We asked our panel:
Will the climate change cap & trade bill help or harm the US economy?
The Kudlow Caucus Breakdown
Stefan AbramsManaging Partner, Bryden-Abrams Investment Management
It’s a regressive energy tax on those who can least afford it, but stop worrying about it. This concept, which has already failed in Europe, will never fly in the USA.
Market Strategist, Stifel Nicolaus
Cap and Trade will seriously harm the U.S. economy by enabling the Federal Government to, in effect, regulate the U.S. economy, allocate capital and layer on another massive tax drain to support even more inefficient income redistribution. It is a direct assault on free market capitalism!
Senior Economist, Economic Policy Institute
It’s not perfect, but it’s a real stab at the huge challenge posed by global warming. Anti-tax ideologues and climate-change deniers will squawk, but when the market fails to adequately price the devastating externalities caused by carbon emission, legislation like this is critically important.
Jerry BowyerChief Economist, Benchmark Financial Network
A monstrously large tax increase in pro-market camouflage; it will kick energy consumers when they’re already down. Veto bait!
Vince FarrellScotsman Capital Management
Harm, and I mean big HARM. It looks to me (as proposed right now) to be one of the biggest redistribution of wealth plans in our history. To sell the initial permits is nothing more than a tax and the cost will be passed on to the consumer and economic growth will be a lot lower than otherwise. McCain's plan to give the initial round of permits away, as opposed to auctioning them, makes somewhat more sense, but the sale of the balance will have a negative effect. I don't know what they could be thinking of.
Jim LaCampPortfolio Manager, Portfolio Focus, RBC Wealth Management
Co-Host, Opening Bell Radio Show, Biz Radio Network
Being that the "greenies" have already told us not to use nuclear power, and we can't drill off the coasts or in Alaska, or Colorado, placing restrictions on our only plentiful domestic energy source will drive up utility costs dramatically for those already suffering from high energy costs. If I was a humpback whale, I would be nervous, because Congress is trying to restrict every other source of energy we have, and we may have to revert to using whale oil.
Art LafferFmr. Reagan Economic Advisor
Chief Investment Officer, Laffer Investments
A cap-and-trade policy represents a large increase in taxation and regulation that will increase the variability of the price of energy and decrease economic growth. A pro-active environmental policy should include an appropriate carbon tax fully offset by a static dollar-for-dollar across-the-board reduction in marginal income tax rates.
Donald L. Luskin Chief Investment Officer, Trend Macrolytics LLC
The cap is simply a tax, and the trading element just gives a phony free-market gloss to it.
What is taxed here is energy, and the ability to use energy is one of the two fundamental drivers of all growth. It is axiomatic that if you tax something, you get less of it. Tax energy, get less energy. Get less energy, get less growth. Period.
It's so simple even a politician should be able to grasp it. But maybe that's over-estimating politicians' endowments of the other fundamental driver of growth -- intelligence.
Steve MooreSr. Economics Writer, The Wall Street Journal Editorial Board
Cap and trade is the largest government intrusion in the economy in a generation. The tax bite and the new regulatory aparatus would reduce output, productivity and employment slightly at first and then more over time as the new taxes and the tighter caps on emissions kick in. This could knock a half a percent of growth off GDP per year.
Sr. Writer, U.S. News & World Report (Money & Business)
If everything goes perfectly -- if we greatly expand nuclear power, if we crack the technological puzzle of carbon capture and sequestration, a.k.a "clean coal" -- we'll end up with somewhat less economic growth over the coming decades than we would have otherwise thanks to the way cap-and-trade limits carbon emissions and taxes energy use. If things go less than perfectly, we could end up with a situation more like a 21st century Great Depression -- call it the "Green" Depression.
Former Labor Secretary
Professor of Public Policy, UC Berkeley
It's the most efficient way of coping with global warming, and doing nothing about the problem will cost far more.
A. Gary Shilling & Co. President
It interferes with completely free markets. It distorts markets. It can be argued in terms of social good that that is a more desirable result than any alternative but we do have, I think it’s fair to say, increasing stakeholder pressure on companies for more environmentally friendly operating procedures. My preference would be for market solutions.