The Kerry-Lieberman Bill Will Cause American Layoffs

Eighteen months after the stimulus package that was supposed to prevent a deep recession, here we are.  Unemployment is still close to 10%, government budgets are at their worst state in decades, and the stock market one bad day away from another meltdown.

Naturally, that means its time for the Senate to introduce a bill that will kill even more American jobs, and for the liberals in the media to do everything they can to hide its impact.

Cue the New York Times. According to them, the Kerry-Lieberman climate change bill will “prompt a decade of job growth.” That story comes from their affiliate, Greenwire, and references a supposedly nonpartisan Peterson Institute for International Economics study.

If you’re wondering how a tax creates jobs, here’s how it works. The cost to emit a ton of CO2 will be set through auction, but they forecast $16.47 in 2013 with lots of exceptions for favored industries.

Then the legislation is a runaway train. By 2020, few permits are given away — most are auctioned off for higher and higher prices. One CNBC report puts the annual global market for carbon credits at $2 trillion a year.  American companies would be paying tens or more likely hundreds of billions of dollars a year to the federal government for the right to emit carbon.

If companies don’t want to pay those fees, they can instead spend money on energy efficient technologies, which creates jobs in those sectors.  These are real jobs — but like those in Spain, they’re not economically productive ones.  In the absence of taxes and regulation, they wouldn’t exist.

But will companies pay the fees or create the jobs?  The study makes assumptions, but as is the case with most economic policies that try to profit by punishing certain behavior, nobody really knows. Maybe everyone just pays the tax and no new alternative energy jobs are created. That’s good for tax revenue but bad for those expecting to get back to work.

Or maybe the entire economy goes green. That’s good for the planet maybe, but not for the budget. Kerry-Lieberman has already promised billions in subsidies to favored industries and is counting on the carbon auction revenues to pay for them.

But what if American industry decides it doesn’t want to go green or pay the tax? Maybe it just decides to go elsewhere.

Where could it go? The well-known consulting firm McKinsey has one suggestion. In 2006 and 2007, as energy prices were skyrocketing, the firm published a report on the economic potential of Gulf Cooperation Council countries as energy hubs.

Their view was that countries like Saudi Arabia, the UAE, Kuwait, Oman, and Qatar could, by promoting their cheap energy (both oil and natural gas), become the leading destinations for energy-intensive industries. These include aluminum, steel, paper, chemicals, and refining.

These countries paid attention. Aluminum is now the second largest industry in the Gulf region, moving ahead of petrochemicals. When oil prices fall, they can rely on these new industries to bring in revenue.  They have no intention of implementing cap and trade. In fact, Kuwait’s carbon footprint is double ours and Qatar’s is triple, as measured by population.

Or the jobs could go to Vietnam, a country Senator Kerry knows well. Vietnam’s largest cities are some of the most polluted in the world and poverty and misery are widespread. Its only attraction is its low wages — their sweatshops can be run at half the cost of China’s.

It’s a good bet that wherever companies in these energy-intensive sectors go, the labor and environmental standards will be far lower than those in the USA.  In recent years, as factories have moved to China, that country’s carbon emissions have skyrocketed.

There’s simply no way that any American company in an energy-intensive industry could keep pace with foreign competitors that don’t have to follow these taxes and regulations. According to the Millenium Institute’s own study, the factory will have only two choices in the long run: move or shut down.

This means that the Kerry-Lieberman bill won’t create jobs. It will kill jobs. Kerry-Lieberman won’t reduce carbon emissions.  It’ll send factories to the countries with the worst practices. And it won’t bring in any new revenue for the government. Instead, it’ll cost money, in the form of misguided subsidies and lost tax revenue.

Unfortunately, this type of feel-good but fundamentally unsound economic policy and an unthinking acceptance of it are what we’ve come to expect from Capitol Hill and the media.

Just read the Democratic summary. It promises American jobs; consumer protections; decreased dependence on foreign oil; more manufacturing and farming; more coal, natural gas, and nuclear power; and more clean energy. All of the extra money goes to reduce the deficit. Who could be against that?

But the summary also lets slip a few key points. First, the bill meets the goals of domestic job creation and energy production by removing regulatory barriers for nuclear and natural gas power generation.

Or put more plainly, your government bureaucracy is already preventing jobs from being created in domestic energy production, so they’re finally going to stop doing some of that. Isn’t this what Governor Palin suggested two years ago?

Next, the summary states that it focuses on the top 7,500 CO2 producers — power plants and factories — and provides some short-term assistance to energy-intensive and trade-exposed industries and to low-income consumers. Thus, they have a pretty good idea who the losers will be, even if they aren’t telling us outright.

Also, who is exempted from the taxes and regulations? Farmers. Evidently, they don’t care about the earth — in fact, they have to be paid off to save it with billions in new subsidies.  Or perhaps, it is just the farm-state senators that need to be paid.

These internal contradictions tell us that they already know what’s wrong with the bill and that it will fall far short of its goals.  Now it’s time to let our senators know that we’re paying attention.