Cap and trade would be terrible for businesses

By Dan Juneau

December 24, 2009 at 3:43 pm  | Mobile Reader | Pring this storyPrint 

The words from the anonymous White House official were quite threatening and no doubt meant to be: “If you (Congress and opponents) don’t pass this (cap and trade) legislation, then the EPA is going to have to regulate in this area. And it is not going to be able to regulate on a market-based way, so it’s going to have to regulate in a command-and-control way, which will probably generate even more uncertainty.” One of President Obama’s “soldiers” was sending the word that the business community and recalcitrant members of Congress had better get in line fast or face the dire prospects of a jingoistic Environmental Protection Agency (EPA) wreaking dire economic consequences on the nation. In other words, they are making opponents an offer that they believe they can’t refuse.

The opponents should refuse it.


While the passage of cap and trade legislation would be good international theater for Obama and his administration, it would be terrible for businesses and consumers. It would drive up energy prices, lower the GDP, eliminate many jobs and drive others to nations that refuse to limit carbon emissions. What it would not do is to lower the earth’s temperature by any significant degree.


The President and his political advisors undoubtedly hope that the threat works. They live in a world where credit for anything the public perceives as good must go to them and the blame for anything that goes wrong must be laid at the feet of others. They fully understand that both the legislation pending in Congress and any forced carbon emission regulations imposed by the EPA will kill jobs and hurt economic growth. Thus the threat. If they can bully Congress and the opponents of cap and trade and overly stringent carbon emission regulations to fall in line, total blame cannot be placed entirely on them when the adverse economic reactions inevitably occur.


If Congress and the regulated community do not take the bait, the Obama administration alone will have to answer for the economic fallout that will come from his EPA “commanding and controlling” many aspects of the American economy. That action would have to be taken at a time when there is rising discontent among voters about the extent to which the federal government is intervening in the private sector economy. It also would come against the backdrop of a significant decline in public concern over the climate change/global warming issue and growing disbelief about the accuracy of the science involved. The President is using threats to try to finesse the issue. He wants to appease his liberal base but to do so in a way that would not result in him having to take the lion’s share of the blame for any negative economic consequences.


If the EPA acts on its threat, its proposed regulations will face a very lengthy court challenge. That challenge could conceivably last beyond the term of President Obama and his EPA appointees (particularly if his poll numbers keep dropping). Part of the legal challenge will likely center on the “science” that the EPA uses in establishing the need for the regulations. In light of recent revelations, that could be some interesting and informative testimony.


If challenged, President Obama will have to decide if he wants to take the political heat for the economic havoc that his own officials admit would be the result of their actions. As for his offer that “can’t be refused,” perhaps the businesses and workers who would be at risk under either the legislation or the regulations should answer with another famous line from a movie: “Go ahead. Make my day!”




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