Kerry-Lieberman Climate Bill Would Destroy Millions of Jobs, Cost Familes Thousands

President Obama has repeatedly told Americans he has three main policy priorities — rewriting health care, overhauling the financial system, and imposing a cap-and-trade system to reduce greenhouse gas emissions. He met his first goal and he’s closer than ever on the second; time is running out if he wants to meet the trifecta by the end of 2010. But make no mistake, the president and his allies in Congress are working hard to pass cap-and-trade before this year is up. The problem is that cap-and-trade bills are expensive, they inevitably cost jobs, and the American people know it.


Last year, the House passed the Waxman-Markey cap-and-trade bill. But now that 1400+ page bill is stalled in the Senate in large part because of its massive costs to Americans. To jump start the debate, Senators Kerry and Lieberman recently announced a new strategy to impose a cap-and-trade system on Americans — the inaptly named “American Power Act.” Senator Kerry no longer calls his various proposals “cap-and-trade,” but changing a bill’s name to disguise its intentions is a time-honored ruse in Washington.

To examine the economic impact of this plan, we performed an economic and distributional analysis of the cap-and-trade portion of the proposal. The following are some of the study’s key findings:

  • The American Power Act would reduce U.S. employment by roughly 522,000 jobs in 2015, a number that rises to over 5.1 million jobs lost by 2050.
  • Households would face a gross annual burden of $125.9 billion per year, or $1,042 per household, with costs disproportionately borne by low-income households.
  • On a net basis, the top income quintile will benefit financially, redistributing to these households roughly $12.3 billion per year from the bottom 80 percent of earners.
  • Households over age 75 bear the largest burden at 2.3 percent of income, followed by households aged 65-74 and under age 25 at 2.1 percent. By contrast, the nation’s highest-earning households between age 45 and 54 years would bear the smallest percentage burden of just 1.5 percent.
  • Contrary to the legislation’s stated goal of reducing price volatility by excluding petroleum refiners from quarterly auctions, the Kerry-Lieberman bill is likely to significantly increase allowance price volatility from quarter to quarter, compared to an ordinary auction in which all covered industries bid for allowances.

It is important to note that these impacts are only from the cap-and-trade portions of the bill. Like Waxman-Markey, Kerry-Lieberman includes hundreds of pages of non-cap-and-trade regulations which will increase the cost of energy and the cost of using energy, while at the same time introducing government micromanagement of many areas of our daily lives, from the choices we can make when purchasing products, to the type of house we live in and ultimately, to the way the government allows us to make our livings. It is a transformational and comprehensive set of mandates designed and marketed as nothing less than a plan to change the way Americans live.

Contrary to its representation, basic economics shows the American Power Act is regressive and will disproportionately impact low-income households.

Instead of distributing revenue directly to American households, the legislation filters the money through regulated utilities. If the goal were to compensate people for higher energy prices, it would make the most sense to send the money directly to people, rather than passing through electricity and natural gas companies. But to secure political support for the bill, Senators Kerry and Lieberman instead would funnel revenue through utilities. This way, utilities — and ultimately their upper-income shareholders — will be able to siphon off some of the benefits, rather than passing them on to consumers.


The numbers speak for themselves. According to the EPA’s own estimates of GDP reductions, the bill would shrink the U.S. economy by $39 billion by 2015 and up to $384 billion by 2050. Some lawmakers say that’s a good deal for climate policy. But with unemployment hovering near 10 percent and the economy pulling out of recession, is today a good time to impose higher energy costs on American families?


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