Newt Gingrichs voodoo cap-and-trade economics

This terrific post is from guest blogger Laurie Johnson, Chief Economist for the Natural Resources Defense Council’s Climate Center. For more on Newt’s embrace of the dark arts, see “Hill conservatives reject all 3 climate strategies and embrace Rush Limbaugh” and “Note to media: Newt Gingrich is an eco-fraud.”

Gingrich at CPACNewt Gingrich has taken to calling President Obama’s proposal to cap global warming pollution an “energy tax,” even specifically claiming it would be a “hidden $1,300-per-family energy-tax increase“:

If the country’s No. 1 priority is to create jobs, then a hidden $1,300-per-family energy-tax increase in the guise of a cap-and-trade system is absolutely destructive. Herbert Hoover raised taxes in 1932, and it further crippled the economy.

Newt Gingrich’s assertion is voodoo economics — designed to scare us into believing we can’t afford climate protection.

In Newt’s nightmare tax math, the economic value of the carbon market just disappears!

He assumes the money doesn’t get returned to taxpayers; it doesn’t get spent on any worthwhile investments in cleaner, smarter energy resources; it doesn’t get invested in ways to reduce the energy we waste today, saving us money; it doesn’t get used to help communities adapt to a changing climate; it doesn’t get used to address regional differences in the cost of cutting global warming pollution. No, in Newt’s scary world, the money just vanishes, leaving us only with the bills. Fortunately, in the real world the dollars created by the carbon market will go to all of these purposes, providing us with a safer climate, reduced dependence on oil imports, and creating new jobs to build our economic recovery.

In reality the cost of climate protection is far smaller than the size of the carbon market, from which the $1,300 estimate is derived. The cost to physically achieve the emission reductions — i.e., the compliance costs for polluting corporations — are roughly 10% of total carbon market value, according to the Energy Information Administration. The remaining 90% is just shifting money away from polluting activities toward cleaner goods and more secure sources of energy.

So, even if Newt were right that the total carbon market size worked out to $1300 per household, the actual cost of cutting that pollution would be more like $130 per household per year (minus any savings we earn from increased energy efficiency), or $2.50 a week.

And for that $2.50 (or less) per week we’d be getting a bargain that is hard to beat.

Just four categories of climate damages alone (hurricanes, higher energy bills, property lost to sea level rise, water supply impacts) are predicted to cost the average household $2,000 a year by 2025, $3,000 in 2050, rising rapidly to over $11,000 by the end of the century. And these estimates ignore (because they are too hard to count accurately), the added costs of droughts, floods, wildfires, agricultural damages, and the value of lost lives. We may not be able to eliminate all of these costs by acting now to cut pollution, but we sure can help reduce them dramatically.

So think twice before you rely on Newt for financial advice.

Crossposted from the NRDC Switchboard via Wonk Room.

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17 Responses to Newt Gingrichs voodoo cap-and-trade economics

  1. Ben Lieberman says:

    Your GWP or Global Warming Party in action.

  2. The dark arts of politics can only mask and hide the concrete science of global warming.

    Until politics respects science, it will remain ineffectual blather.

  3. hapa says:

    “and the greenies want you to eat less sugar and exercise regularly! that’s CRAZY!”

  4. Rick C says:

    This is the guy who’s great idea was to shutdown the government which was done.

  5. DB says:

    “This is the guy who’s great idea was to shutdown the government which was done.”

    IIRC, the idea was to balance the budget. 15 years on, it sounds like a nice idea. (I’m not sure how many programs we can handle with a cost of 11 or 12 zeros.)

  6. MarkB says:

    This is more fear tactics from the do-nothing party. Gingrich is also notably wrong about tax hikes in 1932. They didn’t take effect until 1933, which was near the beginning of a major economic turn-around, which occurred later in 1933.

    Hoover’s greatest folly was certainly not the tax increases – arguably necessary to prevent government bankruptcy. His folly was doing next to nothing for 3 years and letting the situation spiral out of control. Sound familiar?

  7. paulm says:

    a small mile stone…

    Tim Nicholson: A green martyr
    Sacked executive can argue he was discriminated against because of his belief in climate change, judge rules

  8. DB says:

    “Hoover’s greatest folly was certainly not the tax increases – arguably necessary to prevent government bankruptcy. His folly was doing next to nothing for 3 years and letting the situation spiral out of control.”

    Worse than doing next to nothing was doing the wrong thing. The Smoot-Hawley Tariff Act was passed and signed in 1930, and from 1929 to 1933 the Federal Reserve shrank the money supply 65% as the economy contracted.

  9. Bryson Brown says:

    @ DB: The budget wound up better than balanced, small thanks to Newt. It was W and his lock-step Republicans who decided to go on a spree.

  10. Pangolin says:

    Why are we quoting a Republican on economics? Do we quote kindergarteners on quantum physics? It’s clear that any economist with a voice in D.C. doesn’t have as much as a silk thread connecting them to reality. They are down the rabbit hole and have forgotten that there is a real world out here.

    My first-priority climate action wedge, conversion of all buildings to ground-loop thermal systems, would MAKE MONEY after an average of seven years post installation. That income would continue for at least another twenty years on the average install. It would reduce oil import dollars, reduce natural gas imports and require massive job training and hiring in every congressional district.

    Newt, and the rest of the GOP are engaged in a massive, mutual, cranial-colonoscopy. Given where their heads are at it’s no wonder they pronouncements stink.

  11. Harrier says:

    I”m with Pangolin. No more attention should be paid to Gingrich, it just validates him.

  12. Pierre Champagne says:

    Newt needs to talk to the entire country of Brazil! They drastically reduced their carbon emissions when they decided grow their own fuel (ethanol) some thirty years ago!

    They cut their imports, improved their country’s balance sheet, and created local jobs in the agricultural and energy sectors. If a developing country could do it an grow, maybe the US can!

    But, there is a better system than cap-and-trade, one focused on conservation. Henderson proposed on such strategy (see Waves of the Future) and it is REVENUE NEUTRAL.

    For example, fossil fuels would be taxed to bring about both conservation and a reduction of carbon emissions. Retail and income taxes would be reduced in compensation.

    It would be a relatively free approach based on known systems and relative simple to implement.

    Tags: cap-and-trade alternatives

  13. Joe says:

    Ecostew — you need to stay current on this blog!

  14. Sam Carmalt says:

    The big lie, repeated again and again, is eventually believed.

    Those who see it for the lie it is will never prevail with rational arguments. And so long as there is discussion and debate on what should be done, which is the intelligent course, there is no unifying counter-message.

    Those of us who believe action is urgent need a mantra that we can accept (I didn’t say totally agree with), and repeat it just as forcefully and often.

    Perhaps something like: “We either cap and trade today or our taxes increase 200% by 2016; you choose.”

  15. crf says:

    Some large fraction of every American’s money is spent on energy derived from middle eastern oil, which really and truly is lost to them. It’s spent on giant desert metropoli, which Americans don’t live in, and can’t easily get to. It’s spent on foreign kingdoms buying American companies, so Americans lose control of those companies’ economic destiny. And some of the money is just plain wasted, for example, on giant indoor ski resorts in the Arabian desert.

    What the heck is Newt’s problem? Even if he wants to be wilfully blind to climate science, he cannot deny those palm Islands: look on Google Earth!

    Who does he think paid for those Islands?

    America needs to use less fossil energy. Period. It doesn’t have enough of its own.