26 Jun 2009

House Vote Today on New Smoot-Hawley Bill, Biggest Tax Increase in American History

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Jim Lindgren, at Volokh Conspiracy, warns that today is the day. The key basis for Barack Obama and the democrat party’s new Even Greater Depression will be voted on in the House of Representatives today. If Nancy Pelosi can bribe enough farm state democrats with ethanol subsidies into getting in line, you may very well need to kiss the American Economy as you’ve know it good-bye.

Before the last few years, scholars used to say that we couldn’t get a depression today because policymakers wouldn’t make mistakes as bad as the ones they made in the 1930s. Though we’ve made some great moves in the last year — increasing the money supply and guaranteeing money markets funds — we’re also repeating many of the same mistakes as Hoover and FDR (propping up failing industries; raising taxes; wasting money on unneeded public works projects; corruption; expensive new anti-business government programs).

Certainly, the Smoot-Hawley bill of 1930 was dumb; it imposed huge tariffs on foreign goods imported into this country, which backfired when those countries raised their tariffs too. In a sense, cap-and-trade looked like it would be even dumber; it seemed that it might impose a tariff on our own US manufactured goods, but not on foreign goods. But the House realized this and decided to require the administration to impose tariffs on goods imported from countries that don’t restrict their own emissions to the same extent as the US (tip to Maguire and OandO. This 21st century version of Smoot-Hawley will probably take years before the tariffs will be imposed.

The cap-and-trade bill, if passed by the Senate and actually implemented over the next few decades, would do more damage to the country than any economic legislation passed in at least 100 years. It would eventually send most American manufacturing jobs overseas, reduce American competitiveness, and make Americans much poorer than they would have been without it.

The cap-and-trade bill will have little, if any, positive effect on the environment — in part because the countries that would take jobs from US industries tend to be bigger polluters. By making the US — and the world — poorer, it would probably reduce the world’s ability to develop technologies that might solve its environmental problems in the future.

If this bill were very likely to pass the Senate and if the restrictions were to be phased in quicker in the early years of the program than the bill provides, then a double-dip recession would be a near certainty.


The Wall Street Journal explains how much this is going to cost.

Waxman-Markey would cost the economy $161 billion in 2020, which is $1,870 for a family of four. As the bill’s restrictions kick in, that number rises to $6,800 for a family of four by 2035.

Note also that the CBO analysis is an average for the country as a whole. It doesn’t take into account the fact that certain regions and populations will be more severely hit than others — manufacturing states more than service states; coal producing states more than states that rely on hydro or natural gas. Low-income Americans, who devote more of their disposable income to energy, have more to lose than high-income families.

Even as Democrats have promised that this cap-and-trade legislation won’t pinch wallets, behind the scenes they’ve acknowledged the energy price tsunami that is coming. During the brief few days in which the bill was debated in the House Energy Committee, Republicans offered three amendments: one to suspend the program if gas hit $5 a gallon; one to suspend the program if electricity prices rose 10% over 2009; and one to suspend the program if unemployment rates hit 15%. Democrats defeated all of them.

The reality is that cost estimates for climate legislation are as unreliable as the models predicting climate change. What comes out of the computer is a function of what politicians type in. A better indicator might be what other countries are already experiencing. Britain’s Taxpayer Alliance estimates the average family there is paying nearly $1,300 a year in green taxes for carbon-cutting programs in effect only a few years.

Americans should know that those Members who vote for this climate bill are voting for what is likely to be the biggest tax in American history. Even Democrats can’t repeal that reality.

3 Feedbacks on "House Vote Today on New Smoot-Hawley Bill, Biggest Tax Increase in American History"


Has there ever been such an assemblage of pond scum in our history? I doubt it. In any case, as that blathering fool Waxman has said, truth doesn’t matter to him or most of them. They haven’t read it, won’t read it, but will still vote for it–deliberative body, my ass! They are a group of religious zealots; a cult whose orthodoxy is unassailable by facts or truth—impervious. Reason, merit, decency, and honor are lost to them. They are our sworn enemy. We must defeat them.

Scott D

The author makes a keen point, which should be elaborated. Tariffs are economically perverse not simply because they inhibit trade (which they do), but because they effectively impose a tax on the economy and divert capital to less productive activities. Democrats’ zeal for “green” investment ignores economic reality. Imposing taxes on conventional energy sources will, truly, increase use of and investment in alternative energy, but at a huge cost to economic productivity. There is no alternative source of energy that is even remotely as cost effective as oil, gas and coal. If we imposed a huge tax on bulldozers and backhoes, the use of men, horses and shovels would greatly increase, but there would also be fewer construction projects at much higher cost. The absurdity of that example seems obvious, but the imposition of carbon taxes has exactly the same effect.
Congress seems to never learn that legislating outcomes that are uneconomic produces (often devastating) unintended consequences. You would think the recency of the effects of their directives to make homeowners out of masses of the non-credit-worthy would have had a sobering impact, but apparently not.


Heaven help us.


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