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Terminating The Economy
Doug Bandow (archive)

7 Oct 2005

     "We're all Keynesians now," declared President Richard M. Nixon when he surrendered his fiscal policies to liberal orthodoxy.
     California Gov. Arnold Schwarzenegger did much the same with his recent executive order calling for Draconian cuts in the emission of "greenhouse gases" linked to global warming. "The debate is over," he claimed.
     The issue of global warming, though presented as a matter of scientific certainty, is actually highly controverted. Although the planet almost certainly is warming, how much of that is due to humanity - which contributes only about .3 percent of total greenhouse gas emissions - remains in dispute.
     So does the likely magnitude of warming, as well as the ultimate impact on the climate. Over the last decade, predictions of the temperature rise over the coming century have fallen greatly. Moreover, a modest temperature rise would lower morbidity and mortality rates and lengthen growing seasons.
     Nevertheless, assuming that global warming is a problem to be solved, the so-called Kyoto treaty, signed in December 1997, is not a good answer. By its own terms it would merely mean that the temperature predicted to occur in 2100 (any estimate a century off is essentially meaningless) would actually arrive in 2106.
     Kyoto's original objective, to hold energy consumption at 1990 levels, is well nigh unattainable, at least at acceptable cost. Even a dozen European nations that once championed Kyoto now concede that they will fall short.
     Energy is the economy's blood. Radical reductions in energy consumption mean radical reductions in economic activity.
     Among the steps proposed to force down U.S. energy consumption are an emissions cap on greenhouse gases, especially carbon dioxide; a "carbon tax" on fossil fuel consumption; an increase in fuel economy (CAFE) standards on autos; a bevy of appliance, construction and other regulations; and a variety of subsidies for alternative energy sources and fuel efficient cars.
     Total economic output would take a huge hit. Over the last decade or so, estimates have ranged up to $350 billion annually. Eugene Trisko of the United Mineworkers of America warned that "most credible estimates of the costs of reducing carbon emissions in the U.S. show cumulative GDP losses of up to $1 trillion to $3 trillion over a 15- or 20-year period."
     Employment loss, too, would be high. For instance, an early study by Wilbur Steger and Frederick Rueter for CONSAD Research Corp. predicted that between 240,000 and 360,000 jobs would be lost in the first three to five years after Kyoto's implementation. Within a few more years, lost employment could rise above 1.6 million jobs, with several more million jobs at risk in "vulnerable industries."
     Rising energy and regulatory costs would ripple through the entire economy, reducing money for other uses, ranging from health care to safe housing. Moreover, some energy-saving measures are positively dangerous.
     For instance, CAFE standards push people into smaller cars, which lose when involved in car accidents with larger autos and trucks. Raising the standard to 40 mph would, according to a Harvard University-Brookings Institution study, cause an additional 3,800 to 5,800 accident deaths every year.
     California, the nation's most populous state, would bear a large share of Kyoto's burden. The Golden State leads the country in energy consumption. Dramatically cutting back on energy consumption would leave California as the biggest loser.
     But Schwarzenegger doesn't want to just reduce energy use. He hopes to largely eliminate the consumption of traditional fuels.
     Joel Schwartz, a Visiting Fellow at the American Enterprise Institute, figures that Schwarzenegger's energy plan would cut energy use by 11 percent in 2010, 25 percent in 2020, and 87 percent in 2050. He warns: "While reducing (greenhouse gas, or GHGs) emissions to 1990s levels would impose hardship, attempting to reduce GHGs 80 percent below 1990 levels would amount to destroying California in order to save it."
     With the facts against him, Schwarzenegger repairs to the usual political redoubt of "protecting" the children: "We have no choice but to meet this challenge. We must leave a better world for our children and their children."
     If it costs nothing to reduce use of fossil fuels, we could let sentimentalism rule and ignore serious doubts about the dangers posed by global warming. But wrecking the economy would be a high price to pay to deal with a phenomenon of uncertain magnitude that might end up being transitory and even positive.
     Gov. Schwarzenegger was elected after promising to combat job-destroying regulation. Now he is proposing controls far more stringent than anything advanced by Democrats. Alas, the more Republican politicians claim to represent the future, the more they look like their opponents.

Doug Bandow is a senior fellow at the Cato Institute.
©2005 Copley News Service

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