Sunday, April 25, 2010

Cap(Tax) and Trade (Tax)

Beginning with this post will be an overview of the Cap and Trade Bill or as it is better known in more conservative circles, Crap and Tax Bill.  The Bill has passed the house , in the dark of night and right before a recess which seems to be the norm for the leftist regime currently ruling Congress. The Bill is being stalled in the Senate due to the so called Immigration Reform Bill or as is better known in conservative circles,  Buying Votes for Democrats.  The Bill is being presented to the American people as a Climate Bill which is a way of hiding the fact that it is a TAX BILL, pure and simple that will raise the cost to every man, woman and child in the US.  
Today's post will take a look at some of the cost and the HIDDEN COST within the bill. The administration is touting the bill as costing only a small amount to each family but the true cost, just as with Health Care are well concealed.
In future post we will look at the Bill section by section and hopefully educate the uninformed on just how negatively this Bill will affect each and every person in this country.  Yes, the reading may be long at times  and a bit dry but it is important that we understand what is happening to America and the results that it will have on our country.


Reducing emissions to the level required by the cap would be accomplished
mainly by stemming demand for carbon-based energy by increasing its price.
Those higher prices, in turn, would reduce households’ purchasing power. $245 NET cost per household and that is just the beginning!

The costs would be incurred through higher prices for the goods and services that
households consumed, and the incidence of those costs would be determined
primarily by households’ consumption patterns.

Gross compliance costs would consist of the cost of emission allowances, the cost
of both domestic and international offset credits, and the resource costs incurred
in order to reduce the use of fossil fuels:

The cost of the allowances. The cost of acquiring allowances would become a
cost of doing business. In most cases, the firms required to hold the
allowances would not bear that cost; rather, they would pass it onto their
customers in the form of higher prices

The cost of both domestic and international offset credits. Like the cost for
allowances, the cost of acquiring offset credits would be passed on by firms to
their customers in the form of higher prices.

According to CBO’s estimates, the gross cost of complying with the GHG cap and-
trade program delineated in H.R. 2454 would be about $110 billion in 2020
(measured in terms of 2010 levels of consumption and income) That’s $890 per household.
But there are more hidden cost, keep reading!

Households and governments would bear
those costs through their consumption of goods and services. Because households
account for the bulk of spending, they would bear most of the costs. The federal, state
and local governments would bear the remainder (an estimated 13 percent)
through their spending on goods and services.  Again the taxpayer will bear the cost

3 The resource cost does not indicate the potential decrease in gross domestic product (GDP) that could result from the cap. The reduction in GDP would also include indirect general equilibrium effects, such as changes in the labor supply resulting from reductions in real wages and potential reductions in the productivity of capital and labor.The cost of obtaining allowances would be passed into prices in most cases because that cost would raise firms’ variable production costs

Some additional transfers of income and additional costs would result from the
GHG cap-and-trade program under H.R. 2454 but are not reflected in the gross
compliance costs and the disposition of the allowance value discussed above.
Those additional transfers would total about $14 billion, but they would also add
close to $12 billion to the government’s costs, which ultimately would be borne
by households through higher taxes or reduced government spending. They would
include the following:

The cost of the rebates and credits would exceed that allowance
value by $2.8 billion, CBO and the Joint Committee on Taxation (JCT)
estimate. That amount would add to the sums received by households but
would also increase the cost to the government.  We all are smart enough to know what that means.

Increases in government benefit payments that are pegged to the consumer
price index, such as Social Security benefits:.

 Under the assumption that the costs of compliance are passed through to consumers in higher prices and that
the Federal Reserve does not take action to offset those price increases, the
rise in the consumer price index would trigger increased cost-of-living
benefits in indexed programs.5 The increase in those transfer payments would
help offset the increased expenditures for the households that received them.
At the same time, increasing those payments would impose a cost on the
federal government.

Reduced federal income taxes:

 Because the federal income tax system is largely indexed to the consumer price index, an increase in consumer prices with no increase in nominal incomes would also reduce federal income taxes.
That effect would increase households’ after-tax income but would also add to
This is how they cook the books to do the DEFICIT NEUTRAL :
Section 496, Deficit Neutrality:
Ensures that funds established in sections 422, 467, and 480 are treated as separate accounts in the Treasury.

The net economy wide cost of the GHG cap-and-trade program would be about $22 billion—or
$175 per household.

Four factors account for that net cost:
The purchase of international offset credits (about $8 billion),
The cost of producing domestic offset credits (about $3 billion),
The resource costs associated with reducing emissions (about $5 billion), and
The allowance value that would be directed overseas (about $6 billion).

Just who receives this money being sent overseas?  Answers will be shown in future post.

The magnitude of transitional costs would also be affected by international trade,
especially for goods or services that embody large amounts of GHG emissions.
The cost of producing such goods in the United States would rise under the capand-
trade program, thereby disadvantaging producers of those goods relative to
foreign competitors that did not face a similarly stringent program for reducing
emissions. Although large segments of the U.S. economy either do not face
significant foreign competition (for example, the electricity and transportation
sectors) or involve trade with countries that have a cap-and-trade program (the
European Union, for example), some important manufacturing industries, such as
steel, face competition from countries that do not face the costs of such a system.

Some regions and industries would experience substantially higher rates of
unemployment and job turnover as the program became increasingly stringent.
That transition could be particularly difficult for individuals employed in those
industries (such as the coal industry) or living in those regions (such as Appalachia).

The largest part of the gross cost of the program would stem from holding
allowances and purchasing offsets. Those costs would become a cost of additional
production for firms subject to the cap on emissions, which they would generally
pass on to their customers in the form of higher prices. The prices of goods and
services throughout the economy would rise on the basis of the CO2 emissions
associated with their production and consumption. Goods and services resulting in
greater emissions would have larger price increases; for example, the price of
electricity would increase more than the price of food.

Another portion of the gross cost is the resource costs of implementing the
legislation. Those resource costs would include expenditures that firms and
households made to reduce their emissions (for example, by generating electricity
from natural gas rather than from coal or by installing insulation) as well as
inconvenience costs (from driving less, for instance). CBO reports all of those
costs in dollar values and has assumed that households would bear those costs in
proportion to their consumption of goods and services that result in CO2
emissions. Thus, households that consumed relatively large shares of fossil-fuelintensive
goods and services prior to the policy would bear the cost of either
reducing those emissions or purchasing allowances and offset credits.  :LIKE HAVING TO BUY HEALTH INSURANCE?

In total, households in the highest income quintile would bear an
estimated 36 percent of the gross cost associated with the cap, and their annual
expenditures would increase by about $1,380… As we can now see it is the segment
of the population, known as producers and production makers who will bear the cost.
Although the increase in out-of-pocket expenditures because of the higher prices
would be substantially larger for high-income households than for low-income
households, they would impose a larger burden—measured as a share of
income—on low-income households. WHAT  A TAX ON THE POOR!
So much for cutting taxes for 95% of Americans.
That increased cost would account for 2.5percent of after-tax income for the
average household in the lowest income quintile, compared with 0.7 percent of
after-tax income for the average house holdin the highest quintile.

That difference occurs for two reasons: Lower-income
households consume a larger fraction of their income, and energy-intensive goods
and services make up a larger share of lower-income households’ expenditures.

By CBO’s estimates, 25 percent of the direct relief
to households would go to households in the lowest income quintile and
50 percent to households in the two lowest quintiles combined. On average, the
amount of direct relief would offset 94 percent of the additional expenses that
households in the lowest quintile incurred.
Sounds good so far for lower income and low middle income BUT.
In contrast, the direct relief received by households in the highest quintile would
offset only 18 percent of their added costs.

CBO estimates that about 63 percent of the allowance value conveyed to
businesses would ultimately flow to households in the highest income quintile.11
On average, that relief would offset $885 of the additional expenses of those
households resulting from the higher prices. In contrast, households in the lowest
income quintile would receive only an estimated 5 percent of the relief targeted to
businesses—an average of $65 per household. 

9Trade-exposed industries might not be able to increase their prices to reflect the higher costs that  they would face as a result of the cap. As a result, the cost of the cap might fall on workers and  shareholders in those industries rather than on their customers. Correspondingly, the relief aimed at those industries (which would be linked to their level of production) would tend to offset costs that workers and shareholders in those industries would otherwise incur. CBO assumed for this  analysis that the cost of complying with the cap would lead to price increases for those industries.

The cost for families will run into the thousands of dollars rather than the supposedly few hundreds as touted by the administration as anyone can see just within this letter from the CBO.  We all know that the CBO often underestimates the REAL COST until after the measure has passed and then they come back , as they did with NOCARE HEALTH CARE, and reveal that the cost will run trillions over their original estimate. 
This Bill, if passed ,will complete the destruction of the US economy and take us one step closer to being controlled by a global governing body.  I  for one am not ready to see my country destroyed.


Anonymous said...


Sen.Jim Inhofe ( R-OK ) is fighting the bill tooth and nail for all the reasons you detail. He needs our thanks and encouragement.

Inhofe debates author of bill on Fox News Sunday

Fred G.

Maggie Thornton said...

Inhofe is my hero. Now I want to know why he is supporting SB3081:-) I'm calling him later today.

Ticker, this is an amazing and mindboggling post. I will link you in the next day or so. I'll be out most of today.

You do this kind of thing extremely well!

Ticker said...

Maggie, I think as most do , that the bill itself is misunderstood and has no chance of passing but is simple to make a statement. NO TERRORIST TRIED IN US COURTS.
It makes a good statement but will definitely be used by the leftist against all those who vote for it.

Thank you for your kind words of encouragement. I will be putting up the Bill section by section starting with Tuesdays post, hopefully. It's my thing, I love to read and research and then take things apart to see what is really there. Old psychologist are that way I suppose.