Since the late 1970s, California has prided itself as being a laboratory for progressive environmental policy. Not coincidentally, since the late 1970s, California’s once-mighty manufacturing sector has left the State.
I could care less about the California’s self-inflicted wounds, although I would find them humorous, all else being equal. Alas, I am forced to care, because the state’s massive Congressional delegation is adept at enacting federal laws that nationalize California’s boneheaded environmental standards. This is no laughing matter.
With this danger in mind, consider the first two paragraphs of an article published yesterday by Bloomberg, about California’s newly minted cap-and-trade scheme:
California (STOCA1) Governor Jerry Brown plans to use half of the revenue from the nation’s first state- run cap-and-trade air-pollution program to help ease a $9.2 billion deficit in the most populous U.S. state.
Brown estimates the state will take in about $1 billion in the year beginning July 1 under the landmark legislation, which allows industry to buy and sell carbon credits to reduce greenhouse gases. The 73-year-old Democrat wants to use about $500 million on environmental programs now financed through the general fund, said H.D. Palmer, a Finance Department spokesman.
So…half the $1 billion cap-and-trade annual “revenue” will go to deficit reduction. If California wants to pay down debt on past profligate spending, then the legislature ought to raise taxes or reroute current spending. Instead, the Governor is easing the deficit with climate policy, which has nothing to do with the state’s red ink. This sort of illogical fiscal thinking is why California’s finances are in terrible shape. It’s also a major reason business is accelerating an exodus from the state.
Today, LA Times published a story on business’s negative reaction to Gov. Brown’s “back-door tax increase.” According to the LA Times,
…business groups are already denouncing Brown’s plan as a back-door tax increase that they intend to challenge in court if the proposal is approved as part of the state budget for the fiscal year that begins July 1.
“At a time when the public is concerned about jobs and the economy, the budget proposes a new tax on California businesses for climate change activities,” said Dorothy Rothrock, vice president of the California Manufacturers and Technology Assn.” The anticipated $1 billion is not windfall revenue. The funds will be paid by California employers suffering the worst recession since the Great Depression.”
In the 111th Congress, California Reps. Nancy Pelosi and Henry Waxman used every procedural shenanigan in the book in order to push a California-style cap-and-trade through the House of Representatives. Thankfully, the legislation died in the Senate. Due in part to the unpopularity of Reps. Pelosi and Waxman’s climate bill, the political composition of the 112thCongress changed from that of its predecessor. It is, therefore, with relative safety that the rest of the nation can witness California’s energy experiment. Perhaps, American federalism will work as intended, and the lessons of California’s cap-and-trade will steer the country away from energy rationing policies.
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Unfortunately for the citizens of California, Gov. Brown’s static accounting does not actually show the amount of business that will leave the state, rather than pay this “fine”. So much for his accounting! The best that we can hope for is that the court case currently being heard in the eastern district of California, will overturn the cap-and-trade due to its conflicting with the Constitution on the Commerce Clause, whereby small Midwestern corn providers were assigned higher carbon values than their California counterparts.
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