon dioxide, methane, or other greenhouse gasses is causing or will, in the foreseeable future, cause catastrophic heating of the Earth’s atmosphere and disruption of the Earth’s climate. Moreover, there is substantial scientific evidence that increases in atmospheric carbon dioxide produce many beneficial effects upon the natural plant and animal environments of the Earth.
    http://www.petitionproject.org/qualifications_of_signers.php

  29. GK

    “Are you saying that medical care is now or should be merit-based? Wow.”
    No. But socialists like Johnson want to make it even worse than it is today.
    Medical tourism is the only near-term solution to spiraling healthcare costs. Insurance companies are offering cash incentives and vacation packages to patients who get expensive procedures done at top facilities in India and Thailand. Even after the cash incentives, the insurance company is paying just 20% of the US cost for many major surgeries.
    This will leak out a lot of US healthcare spending, and deservedly so.

  30. GK

    Regarding climate change :
    The Earth gets about one 200 millionth of the sun’s light. Sunspot and solar flare activity is a far bigger force than the annual cycle of leaves falling (releasing CO2) and regrowing (absorbing CO2).
    The annual leaf cycle is a far bigger force than human combustion of coal and oil.
    So in short Sunspots >> Natural Vegetation >> Human fossil fuel use.
    So, the answer according to Algorians is :
    Pass laws that destroy the economy in order to make a 0.0001% change in the factors that affect Earth’s climate!!!!!!! Brilliant!!!!!
    One issue that indisputably is caused by humans is the dumping of mercury into the ocean (where it winds up in fish that we eat). But someone environuts don’t care about this.

  31. Phillip Huggan

    GK, the scientists have already measured solar radiant flux. Not strong enough forcing. It was one of the first things they looked for. Around 1/4 strong enough to explain any temp rises.

  32. Reed Hundt

    I write as co chair of the Coalition for the Green Bank, an all business voluntary association that advocates the green bank in the House bill and seeks the same, expanded, in the Senate. The CBO study failed to take into account the Green Bank as passed, because it was added to the bill after CBO did its analysis. In short, the Bank provides, indirectly, low cost financing, assuring thereby that equity investors will make their needed returns and consumers will not pay more for electricity coming from green sources. As a result, the replacement of existing dirty energy with clean energy will produce economic growth, new jobs, and no negative consumer impact. It all starts the day the law is signed.

  33. Menzie Chinn

    DickF: The point is whom to cite in an educated and intelligent discussion of an issue (as opposed to an exchange of bullet points). When it’s economic issues, I’ll cite economists. When it’s biomechanical engineering, I’ll cite biomechanical engineers. When it’s climate change, well, I think I’ll cite somebody who has a Ph.D. in atmospheric science, over, say, somebody who’s got a Ph.D. in a completely different field. But, hey, don’t feel bound to cite people who’ve studied a subject formally…

  34. PQuincy

    A meta-comment only: this posting brought out, cascade like, various market fundamentalists and especially climate-change deniers.
    Some of the evidence they suggest is pretty amusing. Being empirically-minded, I can say with considerable confidence that the opinions of Polish voters have a zero correlation with future global temperatures. Others murmur about it must be all owing to sunspot activity — although reading even general-interest articles about sunspot activity clearly says the opposite. Simple deniers are prevalent, too. Human CO2 emissions are “negligible”, claims one poster, ignoring the enormous body of evidence showing large increases in the amount of CO2 in the atmosphere.
    I’ll go with Mr. Chinn’s approach: let’s let climate scientists explain climate science. Unlike the deniers, most real climate researchers readily admit that their models are imperfect, and gladly explain where the gaps, questions, and problems are. This is because they are scientists, which means they actually care about being as right as possible. In contrast, those arguing against human-caused climate change tend to remarkably certain that they are right, regardless of their often irrelevant “qualifications.”
    Could human-caused climate change be an illusion, and perhaps fade away as a problem? Yes, it’s conceivable that the vast majority of serious researchers in the field might be wrong. But it isn’t very likely, is it?

  35. PQuincy

    Dick F: it’s generous of you to refer us to a website listing the qualifications of a list of signers who are skeptical about human-caused climate change.
    The website might be more plausible if the ‘peer-reviewed’ evidence it provided were not from a journal (of rather dubious lineage which apparently doesn’t even have an ISI impact rating) that is directed at physicians and surgeons. At such a journal, ‘peer review’, logically enough, would be undertaken by, well, physicians and surgeons, right?
    If you ask your surgeon for advice about climate change, that’s your business, but I’d prefer to ask, well, a climate scientist. And among these, there really is a considerable consensus about the current situation.

  36. Jim Glass

    An economist writes of the economics side of Waxman-Markey:
    Donald Marron: “From a budgeteer’s perspective, the House bill is a disaster.”
    And isn’t there another thread running about the $60 trillion+ express and implicit national debt that we have to start dealing with … soon?
    An excellent time to voluntarily incur another budget disaster.

  37. Gregman2

    A national tax on gasoline would seem far more rational than the current cap and trade proposal. Because it’s simpler, and not so disruptive…and more an intermediate approach.

  38. djt

    When you hear the various statements about the cost to the average American, perhaps the best way is to look at your own carbon generation and to determine how much it would cost YOU to reduce your own family’s carbon footprint.
    At present I cannot take into account the carbon content of various goods I purchase, but in terms of point of use energy consumption, I could reduce my family’s CO2 footprint from about 60% of the national average to less than 20% of the national per capita average for perhaps $500 per year for our family of five. So reductions in this bill of 10, 20, or 30% surely cannot cost what the Heritage Foundation claims. Yes certain activities will be expensive when done the way we do them now, but largely equivalent substitutions can be easily made to get the cost back.

  39. Joseph Somsel

    I see Dr. Chinn basing his argument on the logical fallacy called “an appeal to authority.” As citizens of a democratic republic it is OUR duty and OUR power to make decisions based on our judgment of the arguments.
    Tenured professors of ANY discipline get no special priviledge in political issues.
    Climate scientists who argue for political actions enter the political arena and leave their ivory towers. Their voices have some merit but we get to judge their overall competence. From my review of climate science and the IPCC reports as an educated citizen, I judge that the advocates of climate change are far outstripping their competence as predictors.
    In any case, there is far from unanimity amongst the PhDs. Besides, were are the system boundaries? I think astronomers have a very strong case, both intuitive and historical, about solar inputs being a driving factor in natural climate change.
    Do two simple gedunken experiments. First, predict the earth’s mean temperature if the sun went out. Second, predict the earth’s mean temperature if the sun became a red giant.
    As to using nuclear as a replacement for coal, the Obama administration has refused to authorize the political insurance program needed prior to private investment in new nukes would be considered. Their obstruction (bordering on opposition) to Yucca Mountain may be be a pure political play for Reid’s sake but it comes at great costs to investor confidence in stable government policy.
    Sorry, but I come down on the side saying Waxman Markey would be ruinous to our economy and our standard of living and with no benefit to the public.

  40. Menzie Chinn

    Joseph Somsel: Hmm, it’s not a blind appeal to authority. I do have some knowledge of these economic models (I suspect, but will not assert, more than you), and the models I was talking about were about the impact of cap-and-trade. So, please be specific about what “appeal to authority” you were speaking to, in order to not cloud the issue.

  41. Tom

    The economic importance of this issue is grossly exaggerated. It is a question of the relative efficiency of fuels that (net) produce carbon dioxide, versus those that produce less or none. That is impossible to measure and very difficult to guess. But the legislation set for passage in the US is modest. You would have to be quasi-religious to believe such a small step would have the kind of catastrophic consequences that are being chanted by its opponents.
    More importantly, this is a moral issue. Carbon dioxide is a peculiar poison that affects the whole world equally – its effects are not concentrated on the locale where it is emitted, so the usual local reaction against pollution is missing. It’s very easy to take a beggar-thy-neighbor position, and absolutely understandable that so many do. Conservationism has always been a tough pitch. That said, I’m very impressed by how well so many people have risen to the challenge posed by climate change, and I haven’t given up hope yet.
    As for nuclear power, I am neither for it nor against it, but given its record it seems unrealistic to expect people to vote for any kind of subsidies or guarantees.

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