Cap-and-trade: unread, undead

Paul Jacob
Sunday, June 28, 2009

The House just passed the Waxman-Markey cap-and-trade carbon emissions control act. If it passes the Senate, expect the president — the bill’s pusher-in-chief — to sign it at first opportunity.

I have not read the bill, so I should not comment on it at length. But then, neither has any congressman read the now 1000-pages-and-plus wonder. So they should not have passed it.

We are supposed to believe it is a good bill because we must trust the congressional assistants who wrote it. If anything is a testament to “the power of belief” it's the enthusiasm for a bill that has not been read, much less understood.

One thing is certain: The cap-and-trade program will increase the cost of energy in the United States. It is essentially a big, fat tax increase on businesses and consumers . . . in the face of which, businesses and consumers will decrease activity, depressing the economy.

The White House and congressional leaders say the bill will create new “green” jobs. But increasing the cost of doing business does not spur employment in general. It will likely increase pressure to build plants and factories outside the U.S., and even the specific jobs created by such mandates tend to come at the expense of other jobs.

The most astute commentary on the bill, so far, rests on a comparison between today's darkening days and the darker days of the Great Depression, when that day's Congress and president rushed through the Smoot-Hawley Tariff . . . thereby digging the depression deeper, marching America into a scary, institution-threatening poverty that only ended in the aftermath of World War II.

Back in 1930, general political wisdom had it that protectionism protected the whole economy. There was scant evidence for this. From Adam Smith on, the studied understanding of protectionism was that it helped some (generally richer) people at the expense of other (generally poorer) folks.

But protectionism did make a plausible surface sense, like the minimum wage does to so many, today. And remember, in those days of yore, economists had not yet been bought off by the lure of state power and the allure of political prestige, so, almost to a man, they opposed the bill.

Then and now, politicians hate listening to economists when it comes to resisting the in-crowd wisdom. Skepticism about protectionism? How un-American! Lincoln was for trade restrictions and the protective tariff! How dare you oppose Lincoln?

Just so, Democrats, today, think it bad form to be skeptical of Al Gore’s trendy hysteria. Besides, he does have an awful lot of scientists on his side.

Indeed, the president and his new guard love to talk of “science” as if the pronouncements of scientists were utterly immune from political pressure and economic enticement. The fact that those scientists are generally paid for with tax-supported research grants doesn’t faze today's political leaders. And yet how many of the president's men — or the current Congress — would buy the science supported by tobacco companies? How many would hesitate to dismiss science paid for by oil companies?

The double standard regarding the misapplication of science still leans to favor those who like to do “great things” in government, leaning the other way from those who proceed cautiously regarding intrusive regulation, taxation, and prohibitions.

We witnessed this in the 20th century. Think of all those economists who pretended they could guide the economy. Now we may be witnessing it in scientists who have pushed the Waxman-Markey monstrosity.

The parallels here are striking. Today's leaders in economics and finance, until about nine months ago, confidently thought they could predict the future and manage the economy and banish risk with an elaborate mathematical and statistical arsenal.

Just so do today's climate scientists aim to model the long-term trends of the global ecosystem. They pretend they can predict where the “tipping points” are, and tell us why, with an air of bracing certainty, we must stop increasing CO2 atmospheric production immediately.

In a mere decade, we have witnessed two financial bubbles, the tech bubble and the housing finance collapse. What's the next bubble to expand only to burst? Columnist Steve Christ thinks that the Waxman-Markey regime would create a cap-and-trade bubble.

For that to happen, we would need a compliant Federal Reserve, hell-bent on pumping up the funds to feed it. Alas, Ben Bernanke, fearing a Greater Depression, will likely prove more than willing.

But the next bubble to burst may be far more salutary. In a few years enough data may build up, at long last, to prick the climate catastrophism bubble. By this I mean “the science” of panicky predictions. Yes, “global warming” may soon become an international embarrassment. And then we will witness a whole lot of experts skulking off to write their next research grant proposal in a well-deserved ignominy.

I just hope this happens in time for a new Congress to repeal Waxman-Markey -- before its most burdensome caps kick in, ensuring a long, ugly life to our deepening depression.