In Friday’s Washington Post, Reps. Henry Waxman (D-Beverly Hills) and Ed Markey (D-Massachusetts) pitched cap-and-trade as a means to balance the budget. According to the Congressmen,
“The debate over how to reduce our nation’s debt has been presented as a dilemma between cutting spending on programs Americans cherish or raising taxes on American job creators. But there is a better way: We could slash our debt by making power plants and oil refineries pay for the carbon emissions that endanger our health and environment.”
This statement is absurd. By design, a cap-and-trade policy makes conventional energy more expensive. It is, therefore, functionally equivalent to a tax on a commodity—energy—that is fundamental to every act of economic production. It’s an economy wide tax. In effect, Reps. Waxman and Markey are claiming that a broad consumption tax (cap-and-trade) avoids “the difficult dilemma” of raising taxes, which doesn’t make any sense. Fortunately, these two Congressmen are in the minority party in the House, so their policy idea is a non-starter.