Posted by: bmeverett | June 8, 2010

The “I Hate Congress Act”


“American Idol” is part of our national mania for measuring people’s popularity. Every week we get to decide which singers stay and which go into ignominious defeat and obscurity. Politicians are subjected to popularity polls almost daily, and over the last year, Congress’s approval rating has fallen to levels usually associated with used car salesmen. A recent CBS News poll showed Congress with an approval rating of only 15%.

Most TV news commentators argue that the public is unhappy because Congress is not moving forcefully to expand the power of the federal government to solve all of our problems quickly at no cost. Not exactly. The real problem is that virtually all members of Congress have stopped paying any attention to the actual problems the country faces, such as terrorism and the national debt, and are instead testing catchphrases with focus groups. OK, staff, which statement gets higher approval ratings: (a) the Earth is flat or (b) the Earth is round? Go with whichever one scores higher on the applause meter.

You can see this problem at work by picking up any piece of draft legislation. You don’t have to read the bill (nobody does that), but at least look at the title. In the good old days, titles would give you a clue regarding the content of the legislation. For example, the Civil Rights Act of 1964 was entitled “The Civil Rights Act of 1964.” Gone are those days. Today, laws carry titles indicating what the bill’s sponsors think is a really slick motto, and the cuter the better. The actual legislative content is irrelevant. The democrats’ health care bill was entitled “The Patient Protection and Affordable Care Act.” Who could possibly vote against such a bill? Presumably only someone who believes in patient exploitation and unaffordable medical care. Unhappy republicans quickly introduced equally silly bills, such as “The Coercion is Not Health Care Act” (Ron Paul, R-TX) and “The 10 Prescriptions for a Healthy America Act” (John Gingrey, R-GA).

Energy and climate change legislation are following this trend. Last May, Senator John Kerry (D-MA) introduced the “Energy Fairness for America Act.” Any idea what that was about? Last December, Senators Collins and Cantwell introduced the “Carbon Limits and Energy for America’s Renewal Act”. The only good thing about the bill was its clever acronym. That same month, Congressman Earl Pomeroy (D-ND) introduced a bill called the “Save our Energy Jobs Act.” With titles like those, who needs substance?

The latest attempt at climate and energy legislation was introduced by Senators Kerry (D-MA) and Lieberman (I-CT) with the title “The American Power Act”. Get it? “Power” as in electric power and “power” as in exercising America’s power around the world. How cool is that? Like the health care bill, this one is hefty: 987 pages for the discussion draft. And, yes, I’ve actually read it.

OK, so what exactly is in “The American Power Act”? (Caution: the following discussion contains ideas and images that may be disturbing to readers.) The bill starts with “cap-and-trade”, a concept that’s been around for a while. The idea is simple. Congress sets a limit on greenhouse gas emissions for certain large energy consumers. Those who can operate within their limits do so, but those who cannot stay within the target must purchase emission rights from those who emit less than their entitlement. The auction of these emissions credits sets the market price for carbon. At this point, the government can step out of the picture. Carbon mitigation steps that cost less than the price of carbon will be implemented, while steps that cost more will not. The market will choose which is which.

Great idea, but that’s not what the bill does. It starts by setting outrageously optimistic targets. Greenhouse gas emissions are to be reduced below 2005 levels by 4.75% by 2013, 17% by 2020, 42% by 2030 and 83% by 2050. Pretty impressive, right?

A small provision of the bill, however, removes all the market-based provisions. Politicians recognize that a carbon price high enough to achieve the proposed reduction levels would strangle the economy, so the carbon price has to be capped. In this bill, the maximum allowable carbon price will be $25 per metric ton starting in 2013. The maximum price will increase by 5% per year above the rate of inflation, and would grow (in real terms) to about $50 per mt by 2030. How high is that price? Well, gasoline emits about 9 kilograms of CO2 for every gallon burned, so $25 per mt is the equivalent of $0.225 per gallon. $50 per mt equals about $0.45 per gallon. Does anyone really believe that increasing gasoline prices by $0.45 per gallon will reduce gasoline use by 83%? You’ve got to be kidding.

So how does this bill propose to reach the carbon reduction targets with such a low carbon price? By pretending that we are on the verge of breakthroughs in carbon reduction technology. The bill highlights nuclear power, electric cars, carbon sequestration and renewable energy sources like solar and wind. None of these technologies is commercially viable today. The bill would try to make them commercial through the usual governmental means: studies, reports, research funding, commissions, clearinghouses, information exchanges, subsidies and tax credits. These programs all sound good, particularly to people who make their living studying, reporting, applying for government subsidies etc., but none has any impact on whether the technology will become affordable on a large scale. Remember that we have been working on these technologies for decades without much success.

If this bill passes (and I sincerely hope it does not), we can confidently make four predictions. First, we will spend tens of billions more dollars we don’t have. Second, the government will gain a new source of revenue at the expense of consumers. Third, the impact on greenhouse gas emissions and oil imports will be too small to measure. Finally, future Congresses will change the targets rather than take the prohibitively expensive steps required to meet them. (For a preview of how this process will work, check out the history of Medicare reimbursements. Congress mandated annual reductions in fees paid to doctors under Medicare, but conveniently waives then every year.)

If you’d like to know how unserious this bill is, just read the very last provision, entitled Section 7001 – Budgetary Effects on page 987, which requires that Congress apply the Pay-As-You-Go rules to any expenditures under this act. Congress may have lost its popularity with the public, but at least it has kept its sense of humor.

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Responses

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