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CBO Cost Estimate of Cap & Trade Pulls Out All the Gimmicks

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On Friday the House is expected to vote on the Waxman-Markey climate change and energy bill, which contains an aggressive cap-and-trade program. Critics have pointed out that it could impose serious harms on the U.S. economy with little environmental benefit. The CBO entered the fray [.pdf] recently and announced that by 2020, the annual cost to the average household would be a mere $175. Not bad for saving the planet, eh?

Of course that number is absurd. Just as Tom Woods took pleasure in documenting how the Supreme Court managed to “reconcile” federal actions with the Constitution, so too did I (and the rest of the IER hit squad) have fun pointing out the CBO’s tricks.

My favorite example: The CBO argued that cap and trade would raise nominal energy prices more than household income would rise. Thus, because the income tax is indexed to price inflation (they claim), it means households fall into lower tax brackets. The CBO counted this as an $8.7 billion benefit to households from the cap and trade scheme, which it used to suppress the overall hit.

Robert P. Murphy is a Senior Fellow with the Mises Institute and Research Assistant Professor with the Free Market Institute at Texas Tech University. He is the author of many books. His latest is Contra Krugman: Smashing the Errors of America's Most Famous Keynesian. His other words include Chaos Theory, Lessons for the Young Economist, and Choice: Cooperation, Enterprise, and Human Action (Independent Institute, 2015) which is a modern distillation of the essentials of Mises's thought for the layperson. Murphy is co-host, with Tom Woods, of the popular podcast Contra Krugman, which is a weekly refutation of Paul Krugman's New York Times column.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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