When the first President Bush tackled acid rain with the Clean Air Act, industry-backed studies got the economic effects of an acid rain cap and trade system totally wrong. Industry analysts insisted electricity prices would skyrocket. Instead, electricity prices dropped. Now, they’re saying the same things about President Obama’s cap & trade program for powering a clean energy recovery:

After an estimated 48 cents per gallon increase in 2020, motor fuels are estimated to increase by 19% (74 cents per gallon) relative to baseline levels. Electricity costs are estimated to increase by 27% (3.6 cents per
kWh) relative to baseline level in 2020, rising by 44% (5.8 cents per kWh) in 2025.

In 1989, coal companies and the Edison Electric Institute hired Temple Barker and Sloane, a pro-industry research organization, to conduct an economic analysis of the effects of a cap & trade system on sulphur dioxide (SO2), the main pollutant that causes acid rain.

Their projections proved to be wildly inaccurate. They estimated the acid rain cap & trade program would “cost electric utility ratepayers $5.5 billion annually between enactment and the year 2000, increasing to $7.1 billion per year from 2000-2010.” In fact, electricity prices actually dropped:

Average electric rates dropped from 8.05 cents per kilowatt hour when the Clean Air Act was passed in 1990 (calculated in 2000 dollars) to 7.48 cents per kwh . . . in 1995, to 6.81 cents per kwh . . . in 2000. By 2006, electricity was up slightly to 7.63 cents per kwh (2000 dollars) but still 5 percent less than before the acid rain program began.

What’s more, by 2003, the Congressional Budget Office concluded that the acid rain cap & trade program had “the largest quantified human health benefits – over $70 billion annually – of any major federal regulatory program implemented in the last 10 years, with benefits exceeding costs by more than 40:1.” In 2002, The Economist magazine called it “the greatest green success story of the last decade.”

Today, the U.S. Chamber of Commerce has hired CRA International, who has Howard W. Pifer III, founding director of the Energy & Environment Group at Temple, Barker & Sloane, as a senior adviser, to analyze the effects of a cap & trade system for carbon dioxide (CO2). Their analysis makes similar dire projections about the price of electricity. The faulty logic is similar. As Dan Weiss of the Center for American Progress explained, these studies “base their cost assumptions on existing technologies and practices, which means that they do not account for the vast potential for innovation once binding reductions and deadlines are set.”

According to Laurie Johnson, chief economist of the Natural Resources Defense Council, their analysis does not consider any efficiency or technological improvements, actually finds the economy would grow 72% by 2030 even with a cap and trade program, and “does not even pretend to model” the Waxman-Markey American Clean Energy and Security Act. Read more of her analysis here.

Yesterday, a provision that would have allowed bankruptcy judges to cram-down mortgages for troubled homeowners failed to pass the Senate. But that evidently wasn’t enough for Sens. Jim DeMint (R-SC) and David Vitter (R-LA), who immediately after the vote sought to take down another piece of housing legislation, which is aimed at easing eligibility restrictions for the not-very-successful Hope for Homeowners program:

Jim DeMint, R-S.C., and David Vitter, R-La., began offering amendments to the bill shortly after the Thursday defeat of a controversial amendment to attach a bankruptcy provision known as “cramdown.” “The net effect of [the amendments] is to virtually bring down this bill,” [Sen. Chris] Dodd said.

Sen. Harry Reid (D-NV) said that he may pull the bill, even though “lawmakers on both sides of the aisle acknowledged that [Hope for Homeowners] is a failure because of overly restrictive eligibility requirements.”

Indeed, since the $300 billion program was launched last summer, just one homeowner (yes, one) has made it all the way through the process. Meanwhile, foreclosure filings jumped nearly 20 percent last month. Are those numbers that sit well with Vitter and DeMint?

Yesterday, Chrysler became the first major American automaker to file for bankruptcy, after eleventh-hour negotiations between the Treasury Department and some of Chrysler’s creditors fell apart. President Barack Obama promptly criticized this “small group of speculators” for forcing the automaker into bankruptcy. “A group of investment firms and hedge funds decided to hold out for the prospect of an unjustified taxpayer-funded bailout,” Obama said.

As Bloomberg reported, “Obama’s team had first offered secured lenders $2 billion for their $6.9 billion in loans, and then raised the offer to $2.25 billion. In a game of chicken, the holdouts asked for $2.5 billion, and Obama’s patience ran out.” Steven Pearlstein put these numbers into perspective:

What you need to know about these vultures is that their idea of fairness is throwing 100,000 people out of work and denying retirees their pensions and their health benefits just so they can liquidate the company and maybe squeeze an extra 15 cents on the dollar from their Chrysler debt. Of course, to get that extra 15 cents, the hedge funds would probably have to fork over a penny or two to pay the army of $700-an-hour lawyers needed to spend two years working it through the bankruptcy process.

The greed factor here is really appalling, but bad intentions can sometimes produce a good result. Chrysler has been headed toward a pre-packaged bankruptcy for a while, and repeated infusions of cash was simply punting the inevitable down the road. And handing these companies billions while they shed jobs was, as Robert Reich wrote, the equivalent of “‘saving’ Vietnam by bombing it to smithereens.”

Now it will be up the bankruptcy court to figure out how best to handle the various Chrysler creditors. Felix Salmon conveys the appropriate sentiments:

As for the smaller creditors who stood in the way of a deal which would have avoided bankruptcy, I have very little time for their plaints. They’re offering nothing which will help Chrysler in the future: they just want to get the maximum return on selling the bonds they picked up for pennies on the dollar. I hope and trust that the bankruptcy judge will give them short shrift.