Quickie on Cap and Trade

I just wanted to quickly comment on a few aspects of President Obama's cap and trade program. Regardless of how you feel regarding global warming, cap and trade may be the most backhanded way redistributing income in America since the sixteenth amendment. What perplexes me the most is that the true effect of cap and trade will be that the poorest Americans will be hurt the most by its effects. Today's Wall Street Journal had an excellent editorial today entitled Who Pays for Cap and Trade? which outlined many of the costs that would be associated with such a program, and include a statistical analysis of how that cost would be distributed based on both income level and geographical region of the country. I highly suggest you read the article, and I don't want to repeat it all here, but I do want to emphasize a few of its key points.

First, and probably most importantly, cap and trade is in effect a regressive tax. Everyone admits that the goal of the program is to drive up energy prices that are fossil fuel based. However, poor Americans spend a higher percentage of their income on energy than do the more affluent, so they will see a larger portion of their income go towards the costs of financing cap and trade than will rich Americans. President Obama should begin qualifying his promise that 95% of Americans will not see a tax increase with the phrase "UNLESS YOU USE ENERGY."

Secondly, certain regions of the country will face a much larger burden than others. Coal rich areas like the Midwest, South and Mid-Atlantic will see their costs rise the most. For example, in my home state of Pennsylvania, over 50% of the electrical energy produced comes from coal. Many states in the Midwest such as Indiana generate over 90% of the energy from coal. The poorest people in these regions could see up to 10% of their annual after tax income go strictly towards electricity costs.

Where will this money go? Well President Obama will be auctioning off the permits, so the federal government will be getting it. The President has stated that he wants to use some of the money to re-invest in "green" energy sources. If this is the case, it will probably end up in the hands of Wall Street investors with the right connections who are financing new "green" initiatives and other special interest types. Hopefully a few democratic senators from states like Wyoming, the Dakotas and the rest of the midwest will stand up to President Obama and not allow their constituencies to bear the brunt of these self righteous policies. I knew President Obama would be in favor of a redistribution of wealth in America, I just never guessed that he would be taking money away from the poorest Americans under the guise of saving the environment. Isn't it ironic that the goal of ending global warming is designed to benefit all of human kind, but the policies proposed to reach that goal could end up up impoverishing the lower classes and lower the standard of living of the vast majority of the public?