The Ensign Amendment
April 2nd, 2009Posted by: Roger Pielke, Jr.
As I mentioned yesterday, some stark political lines are being drawn in the Senate on cap and trade legislation. The Thune Amendment had 89 members of the Senate going on record opposing any increases to electricity or gasoline prices as a result of cap and trade legislation. In the Senate yesterday another important amendment to the Budget Resolution was approved unanimously, 98-0, sponsored by Senator Ensign (R-NV), chair of the Republican Policy Committee. Here is its text:
To protect middle-income taxpayers from tax increases by providing a point of order against legislation that increase taxes on them, including taxes that arise, directly or indirectly, from Federal revenues derived from climate change or similar legislation.
What does this amendment mean?
It means that money raised from cap and trade (or even a carbon tax) cannot lead to a net increase in the overall tax burden on the “middle class.” What is “middle class”? According to Senator Ensign in a press release trumpeting the amendment, it includes those households earning less than $250,000 per year. Senator Ensign cites the President on this point, referring back to his campaign promises not to raise taxes on this group.
Politically and practically, this amendment could then mean that proponents of cap and trade will need to pursue an explicit “cap and dividend” approach with any such policy being tax neutral for those earning less than $250,000 per year. In other words, the costs of cap and trade will have to be fully borne by those earning above $250,000 per year. Some of the challenges of the distributional effects of cap and trade are discussed in recent CBO testimony (PDF). Whether or not legislation can be written that allows supporters to claim to have met the spirit of the Ensign Amendment, it is clear that the Amendment makes the political challenge that much more difficult.
Another option to avoid the tax increase provision would be for the government to give away emissions allowances, rather than auction them. The Obama Administration has voiced its opposition to such a strategy, However, you can be sure that industry would not object to such a windfall. Here again, whether or not such a strategy could be successful politically, it makes the challenge that much more difficult.
The current strategy of Republicans (and indeed those Democrats) opposed to cap and trade now seems clear. They are forcing supporters to take a position on politically sensitive issues like the costs of energy and taxes. Taking such positions creates political liabilities that can be exploited as soon as the 2010 elections if cap and trade legislation results in higher energy costs or in increased taxes. In politics, it does not matter if one can rationalize a change in view or votes at different points in time that actually or only appear to contradict (reference: John Kerry, 2004).
What we are seeing is Politics 101 and opponents to cap and trade are currently using this tried and true strategy to rout cap and trade supporters. It is not even close. Proponents of action on climate change should be asking themselves, when is it time to go to Plan B?
April 2nd, 2009 at 8:40 am
Hooray! Even Congressmen who sign bills without knowing what is in them occasionally do something good, maybe because of pure chance? (maybe not intelligent, but good).
April 2nd, 2009 at 9:10 am
I’m shocked that they’re playing politics in the senate. Shocked I say. Senators are actually being forced to vote on a regressive tax.
By the way what is plan B?
April 2nd, 2009 at 9:45 am
Like the Thune amendment, this doesn’t present a higher procedural hurdle for a measure that increases government revenues. The “point of order” this amendment automatically raises on any such legislation simply requires a 60 vote cloture vote to override. What this is all about, like the Thune amendment, is political positioning in advance of the campaign season in 2010. As Michael Shellenberger wrote, “What this is really all about is preparation for a torrent of television ads and direct mail leaflets that will be unleashed in October 2010 and the run-up to Republicans taking back both houses of Congress against “Democratic excesses.” Republicans will use yesterday’s vote to campaign against anyone who “breaks their promise” and casts a vote for a cap and trade bill.”
Nice close read on this Roger,
Jesse Jenkins
Director of Climate Policy
Breakthrough Institute
p.s. Maurice: Plan B is drop the pollution pricing paradigm and start over with a bill all about investment in a clean energy economy, clean technology and the birth of new industries. Pay for that with a modest carbon tax “to make polluters pay” and make Republicans vote against a jobs bill (instead of hand them “the biggest tax increase in history” to clobber Dems over the head with during the elections).
April 2nd, 2009 at 11:12 am
I personally don’t think cap-and-trade proponent legislators are all that exercised over this. The cap-and-trade citizen advocates will be; the lobbying and interest groups continue to see revenue opps. Progress on the economy will need to happen first for the reasons stated (no increase in prices)–the serious business on cap-and-trade will be in the 112th Congress beginning in 2011. Don’t forget that there are a lot of pros experienced in this game of claiming they are not doing what they are trying to do.
This year the House will pass a bill in the runup to COP 15, which will give the President a marker with the international crowd. The Senate will wrangle over a lot of cap and trade issues (price neutrality etc) without getting a final bill through (that is unless it is “not meaningful” as Shellenberger notes). They are happy to do this because there are a ton of Rs up for reelection as part of Senate class III in 2010–and they are still hoping to run against Bush 3 election cycles after his name no longer appears on the ballot.
In the meantime, the EPA wheels continue to turn slowly but surely, Congress will add many riders and mandates relating to scientific research on CC, especially for EPA and the public lands management agencies. And, short of the carbon tax, the Administration and the majority in Congress can claim they are already creating jobs through clean energy funding through the stimulus and possibly some other legislation coming down the pike.
Of course, the window might be shut by 2011 but that is not what the cap-and-trade crowd is betting on. They are looking for a stronger majority and having the numbers to take the chance of letting the chips fall where they may at that time.
April 2nd, 2009 at 11:54 am
David:
“Of course, the window might be shut by 2011 but that is not what the cap-and-trade crowd is betting on. They are looking for a stronger majority and having the numbers to take the chance of letting the chips fall where they may at that time.”
I think you are right about 2009-10. I’m hoping for the window to be shut by the fact that there are no facts to support that CO2 is causing any warming. I’m betting that the public will smell the rats long before 2011.
April 2nd, 2009 at 6:44 pm
Obama has praised Spain’s efforts to create green jobs. A study of Spain’s “success” shows:
The U.S. can expect 2.2 jobs to be destroyed for every 1 renewable job financed by the government.
Only 1 in 10 of the jobs actually created through green investment is permanent.
Since 2000, Spain has spent €571,138 ($753,778) to create each “green job,” including subsidies of more than €1 million ($1,319,783) per wind industry job.
Those programs resulted in the destruction of nearly 113,000 jobs elsewhere in the economy.
Each “green” megawatt installed destroyed 5.39 jobs in non-energy sectors of the Spanish economy.
The total over-cost—the amount paid over the cost that would result from buying the electricity generated by the renewable power plants at market prices—between 2000 and 2008 amounts to 7,918.54 million Euros ($10 billion).
The total subsidy spent and committed to these three renewable sources amounts to €28,671 million ($36 billion).
Consumer energy costs in Spain would have to be increased 31 percent to repay the debt generated by the green jobs subsidies.
NOTE: According to the U.S. Energy Information Administration (EIA), Spain’s annual emissions of carbon dioxide have increased by nearly 50 percent since the nation began its aggressive push to subsidize and support “green jobs.”
It is impossible to subsidize inefficient production and create a net surplus of jobs. Obama can’t be stupid enough to believe that is. Clearly, however, he thinks the public is stupid enough to believe it. Perhaps the news media will be able to help him pull it off. Or perhaps not.
I think the political winners in the long run will be those who expose the green jobs hoax, not those who tried to sell it.
April 2nd, 2009 at 10:45 pm
[...] (cross posted from Prometheus: The Science Policy Blog) [...]
April 2nd, 2009 at 10:46 pm
[...] Cross posted from Prometheus: The Science Policy Blog [...]
April 5th, 2009 at 8:31 am
[...] the political reality of climate change action in the United States (see Roger Pielke Jr. for a discussion of the most important Senate vote). Move being the abstract notion of climate change action to specifics that have the potential to [...]
April 5th, 2009 at 9:31 am
A small point – the amendment said “middle income,” not “middle class.”