–- Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. The views expressed are her own. –-
Next Thursday, just in time for the July 4 holiday weekend, America’s unemployment rate is forecast to rise from 9.4 percent to 9.6 percent, well above rates in other industrialized countries.
Yet today the House of Representatives is rushing to pass the American Clean Energy and Security Act of 2009, even though the bill was incomplete yesterday and congressmen have not yet had the opportunity to analyze it. The bill would send America’s unemployment rate even higher.
The 1,200-page bill, cosponsored by Henry Waxman, Chairman of the House Energy and Commerce Committee, and Edward Markey, Chairman of the House Energy and Environment Subcommittee, would increase the price of energy by setting allowances for greenhouse gas emissions and mandating new standards for energy production and use. The bill would raise $846.6 billion over 10 years while adding $821.2 billion to federal spending.
The bill requires that greenhouse gas emissions in 2012 do not exceed 97 percent of 2005 emissions, declining to 17 percent of 2005 emissions by 2050. Meeting these standards now is technologically impossible without radically reducing our standards of living, but Congress is hoping that technology will magically appear as needed.
The mechanism for this is a “cap-and-trade” program under which allowances to emit greenhouse gases would be issued by the Environmental Protection Agency at a steadily declining rate through 2050. When emissions exceed a firm’s allowance, or cap, it would have to purchase allowances from the government or other firms, a tax under another name, driving up costs that would be passed on to consumers.
Electric utilities have been given free allowances to encourage them to support the bill. Oil and gas would be particularly hard hit, because they are responsible for 35 percent of emissions yet are allocated only three percent of the free allowances.
Just as the increases in oil prices in the 1970s brought about an increase in unemployment, the energy provisions in the Waxman-Markey bill could usher in years, perhaps decades, of lower economic growth and higher unemployment than would be the case otherwise.
The effects of the oil price increases between 1972 and 1988 have been extensively analyzed by economists Steven Davis of the University of Chicago and John Haltiwanger of the University of Maryland. Although their research deals with the effects of oil price increases, it is also applicable to increases in the price of energy, which would be the effect of Waxman-Markey.
Davis and Haltiwanger find that oil price increases resulted in more jobs lost than jobs gained in almost every industry sector of the economy. The largest oil shock, in 1973, caused an estimated eight percent decline in manufacturing employment over the following two years.
Oil price increases have larger effects on economic activity than oil price declines, Davis and Haltiwanger calculate, a finding shared by other economic studies. In other words, when energy prices increase firms lay off workers, but when prices decline the workers are not hired back as fast.
Davis and Haltiwanger also find that higher energy prices are more likely to suppress employment than monetary shocks. Many politicians fret over the harmful effects of recent American monetary policy, but overlook the even greater danger to employment from the Waxman-Markey bill.
Supporters of the bill claim that the new regulations will create jobs, because people will have to be employed to produce the new technology. But the funds for the new expenditures have to come from somewhere, and money spent on new products is money that cannot be spent on other activities, such buying clothes or food, or anything else that Americans would otherwise buy. This would drive down employment in those industries.
In fact, not only does the bill penalize American firms through higher costs, it gives firms a financial incentive to move abroad through “offsets,” activities that supposedly lower carbon emissions elsewhere. Since Congress knows that firms cannot meet the standards in the bill, legislators are allowing firms to meet 30 percent of their 2012 greenhouse gas reduction obligations, increasing to 60 percent by 2050, by buying offsets. Half of these offsets can take place abroad.
The offset provisions allow firms to shift economic activity abroad to countries with laxer emissions standards, further damaging U.S. job creation. A plant’s emissions might exceed its U.S. allowances, yet its technology might produce lower emissions than the norm in a developing country, allowing the relocation to count as an offset.
The American unemployment rate now exceeds those in France (8.9 percent) and Germany (7.7 percent). With unemployment climbing even without the Waxman-Markey bill, the question for Congress is the following: how high do you want the rate to go?
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Absolutely NOTHING!
“global warming” a.k.a. “climate change” is a SCAM, and FRAUD.
Many reputable scientists have said as much, but on and on the government and media go, about this LIE.
Just another means to stir up fear and unrest, and exploit for money!!!
What will energy from natural resources like oil & gas do to your job?
I can rewrite this article with another title and with the same outcome.
Some time from now there will be no “natural resources” no more. What is mankind going to do then? digging on the moon or mars? From the 1970’s on, oil & gas resources are declining, while prices in comparison are increasing. Ofcourse you don’t remember the price level of oil last year, if it didn’t create the current economical crisis, it triggered it for sure.
Is Cap’n Trade a solution? Maybe not, we just don’t know.
My opinion is that we must invest in “green” energy heavily from now on. Green energy in my opinion is not from oil, gas, coal, uranium, or other “natural resource” you can think off. Do you know how much energy you can extract from human leftovers you every day dump in your toilet f.i.? Or from animal dropouts for that matter? That’s substantial, and here and there are already projects started to benefit from that. It’s about the same as you hit your brake in a toyota prius, the energy used to gain speed and ultimately to make you need to hit your brake, is partially rerouted. now that’s some advanced thinking, and they did that thinking about twenty years ago when developing the toyota prius.
Politicians have to come up with things to create incentives, technicians and developers will hopefully do what needs to be done.
Global Warming - Climate Change - Cap N Tax is a sham. How in the world do we think we can control climate? Since 2001 the climate has been flat. This is about government control. how in the world can congress even vote on this bill without even reading nor understanding what it’s all about.
The bill even states that the technology to even meet it numbers arent even available. Plus it even has a welfare provision that states that you will be compensated if you are laid off because of it. I dont know anyone who can survive on welfare.
This will be a JOBS killa
To J Fernandes,
“Oil is the worst legacy we will leave our children” as you write on a laptop made from petrochemicals derived from oil or natural gas liquids, drive your volvo, and buy produce that was grown, harvested, and shipped by oil-based fuels. What evidence have you that oil is causing global warming? Satellite data show that global temps have been falling for the past 13 years (since 1997). Global temps today are not that different from 1980. Do the research (search rss global temp data).
The Aussies were smart enough to step back from the ledge of enviro insanity and dump their version of crap & trade. Supporters claim this is a jobs bill, the Chosen One says millions of jobs will be created by this. We will see a net loss of jobs as manufacturing flees to countries like Brazil, China & India. This was nothing more than a brazen ploy to gain more control over the country. They already are trying to dictate that you can’t buy a big screen tv because of energy concerns. Crap & trade will only hasten similar restrictions.
“Climate change”, “global warming”, or whatever you leftists wish to call it, is a myth, a hoax, and a joke.
It is an excuse for another government power-grab led by the anti-liberty, anti-capitalist, anti-American nutcases that believe dictators can do better than markets.
It is supported by you “Obama voters”, read dimwits, that have no ability to think on your own and believe the propaganda fed you by the Democrat-run teacher’s unions, the Democrat-run media, and the Democrat-run government agencies.
Climate change is not about “saving the planet”, it is about accumulating government power so the extremists on the left, the Democrats, can control the lives of their subjects; you.
“”Whether you believe that climate change is a man-made phenomenon or not, I think everyone realizes that the Earth’s climate is currently on a trend that doesn’t serve to benefit it.”"
This is the most absurd statement Ive ever heard. What this poster is saying is that even if climate change (notice no more global warming)is happening naturally, we can and should pass legislation to stop it. The arrogance and stupidity behind that statement is appalling
“”“Diana Furchtgott-Roth….a senior fellow at the Hudson Institute”
In other words she’s a shill for unregulated Capitalism.”"
Typical leftist shrill response: Why dont you dissect her thesis instead of engage in ad homenim attacks
The left claims that the bill will only cost $175 per household: Two problems
1. Why should I pay even $175 if there arent $175 in benefits?
2. Obviously the $175 figure is a lie because $175 isnt enough to result in a demand reduction that reduces carbon emossions
The biggest threat to our country is the economic ignorance of the populace, so vividly on display in much of this thread. This bill, which will likely not pass the senate, is economic suicide solving a “problem” of deabtable impact.
The market of billions of daily decisions by individuals is infinately smarter than a moronic plan like this….or nationalized healthcare….or bailouts for failed business models. When India and China agree to a similar system as this, I might condsier supporting it, but until they participate as well, they will reap the economic rewards of cheap energy sources while we implement this moronic system of economic handicaps. Where do you think capital will migrate when the we hinder returns through this system? Hint, like water always seeking its lowest point, capital always seeks its highest returns and it won’t be in the US. Silly idealists and political hacks with legislative power are going to blow our economic heads off. The truth hurts sometimes…but that’s the reality.
It’s a bit sad to see how we continue to not address the prime cause of our condition globally, over population.
I worked in the environmental field my entire life, started back in the 60’s with school, then trying to change things from the within the State and Federal Governments, Chemical Industry then the Finnancial Industry without any significant impact on the fundemental thinking of same, which is why I comment on the blog…
For some reason, we continue to approach the solution to problems the same way, write legislation influance by the vary people and/or institutions which have brought the world to the very edge of collapse, both finnancially and environmentally
To think that by passage of legislation here in the United States will correct environmental concerns here or globally is very short sighted.
We increase the population of the world by hundreds of thousands of people daily, and coupled with a use of natural resources that will take another “PLANET” to support the worlds population within the next 100 years…. going after the the tail of the problem is really quite ridiculus
Women have the right to control their body’s, by law…
and I continue to hear how smart they are… so, for what reasons have we not been able to address the issue of REPRODUCTION of the human species. There is only one of the species which can carry to term a “child”.
We can address every issue in the world, except population control and to make a point, the only ones that can address population control is WOMEN, the man has nothing to say about it….
No is No……
Some facts to consider, which are not normally discussed:
1. While global warming has been proven, the ultimate effects it will have on the climate have not. We will not be able to determine if global warming will change our climate, and if so to what extent.
2. Even if we were capable of cutting emissions by 40% in the next 20 years (already laughable), this will not slow down or stop the immediate effects of global warming. It won’t even reverse short term effects. All we will do is slow down further additional long term effects.
3. So as the effects (if any) will be a forgone conclusion even with emission reduction, we are going to have serious problems for the third world. At about the same time the first world starts to have peak oil. Not a good time to hinder one’s own economy.
4. And at the end of the day, the third world are not going to jump on board to cut emissions. Not unless someone else does it for them (ie the 1st world pays for, or installs, all the green tech for them).
5. And there is always the depressing possibility that green energy will ultimately not work (ie. the energy costs far too much to produce). If the choice is between an economy and a hot planet, and no economy (with resulting collapse of society), you can bet what choice the world governments will pick.
So at the end of the day we are sitting on our collective asses, waiting for the eggheads to save our bacon. And rearranging the ‘emission’ chairs on the ‘economic’ titanic in the meantime, so we can feel like we are doing something.
And as the future arrives, we may find that the effort we spent trying to stop global warming, may have been better spent learning how to live with it…
Ok, let’s fix it first:
-the assumption, that the effect of rising the tax on energy etc. will set our standard of living lower: i would say higher, because we don’t have to live in a world of toxic gases, the clima change, the toxic gas emmissions, the environment contamination are the factors which will determinate our future and if we don’t begin to fight with them on time than our children will have to live in a world full og garbage, smoke and the results of the toxic gases like cancer, lower average age and these is our responsibility
-on the assumption of the price elasticity should study the author, because it is that factor that determinate the abilitiy of the company shift off the higher costs on the consumers
-the author have to learn about the energy intesive processes, bacause very much of them are already in dictatorships like china, indonesia etc maden, what every time under question is, is the added value and in these aspect, however harley-davidson parts or parts of the bmw car are maden in china (just fix it yourself and look the scripts: made in china or made by bmw stands for these dictatorships)
-the u.s. are often critised of the low standards of green gas emmissions, low standards of enviromental protection on this issue have the u.s. give and show the world the good will the resulting step otherwise the other part of the world can wink with the finger and say: not just the bigger emmisioner of the world had taken steps against it!
-the last point is that every government have to recognize, that with simulteous actions against the pollution we can step forward, countries without such steps could be punished by penalty tolls, till they won’t accept such bills and this is not against of any of the four main principles of the wto
I hope the next main article on Reuters will be “What severe climate change will do to your life”. Isn’t presenting both sides of the story necessary if you want to encourage a great debate? How can you have one if you only present the view of a skeptic? Fair and balanced- typical coverage of mainstream media.
It’s amazing how short sighted people can be. Sure there will be costs associated with trying to prevent drastic climate change but they pale in comparison to the costs human race will have to bare in a few decades if nothing is done. Even the less severe prediction are quite scary.
I’m willing to pay a lot more for may energy use to prevent that. But wait, that will leave me with less money to buy all that useless junk the gurus on Madison Avenue insist I can’t live without. Thank you Diana for helping me see the error of my ways. Now, where did I leave the keys to my Hummer.
I have one overarching comment, why penalize and not put ore focus on incentives? It seems, the US and other countries (we operate mostly in China) are focused on penalizing corporations and individuals for ‘Climate Change’ related efforts towards December. Why not give a ‘positive’ spin by giving incentives? Also, we run the risk of ‘certain’ areas of ‘Green’ becoming fascist if we go down the penalizing route. And adding to some aforementioned points, the risk increases especially when led by thinkers without PhD’s in science and mathematics. Just a thought…
Some of the comments here are evidence of why it’s dangerous to have a scientific debate in a country where most of the citizens are scientifically illiterate. Unfortunately, it’s not just scientific illiteracy we have to worry about — most of our citizens are also unable to understand basic mathematics, much less statistics. We are quick to an opinion, but very slow to understand enough to make our opinion worth a damn. This “cap and trade” bill has been tried in other countries — it has failed. Even if this bill would produce tremendous benefits in 100 years, that is worthless if our economy is destroyed within the next 20. Anthropogenic global warming is far from a proven hypothesis. Even our perception of global warming itself could be wrong because of the miniscule lifespan of a human being — no one of us is ever on this Earth long enough to truly grasp the pattern of temperature changes over thousands and thousands of years. We have only been tracking “global temperatures” for a few decades. All other data is either extrapolated or anecdotal — even ice core temps are highly educated guesses at best (there is no scientifically valid way to prove that the temp indicated by an ice core for 50,000BC is an accurate representation of the temp in 50,000BC, since no one from 50,000BC is still around to tell us). In short, this bill is a clumsy, illiterate, foolish overreaction to a problem which may not even exist and, even if it does exist, this bill will almost certainly do nothing to remedy it. It will also almost certainly wreck not only the economy of this country, which is still the greatest in the world by far, but also the economies of every other country in the world. This bill is a sham — it is a short-term power grab for demagogic reasons dressed up to look like benevolent paternalism. The only reason it can even be proposed without a popular revolt being the result is that the politicians know they can rely on one persistent characteristic of the American people: monstrous ignorance of science. Go ahead, let the demagogues pass this legislation. You will get what you deserve. And by the time you realize the horrific mistake you’ve made, it will be too late to correct. Congratulations…we have met the enemy, and they are us.
….Why do you say that something that is intended to reduce global warming will inmediately harm Americans and the rest of the world. i think you should be less pesimistic about this bill and wait and see what happens. you say that the technology hasn’t been created yet, but you dont know, actually, we dont even know what scientists will come up next. so dont give up on humanity’s capability of creating…
thats where we have to be creative, when things seem gloomy and dark, we have to overcome this. its a shared effort, and after all we all live in the same planet.
First - the Hudson Institute is hardly objective. Conservatism runs in its genes.
Second - this piece is typical Conservative deep thinking. What exists now will never change, never get developed, never get better. If there is anything we have learned in this country it is that nay-sayers cannot be trusted. America was not founded on the idea that we cannot do wondrous things. It was founded by people who were not afraid of the future or modernity. Conservatives are called that for a reason.
This article is not a reasoned discourse. It is drivel for those who want to be assured that smart people will not let our society advance because those people are afraid of the future.
Me? Not skeert of anything including you know-nothings who think the technology to get reduced CO2 output is “magic.”
I find it incredible that people take such a narrow point of view when analysing energy. Some of the one line comments are downright idiotic!
This article is exactly right and the bill is nothing but an increase in tax aimed at forcing a paradigm change. Why did congress get such a short time to review it before it was passed without any major form of debate? The potential damage that this bill could cause needs to be fully debated rather than rammed down our throats in a politically managed and staged manner.
As a business owner and an executive who has owned and managed businesses in the USA, Europe and in the developing world, and had to deal with regulations, the environmental regulations in the USA are, in some cases more stringent than those in either Europe or Asia. This new bill and the ensuing regulations WILL result in the migration of jobs off-shore since much of what is proposed is based on either infant or conceptual technologies that are insufficiently developed to provide the millions of green jobs projected. Many of them simply are not scalable to the degree needed.It simply will be much more economical to outsource the “dirty” parts of any process to businesses in regions of the world which are less regulated purely due to cost and until such time as everyone on the planet abides by the same rule set, the USA will strangle industrial growth at home while manufacturing flourishes abroad.
With higher taxes in place and less disposable income, the US population will become even more price sensitive and will look for the lowest cost products and services, making the low cost manufacturer and service provider even more attractive. The US will lose out every time, as its standard of living deteriorates.
It is happening now and people wonder why the enconomy is not responding to the huge stimulus packages being applied. The value adding jobs have gone off-shore. building of houses has fallen off, equity based consumption expenditure has gone nd service based industries are collapsing.
France derives about 85% of its energy from nuclear power plants, why are the US based environmental groups so silent on this one? Its cars predominantly use diesel which produce the same level of CO2 per hp as a gasoline engine. Because of the geographic proximity in Europe, electrically powered trains and significant heavy barge traffic haul the vast majority of freight. In the US, this is done by diesel powered locomotives and long haul diesel powered trucks. This substantially reduces the availability of diesel for private transportation in the USA and also increases the generation of CO2.
Inter and intra-city public transportation are used more effectively in Europe than in the USA, eliminating the need for multi-car families.
I have travelled Europe extensively and with the exception of wind farms in Holland and the Northern parts of Germany, they do NOT have more power plants that use renewable energy sources than the USA. The weather conditions in Northen and Central Europe preclude the use of renewables during the cold months, when energy is needed at high levels. Europe imports its natural gas from Russia and its surrounding producers, so they burn fuel for heating purposes, generating CO2.
People must get their facts straight and not spout the popular political line.
The use of nuclear energy is safe and clean and if spent nuclear fuel is reprocessed, it can be re-used many times over until completely spent. We do not re-process nuclear fuel here in the USA because of the environmental lobby and the NIMBY’s who don’t have the faintest clue what the actual facts are, but which have bought into some very emotitional charged and totally false environmental ideas. Wake up America, don’t fall for the political BS. This bill is a very, very bad idea for the USA.
Dear Diana Furchtgott,
You are truely the worst economist out there. OIL is the worst legacy we will leave our children. Will Printing money like paper stop the Global warming legacy.