24 Oct 2003 McCain-Lieberman: It’s No Stimulous Plan

Another timely and valuable note sent over by Mike Catanzaro of the Senate Environment and Public Works Committee staff:

According to a number of indicators — GDP growth, a stock market surge, productivity gains, stable prices — the economy is roaring back to life. Thus it would be useful to assess just how the Lieberman-McCain global warming bill would affect the recovery, and the long-term health of the economy more generally.

Below is an assessment of current economic conditions compared with analyses of S. 139, the Climate Change Stewardship Act, by the Energy Information Administration and the Congressional Budget Office. As the assessment shows, S. 139, contrary to its most ardent champions, would negatively impact everything from taxes and employment, trade and manufacturing, as well as investment and federal deficits.

TAXES

EIA on S. 139: The Lieberman-McCain bill will reduce GDP by $106 billion. That amounts to a tax increase of about $1,000 on every American household.

Ken Mayland, economist with Clearview Economics, quoted in the Oct. 16 edition of the Washington Post: “You give consumers a tax cut and they’ll spend it. That’s the way America works.”

The Joint Economic Committee, Oct. 16 report on the economy: “Consumption has been a sector consistently supporting the economy in recent years.”

EMPLOYMENT

EIA on S. 139: The bill would cause drastic reductions in coal use, resulting in the elimination of over 50,000 coal industry jobs.

The Washington Post: “The Labor Department reported Friday that employers added 57,000 payroll jobs, reversing the long slide that has confounded a broader economic recovery.”

MANUFACTURING/TRADE

EIA on S. 139: The price of natural gas would increase 16 percent in 2010 and 46 percent in 2025. The effect? Manufacturing industries “participate in highly competitive international markets and would be expected to lose markets if domestic energy prices increase relative to foreign energy prices.”

The Associated Press, Oct. 21: “One of the key complaints of American manufacturers is that China is undervaluing its currency, giving Chinese products a competitive advantage against U.S. manufactured goods of as much as 40 percent.”

CONSUMER SPENDING

EIA on S. 139: “Because of lower real disposable income resulting from higher prices for energy, consumers will reduce overall spending and savings. Energy services also represent a key input in the production of goods and services. As energy prices increase, the costs of production rise, placing upward pressure on the nominal prices of all intermediate goods and final goods and services in the economy, with widespread impacts on spending across many markets.”

The Joint Economic Committee, Oct. 16 report on the economy: “Consumption growth increased sharply in the fourth quarter of 2001 and was a major factor boosting real GDP for that and subsequent quarters.”

Richard Yamarone, economist with Argus Research: “Consumers are really supporting the expansion with a voracious appetite for spending.”

INVESTMENT

CBO: “A cap-and-trade program for carbon emissions could impose significant costs on the economy in the form of welfare losses…Welfare losses are real costs to the economy in that they would not be recovered elsewhere in the form of higher income. Those losses would be borne by people in their roles as shareholders, consumers, and workers…Losses to industry–in the form of lower stock values–would be broadly distributed among investors, to the extent that they have diversified portfolios.”

The Washington Times, Oct. 10: “Major stock indexes, buoyed by declining unemployment and booming sales at the nation’s department stores, yesterday climbed to their highest levels of the year, marking the first anniversary of a new bull market…Wall Street analysts say the year-long bull run has at least interrupted – and may possibly have ended – the longest bear market in modern times.”

DEFICITS

CBO: “A carbon trading program would lead to a decline in economic activity and a corresponding decrease in tax collections.”

Rep. John Spratt (D-S.C.), ranking minority member, House Budget Committee: “The administration’s tax cuts and budget policies have not created the promised new jobs over the last three years, but they have created huge deficits that will stifle future growth and burden our children and grandchildren with debt.”