The Competitive Enterprise Institute
(CEI is a conservative, free-market think tank that supports principles of free enterprise and limited government, opposes government regulation, and actively engages in public policy debate.)
Coalition letter urges Bush to drop greenhouse gas credit plan in State of the Union address: Tax reforms preferable to early action credits scheme
WASHINGTON -- The Competitive Enterprise Institute and 13 other public policy groups are urging President Bush to drop a scheme to award credits for reductions in emissions of greenhouse gases in favor of supply-side tax reforms that will both stimulate economic growth and increase energy efficiency. It has been reported that the president may include the issue in tomorrow evening's State of the Union address.
January 27, 2003
The Honorable George W. Bush
The White House
1600 Pennsylvania Avenue NW
Washington, DC 20500
Dear Mr. President:
We are writing to reiterate our concerns about the administration's plan to award regulatory offsets ("transferable credits") to companies that reduce emissions of carbon dioxide and other greenhouse gases.
Three significant events have occurred since our earlier (Oct. 2, 2002) letter -- events that make the case against carbon credits even more compelling. Those events are: (1) introduction of the McCain-Lieberman bill to establish a Kyoto-style cap-and-trade program for the United States; (2) publication of a major study in Science demonstrating the futility of regulatory "solutions" to climate change; and (3) your advocacy of expensing as part of the administration's growth and jobs policy.
As noted in our previous letter, transferable carbon credits attain full market value only under a mandatory emissions reduction target or "cap," like those proposed in the McCain-Lieberman bill. Thus, companies that earn carbon credits for "early reductions" will gain incentives to lobby for the bill. If enacted, McCain-Lieberman will have the same effects on consumers as an energy tax. The carbon caps will increase the prices households must pay for electricity, gasoline and home heating oil, and the impacts will be regressive, imposing proportionately larger burdens on those, like seniors and the poor, who are on fixed or low incomes.
Clearly, McCain-Lieberman is antithetical both to your National Energy Policy, which seeks to secure affordable energy for the American people, and your growth and jobs policy, which seeks to stimulate the economy via tax cuts. The administration's crediting plan will build support for McCain-Lieberman and similar energy rationing schemes.
We share your view that climate policy should emphasize long-term technology change, not short-term regulation. As a study in the Nov. 1, 2002 issue of Science explains, world energy demand could triple by 2050. However, according to the study, "Energy sources that can produce 100 to 300 percent of present world power consumption without greenhouse emissions do not exist operationally or as pilot plants."
Major technological breakthroughs and decades of market evolution must occur before nations could stabilize atmospheric CO2 levels while meeting global energy needs. Any serious attempt to stabilize CO2 levels via regulation would be both futile and economically devastating.
But, if regulatory strategies are unsustainable, then no good purpose is served by providing a pre-regulatory ramp-up to such policies. An early start on a journey one cannot complete and does not want to take is not progress; it is wasted effort.
As an alternative to Kyoto's mandatory tonnage reduction targets, which are anti-growth, you have proposed a voluntary carbon intensity reduction goal, which can accommodate growth. The administration views early credits as a way to motivate companies to invest in newer, less carbon-intensive, technologies. However, there is a better way to speed up carbon-intensity decline, and it comes straight out of your economic policy playbook: expensing.
Your growth and jobs plan calls for increasing the small business expensing option from $25,000 to $75,000. This is a good first step, but we think the limits on expensing should be expanded even further, and extended to all capital investment.
A study sponsored by the American Council for Capital Formation found that, as of Dec. 2001, the United States lagged behind several of its trade partners in terms of capital cost recovery for electric power generation, pollution control technology, and other energy assets. For example, after five years, a company that builds a combined heat and power plant in the United States recovers only 29 percent of its investment compared to 51 percent in Germany, 53 percent in Japan, 100 percent in the Netherlands, and 105 percent in China.
By removing the tax penalty on capital investment, expensing would encourage more rapid turnover of plant and equipment. In general, state-of-the-art facilities are more productive than older units, delivering more output per unit of input, including energy inputs. Expensing would thus accelerate carbon intensity decline -- yet without building political support for energy rationing.
Because expensing enhances productivity and boosts wages, it makes good economic sense whatever science ultimately tells us about global warming. Expensing is a true "no regrets" policy.
We would be pleased to help the administration develop a climate policy that employs expensing rather than transferable credits to reduce U.S. energy and carbon intensity.
Fred L. Smith, Jr., President
Marlo Lewis, Jr., Senior Fellow
Competitive Enterprise Institute
Citizens for a Sound Economy
National Taxpayers Union
L. Patricia Callahan
American Association of Small Property Owners
American Conservative Union
Small Business Survival Committee
60 Plus Association
Americans for Tax Reform
American Legislative Exchange Council
Senior Vice President & Chief Operating Officer
The Seniors Coalition
African American Republican
Citizens Against Government Waste
Benjamin C. Works
Strategic Issues Research Institute
The Cato Institute
Cato expert comments on Blix's remarks to U.N. Security Council: Key question for Americans is whether Iraq poses an imminent threat to U.S. security
WASHINGTON -- In response to remarks made this morning by chief United Nations weapons inspector Hans Blix before the U.N. Security Council, Ted Galen Carpenter, the Cato Institute's vice president for foreign policy and defense studies, issued the following statement:
"As expected, Hans Blix has issued an ambivalent report about Iraqi compliance with the U.N. inspections system. However, the Bush administration is likely to find enough negative features in the report to support Washington's drive for a military campaign against Iraq.
"The obsession with the Blix report and the inspections process obscures a more fundamental issue. The key question for Americans is, or at least ought to be, whether Iraq poses a serious, imminent threat to the security of the United States. If it does, the Bush administration is justified in taking military action whether or not it has the backing of the United Nations, U.S. allies, or Iraq's neighbors. If Iraq does not pose such a threat, the administration would not be justified in launching attacks even if it had overwhelming backing from those parties.
"The administration has not made its case that Iraq poses a serious threat either directly or indirectly. It is highly improbable that Iraq would directly attack the United States, knowing that there would be an annihilating counterstroke. And it is barely more plausible that Iraq would attack the United States by using al Qaida as a proxy. The administration has not been able to provide credible evidence of any connection between Baghdad and al Qaida.
"Rather than debating the minutiae of the Blix report, Americans should insist that President Bush back away from an unnecessary and unwise war."
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