“Cap” Industrial Competitiveness and “Trade” Domestic Manufacturing Jobs Abroad

Posted: Oct 05, 2009 12:01 AM

Now that the Senate has returned from its August recess, its members have many issues with which to contend. Although health care reform has received much of the attention in recent weeks, another bill, the American Clean Energy and Security Act of 2009 (H.R. 2454) or more widely known as Waxman-Markey or “cap & trade,” is equally deserving of scrutiny. This is because most major economic impact studies demonstrate that the “cap & trade” scheme proposed in the Waxman-Markey bill will create massive consumer costs with undefined environmental benefits.

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In June, the Waxman-Markey bill narrowly passed the U.S. House 219-212 with the majority of 28 state delegations opposing the bill.

And we have already gotten a taste of what the U.S. Senate intends to do in legislation offered up just this week by Senators Kerry and Boxer. While there are differences between the Kerry/Boxer legislation and the bill that passed in the U.S. House, such as increased emission targets and preserving the Environmental Protection Agency's (EPA) authority to regulate large sources of greenhouse gases, such as coal-fired power plants, there are also similarities. Both bills will result in massive job loss across the country, increase the costs of goods and services, and make American products uncompetitive in the global marketplace. It is clear that both House and Senate leadership have decided to ignore the concerns of their own members, not to mention the American people, by attempting to rush through legislation that would only increase economic burdens on our nation's workers.

Members of industry understand the importance of environmental stewardship, voluntarily spending millions on this effort each year. Therefore, they commend the efforts of those trying to legitimately address this complex scientific issue while affording equal protections to the U.S. economy - these are not mutually exclusive principles. Furthermore, it is difficult for the American manufacturer to understand how adding new regulatory burdens with undefined indirect costs and increasing direct costs of everything from fuel to electricity will not harm domestic industry.

The Beacon Hill Institute recently estimated that Waxman-Markey will cost Virginians in excess of $25 billion by 2050. The Heritage Foundation estimates that Virginians will pay $500 more per household for electricity, and gasoline prices will increase 64 cents per gallon. Finally, the National Association of Manufacturers projects that Virginians may pay as much as $159 per metric ton of CO2 emitted annually, 64.3% more for natural gas and Virginia should brace for a loss of 56,400 jobs by 2030.

Contrast these costs with the fact that Virginia manufacturers, according to a Virginia Joint Legislative Audit & Review Commission (JLARC) report, already spend between $606 million and $1.72 billion per year in environmental compliance. Thus, increasing the financial burden by potentially such an extreme cost will harm the ability of domestic manufacturers to remain competitive in the global economy.

“But, we must act now to stop global warming…” The tragedy of the proponents’ persistent mantra is that it only works in the field of political science. Proponents of “cap & trade” believe immediate regulation will force industry to stop using traditional sources of energy. Unfortunately, this position demonstrates a fundamental misunderstanding of global manufacturing today. The truth is “cap & trade” is just another tax on businesses and consumers - regressively so on manufacturing - and it does nothing to stop “leakage” to nations with more favorable conditions. For example, even if Virginia limited all of its CO2 emissions, China’s CO2 emissions growth alone would replace all of Virginia’s CO2 emissions in only 77 days.

This leads me to another key concern about Congress picking favorites in this tax scheme called “cap & trade.” Specifically, Waxman-Markey directs that every commercial user of energy would be given a certain number of carbon credits, permitting it to emit a specific amount of carbon each year. If a manufacturer exceeds its credits, it has to purchase extra credits from others who do not reach their cap. Further, Congress will decide which industries will get more—or fewer—credits; thus, Speaker Pelosi, Majority Leader Reid and partisan political machinery will choose “winners and losers” in the new green economy.

Now, why on Earth would a global company, with other production options, leave their future to a politically motivated tax scheme? They will not.

Manufacturers are making decisions about their future capital investments today. Whether or not Waxman-Markey is embraced by the U.S. Senate leadership is a critical decision, because America will lose opportunities to compete and create jobs in the future as long as the threat of an economy-crushing tax scheme like “cap & trade” exists in the public debate.

The Virginia Manufacturers Association wants Congress to develop responsible policies that protect domestic jobs and the environment. We also want our Congressional delegation to become vocal opponents of “cap & trade” and demonstrate bi-partisan support for the future competitiveness of our Commonwealth. Waxman-Markey will undoubtedly “cap” industrial competitiveness and “trade” domestic manufacturing jobs abroad for an entirely undefined environmental benefit. We can do better. In closing, I have no better words for our U.S.

Senate than the timeless words of Thomas Jefferson to Francis Hopkinson in 1789:

I never submitted the whole system of my opinions to the creed of any party of men whatever, in religion, in philosophy, in politics, or in anything else, where I was capable of thinking for myself. Such an addiction is the last degradation of a free and moral agent. If I could not go to heaven but with a party, I would not go there at all.