THE ECONOMIC CONSEQUENCES OF WAXMAN-MARKEY
August 18, 2009
The Waxman-Markey climate change bill proposes a new national tax of historic proportions. Though levied directly on carbon-based energy, the tax's impact spreads through the economy, increasing prices, reducing income, destroying jobs and significantly expanding the national debt, say researchers from the Heritage Foundation.
As the Waxman-Markey energy tax spreads through the economy, businesses and consumers will adapt as well as possible to these higher prices by spending more for less energy, say researchers. They will build smaller houses and buildings. They will drive smaller, less safe vehicles. They will turn thermostats up in the summer and down in the winter. But these activities will not be enough to offset the higher energy costs.
In particular, the Heritage analysis projects that by 2035:
- Gasoline prices will rise 58 percent (or $1.38) above the baseline forecast, which already contains price increases, natural gas prices will rise 55 percent, heating oil prices will rise 56 percent and electricity prices will rise 90 percent.
- A family of four can expect to pay $1,241 more for energy costs per year, and including taxes, they will pay $4,609 more per year.
- That same family of four will reduce its consumption of goods and service by up to $3,000 per year, as its income and savings fall.
- Aggregate GDP losses will be $9.4 trillion, job losses will be nearly 2.5 million; and the national debt will rise an additional $12,803 per person.
All of these costs will be paid for no more than a 0.2 degree Celsius moderation in world temperature increases by 2100, and no more than 0.05 degree reduction by 2050. Saddling the next generation with higher prices, higher debt, less income, fewer jobs and more taxes does not seem like a worthy legacy, say researchers.
Source: David Kreutzer et al., "The Economic Consequences of Waxman-Markey: An Analysis of the American Clean Energy and Security Act of 2009," Heritage Foundation, August 6, 2009.
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