A Cap And Trade Calamity?

By William Galston
The New Republic
March 23, 2009

It is gradually dawning on Washington that cap-and-trade legislation won't pass
anytime soon--certainly not this year, and probably not next year either. One
reason is public opinion: a Gallup survey released last week revealed that "for
the first time in Gallup's 25-year history of asking Americans about the
trade-off between environmental protection and economic growth, a majority of
Americans say economic growth should be given the priority, even if the
environment suffers to some extent." Just four years ago, protecting the
environment enjoyed a 17-point edge; today, the advantage goes to the economy, 51-42.

The second reason is regional politics. Support for environmental legislation is
strongest on the coasts, weakest in the interior areas that depend more heavily
on coal-fired power plants. The Midwest, which has already been hit hard by the
collapse of manufacturing, would take a second blow. This matters because the
Democratic Party is an uneasy coalition between the coasts and the interior,
symbolized by bitter fight between Henry Waxman and John Dingell for the
chairmanship of the House Energy and Commerce Committee. It is hard to imagine
Midwestern Democrats voting for cap-and-trade in current economic circumstances,
and perhaps not in any economic circumstances--that is, unless they receive
credible assurances of dollar-for-dollar offsets against the higher costs their
constituents would have to bear.

This reality creates two difficulties for the Obama administration. On the
fiscal front, the administration is counting on $629 billion in revenues from
cap-and-trade to pay for the Making Work Pay tax credit and its proposed
spending on clear energy technology. Failure to pass cap-and-trade would force
the administration to choose between cherished programs and an even higher
budget deficit, already estimated by the CBO at $9.3 trillion over the next
decade. On the diplomatic front, when the Copenhagen Climate Conference convenes
this December, the administration faces the prospect of showing up empty-handed.
Senior officials acknowledge the potential embarrassment for a president so
clearly determined to assert American global leadership on energy and
environmental issues but see no easy way out.

In the face of these inconvenient developments, the administration's options are
limited. If the president remains committed to Making Work Pay and clean energy
investment, he will probably have to agree to equivalent spending reductions
elsewhere, because fiscal moderates within his own party will insist.
Internationally, the president's team would be wise to prepare other key
participants in the Copenhagen conference for the near-certainty that the stance
of the United States on emissions reductions will be based mostly on good
intentions rather than settled policy. The administration, quite simply, won't
be close to meeting its own standards of success on environmental issues--and it
is hard to erect credibility on a foundation of overpromising and underperforming.


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