Cap and trade, with public option health care, will harm our economy

Posted on June 25, 2009

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In line with the continuing mad dash to enact every piece of a strongly liberal agenda before the public begins to sour, a key vote on the environmental cap and trade bill looms for tomorrow. There are conflicting reports about the status of the House vote on Friday (that of course Al Gore is involved in), as some report the bill will pass a close vote, while others say Democrats are concerned about having enough “yeas” to move to the Senate, where the real debate will hopefully be held.

At the same time, the President and ABC hosted a poorly rated town-hall “dialogue” on Obama’s plans to radically reform health care. “Dialogue” is in quotes because the President, taped segments, and ABC anchors took up 88% of the special’s time, and Republicans weren’t offered any meaningful chance at rebuttal or alternatives.

In short, these are two ill-advised proposals that will fundamentally harm the American economy and hamper any further efforts to get us out of the economic straits we find ourselves in.

Take cap and trade. It’s being lauded as a responsible measure to combat global warming (the science for which is highly debatable, but that’s another discussion) in which industry buys emission credits, and high polluters must trade them with lower polluting companies or face steep penalties. Supporters might feel warm and fuzzy knowing the CBO estimated cap and trade will only cost families $175 a year by 2020, but that’s because, among other reasons, by the CBO’s own admission, they didn’t examine at all the impact on the nation’s total economic output from the policy. The Heritage Foundation, in contrast, found these estimates:

Under this more comprehensive scenario, it found 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.

If you don’t trust the Heritage Foundation, consider that an MIT scientist offered an estimate of $3,900 a year that he whittles down to $800 a year through some fuzzy logic that claims that the costs to consumers will be somehow returned to them by government and hence don’t need to be considered part of the calculation. The reality is that cap and trade will be a burdensome tax on manufacturing and industry at precisely the wrong time to impose it. It will result in higher costs for consumers, as high costs for businesses will be passed on to customers, and it will lead to the further destruction of an already decimated domestic manufacturing industry, a prime reason the Rust Belt is bleeding and blue collar workers are finding themselves increasingly in financial peril.

And take health care reform, the key component of which is the so-called “public option” to supposedly keep the insurance companies “honest.” To start with, to frame the debate against the evil and dishonest private insurers is as shameful an example of demagoguery as I have ever seen. So does government need to get into the cell phone business to keep cell phone companies honest? Does the government need to sell used cars to keep used car salesmen honest? It’s a ridiculous line of reasoning, but it amazingly seems to be the main thrust of argument for a public plan.

The CBO looked into the cost for this as well, and estimated the cost to be around $2 trillion over 10 years ($4 trillion from some sources), a nearly unsustainable figure and one that sent Democrats scrambling back to the drawing board for a public plan that will cause less sticker shock. But beyond the cost is the result of having a public plan, which for some supporters may be intentional – it will drive out private insurers so that pretty much everyone will go to the government option. Here’s how: if employers have a choice between offering the taxpayer-funded public plan and offering private insurance but paying a tax to the government for not opting into the public plan, which do you think they would choose? The obvious answer is the former, as the plan is designed to make it painful enough for employers that they’ll choose to enter the public plan, whether their employees want to or not. There is a difference between this scenario and a company choosing one private insurer over another as companies will penalized for choosing any private insurer. This is the only way public plan designers can give the government system enough of an edge to be successful, but it’s not designed to do any favors to the private sector.

This doesn’t even touch on the quality of care issue, which Medicare and the VA system sadly illustrate well. Health care is no doubt in need of repair, but the fact is that replacing a private bureaucracy with a taxpayer-funded government one isn’t going to solve these problems, and in the end will prove more costly and decrease the choices available in this country.

So as these two issues become ever more relevant over the next few weeks, keep these points in mind, and remember that it wasn’t government goodwill that brought America to greatness, it was the hard work and ingenuity of its private citizens. But government spending, however well-intentioned, has a good chance of deeply harming that which has made us great – a capitalist, free-market society.

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Posted in: News, Politics