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I don't know what color the sky is in a world where that won't happen, but I'm sure you can ask the unicorns.

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June 23, 2009 – Comments (17) | RELATED TICKERS: FPL.DL2 , EXC

 

I literally laughed out loud when I came across this quote a few minutes ago.  I'm glad that I wasn't drinking anything at the time or I'm sure that I would be cleaning it off of my monitor instead of writing this right now.

The nonpartisan Congressional Budget Office, which in my opinion has actually done a reasonable job at estimating the future cost of a number of programs lately, is significantly underestimating the cost of the new climate change bill that Congress is debating right now.

The CBO recently published a study in which it concludes that if passed the new climate-change legislation would only cost the average American household $175 extra per year by the year 2020.  I find that extremely hard to believe.  The CBO concluded that the changes that the bill mandates could end up adding 0.7% per year to the CPI by 2020.  Buy those TIPS now people.  The CBO even admits in its report that "some regions and industries would experience substantially higher rates of unemployment and job turnover as the program became increasingly stringent." 

The cost estimate in the report is actually much higher than $175 per household, a gross cost of $770 - $1,380 more per household per year but the CBO assumes that the government will offset this cost with the revenue that it brings in from the permits that it sells.  What are the odds that the grubby politicians in Washington, Democrat or Republican, don't start drooling over that extra revenue from the pollution permits and start spending it like they have been doing with the Social Security and Medicare funds for years?

Here's what Michael Steel, a spokesperson for House Minority Leader John A. Boehner had to say about the bill:

CBO analysts "got an unrealistically low number for cost per family because they didn't factor in the millions of American jobs that will move overseas if the United States imposes this tax and our foreign competitors, like China and India, do not. I don't know what color the sky is in a world where that won't happen, but I'm sure you can ask the unicorns."

Boehner claims that the bill could raise household energy costs by $3,128 annually by as early as 2015 and that it would drive jobs out of the country.  The conservative Heritage Foundation has asserted that the cost could reach $4,300 a year.

Just like the CBO and another EPA estimate of the bill's cost look a little low, Boehner's and the Heritage Foundation's estimates are probably a little high.  As is usually the case, the truth is probably somewhere in the middle. 

A more realistic estimate of the bill's cost was published by MIT professor John M. Reilly, who estimates that for a family of four, in today's dollars, the bill's cost would rise to $510 extra per year by 2025 and fall to $205 per year by 2050 assuming that new technology is invented that would make green power less expensive.

I would be absolutely shocked if this bill did not make electricity painfully expensive for many people and if it did not have a number of unintended consequences, including an increase in the price of many goods, services, and food that are produced using the more expensive electricity that the bill mandates and possibly causing companies to produce more things in factories overseas at a time when we need jobs in the United States more than ever.

On the positive side, if global warming does exist and if this legislation would actually make more than a miniscule difference in global warming at a time when countries like China are building new coal-fired power plants practically every day (and those are big IFs) then at least the changes are helping the environment.  Also, hopefully the United States can become a global leader in green technology.  If we are able to, the industry may be able to create a number of new, high quality jobs that will help the economy.

Oh well, either way I have hedged my family against whatever pain comes from this bill by purchasing stock in two clean power companies that I like as investments if the bill doesn't pass and LOVE as investments if it does, FPL Group (FPL) and Exelon (EXC). 

Whatever happens, this will be an interesting situation to follow.  As it stands right now, Nancy Pelosi (yuck) is having trouble garnering support for the bill from farm-state Democrats, who have been trying to get changes in the legislation to ease the cost burden on farmers and people in rural areas.  She needs to reach a compromise fast in order to bring the bill up for a vote before the House's July 4 holiday recess.  It may not pass in Congress and even if it does, it could have trouble in the Senate.

By the way, why on Earth do those lazy @#$%^& in Congress get to take a 10 day recess from June 28 to July 7 and then more than month off from August 4 to September 7?  Do you know how many days off, real working people like are taking off during this economy.  I'm taking less than a week off from my two jobs (not including the work that I do at TMF) this summer.  Whatever, I suppose that we're better off when Congress is not in session than when they are anyhow.  They do less damage when they're off.

Related Links:

- New York Times: House Climate Bills's Annual Average Household Cost Is $175, CBO Says

                            House Dems Release Revised Climate Bill as Floor Debate Eyed for Friday

- Associated Press: CBO: Climate bill costs to be modest 

- Washington Post - Climate Bill to Cost Average Consumer $175 a Year: CBO

- The Official CBO Report

Deej

17 Comments – Post Your Own

#1) On June 23, 2009 at 3:20 PM, catoismymotor (45.80) wrote:

Depressions and mass unemployment are not caused by the free market but by government interference in the economy. – Ludwig von Mises

The fewer days Congress is in session the better. As the years go by our taxes increase, our national debt grows and our freedoms more under attack.

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#2) On June 23, 2009 at 3:23 PM, devoish (98.64) wrote:

Ask John Boehner if the sky is hazy brown where he lives, like NY, LA, Denver...

 

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#3) On June 23, 2009 at 4:06 PM, TMFDeej (99.40) wrote:

Hi Devoish.  I understand the need for pollution control, but the question is at what cost?  I suspect that the government is significantly underestimating the cost of the plan that is currently on the table both in terms of the direct cost of more expensive electricity to families and in terms of the indirect cost of more expensive goods and services and jobs lost to foreign countries.

I'm not sure what the ideal solution is, but I'm pretty sure that this isn't it.  Perhaps the government should be spending its money funding research and development projects for new, efficient, clean sources of power rather than on a million other wasteful pork projects that are out there.  Heck, I'd even be for a much higher national tax on gasoline if the proceeds were used to fund green research as well as tax credits and cheap government loans for building cleaner power plants like those that use natural gas and nuclear.  Both of these things would be a step in the right direction and much less painful than cap and trade will likely end up being.

I'd love to hear your or other people's detailed thoughts on the subject rather than just blanket statements like "You'll be sorry when you're underwater in a few years." or "Just wait until your children can't breathe in a few years."  These are the sort of unproductive emotional responses that people like Al Gore love to hear.  Mocking statements like those aren't productive.  An open, calm, rational discussion of the current options that are on the table and solutions that are potentially better are.

Thanks to everyone for reading and sharing their thoughts.

Deej

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#4) On June 23, 2009 at 4:09 PM, Rehydrogenated (32.64) wrote:

Honestly I don't know why America wouldn't want to push the green issue here and abroad. We could be the global leader in proprietary and expensive green technology. It would give us a moral high horse to force our green products on the rest of the world. Sometimes I think we get caught up in the dollars we can make/lose now and not opportunities for the future. We've always used the morally high position as a way to make crazy profits... See the IMF, neoliberal economic policies, or even Obama's tobacco legislation to some extent.

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#5) On June 23, 2009 at 4:42 PM, batteryguy (27.57) wrote:

Thanks Deej for putting this together.  I always enjoy hearing a few knocks on global warming and green initiatives.  As a scientist who works with other scientist we're a lot more sceptical than is generally portrayed in the media.

Anyway, I appreciate the stock recs.  I'll be looking into them. 

The cap and trade system is not the worst that could be chosen.  Unfortunately it hides the costs and benefits and so it is unclear what the outcome would be.  We really need a good debate to figure out what we are trying to limit: CO2, foreign sources of energy, use of fossil fuels.  We hear the term energy independence thrown about a fair bit.  This, Nationalistic, approach is very different from a global warming approach and also peak oil theory where we will have dwindling supplies.  Until we as a country and our politician can decide what we are trying to accomplish the legislation is almost certainly to have unintended consequences.  We have this great aversion to taxes as a society right now, but if they are hidded no one cares.  The airlines new fees are only copying the gov'ts example.  Taxes are actually a great way to reduce use, they enable some measure of cost/benefit and have fewer unintended consequences compared to hidded approaches.

 

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#6) On June 23, 2009 at 4:42 PM, rd80 (98.49) wrote:

"...cheap government loans for building cleaner power plants like those that use natural gas and nuclear."

Dept of Energy has a renewable energy loan guarantee program.  The solicitation was issued in Oct of last year, applications were due earlier this year.  There's also a program for nuclear, but I'm less familiar with that one. 

I think there are also some new programs funded in President Obams's stimulus package.

 

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#7) On June 23, 2009 at 5:02 PM, portefeuille (99.59) wrote:

Honestly I don't know why America wouldn't want to push the green issue here and abroad. We could be the global leader in proprietary and expensive green technology. It would give us a moral high horse to force our green products on the rest of the world.

Germany (thank you green party!) has "pushed the green issue" and it has been quite successful at that. See this document (pdf, from here ...).

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#8) On June 23, 2009 at 5:05 PM, portefeuille (99.59) wrote:

Sorry for bringing the German aspect to quite a few of your blogs, tmfdeej, but when it comes to renewable energies, gas taxes, etc. they do some things right over here ...

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#9) On June 23, 2009 at 6:06 PM, NOTvuffett (< 20) wrote:

Who would make steel in this country if they were less competive because of taxes on carbon?  Would we impose tariffs and piss off our trading partners or just buy it from other countries?  If we just bought it from other places what would we actually accomplish if you believe the planet is in jeopardy because of the use of fossil fuels?

The level of carbon dioxide is only about 380 parts per million.

 

 

 

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#10) On June 23, 2009 at 8:33 PM, ralphmachio (24.63) wrote:

Look, I am the most anti oil company minded person I've ever met.  You don't tax the people for pollution when alternatives are being restricted by the conventional power dealers!  That is everything wrong with this country in a nutshell, almost.  That would be the needle that killed pai mai, from the movie "master killer"- I realize I may not be amongst kung fu movie enthusiasts, but trust me, it took a lot of needles in all the poor old guy's pressure points to finally kill him.

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#11) On June 23, 2009 at 9:47 PM, NOTvuffett (< 20) wrote:

I think all of our energy needs can be met by sunshine, pixie dust and unicorn farts.  Oh, we may need to burn some polar bear carcasses for peak loads, they must be abundant, lol.

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#12) On June 23, 2009 at 10:15 PM, NOTvuffett (< 20) wrote:

Even if we assume the CBO is right about these numbers, and also assume that they are right about their other numbers, Alstry is more right than wrong.  I am not part of the doom and gloom crowd, but this bill will be a disaster for the working man.

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#13) On June 24, 2009 at 12:07 AM, checklist34 (99.71) wrote:

climate change = the single greatest, most expensive lie ever told to and forced down the throats of the civilized world

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#14) On June 24, 2009 at 11:35 AM, JTShideler (79.99) wrote:

While not in the habit of defending scumbags. . . aka your average congressman, I believe the reason for the recess is so members can go back and yuck it up with their constituents in their district.

I like August in DC it makes my commute almost bearable even if the weather is anything but.

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#15) On June 24, 2009 at 12:00 PM, booyahh (< 20) wrote:

Just impose a carbon tax, and also apply that tax to all goods that China produces.

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#16) On June 25, 2009 at 5:17 PM, ElCid16 (93.65) wrote:

NOTvuffet, since modern humans have inhabited the planet, atmospheric CO2 has normally peaked around 300 ppm in between hot/cold cycles...380 is substantially higher.

checklist34, to say climate change (or global warming for that matter) is a lie really doesn't make any sense - at all.

Climate change is a natural cycle on planet earth.  I can assure you that the concept of an ice age isn't a fabricated story.  I believe what you intended to say was that human caused climate change is a lie.  In which case I would still disagree with you.

I'm glad I only read these blogs for investment advice...

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#17) On June 25, 2009 at 5:32 PM, NOTvuffett (< 20) wrote:

"invest" in solar panels for your own house dkilqour16, tell me how that works out, lol.

 

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