Numerous conservative media figures have seized on outdated Treasury Department memos obtained September 11 by the Competitive Enterprise Institute (CEI) to falsely suggest that the Obama administration estimates that cap-and-trade legislation recently passed by the House of Representatives would cost up to $200 billion per year or $1,761 per household, and that, in Sean Hannity's words, "they didn't tell you the truth." However, the Treasury memos do not address the current House climate change bill but, rather, a proposal that would auction 100 percent of the emissions allowances; the bill under consideration spends revenue created by the program to offset costs to households and businesses.
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Conservative media seize on months-old memos to claim Treasury thinks cap and trade would cost taxpayers up to $200 billion/year
CBS News' McCullagh: Cost per household would be "$1,761 a year." Reporting on the memos obtained by CEI, CBSNews.com correspondent Declan McCullagh stated that "[a] previously unreleased analysis prepared by the U.S. Department of Treasury says the total in new taxes would be between $100 billion to $200 billion a year. At the upper end of the administration's estimate, the cost per American household would be an extra $1,761 a year," or, McCullagh said, "the equivalent of hiking personal income taxes by about 15 percent," as the blog Think Progress noted. McCullagh later added, "These disclosures will probably not aid the political prospects of the Democrats' cap and trade bill," and quoted CEI fellow Christopher Horner asserting that "[t]hey're not telling you the cost -- they're not telling you the benefit." McCullagh subsequently responded to criticism of his figure by stating that "it's true that the House bill is not the same as what [President] Obama had proposed, but the final version has yet to be written, and my article explicitly noted this by saying: 'Obviously, any final cap-and-trade system may be different from what Obama had proposed, and could yield higher or lower taxes.' " The figure of $1,761 per year does not appear in the Treasury documents, which did not address costs per household. [CBSNews.com, 9/15/09]
Hannity: "[S]hocking Treasury Department prediction" says families could pay "1,761 bucks a year in taxes." Sean Hannity stated that "a memo from President Obama's Treasury Department has been uncovered that reveals the true cost of cap and tax. They have known it all along, folks, but they didn't tell you the truth." He later added, "the cap and tax bill could be next on the Democrats' agenda, and they want you to believe it won't cost you a dime. But President Obama's own Treasury Department disagrees. Thanks to a Freedom of Information Act request. The Competitive Enterprise Institute obtained a shocking Treasury Department prediction. And it says average American families could pay an extra 1,761 bucks a year in taxes. Hey, Democrats, good luck explaining that at your next town hall." [Hannity, 9/16/09]
Fox News' Kelly: Treasury documents "detail the so-called cap-and-trade bill" passed by the House. Kelly falsely stated that the "documents detail the so-called cap-and-trade bill, which has already passed in the House. The documents reveal, quote, 'A cap-and-trade program could generate federal receipts on the order of 100 billion to $200 billion annually.' " During the segment, Fox Business' Stuart Varney noted that the House bill gives away most of the permits but he did not note that much of the revenues are spent on mitigating the cost of the program to taxpayers. [America's Newsroom, 9/16/09]
Beck: Obama administration "privately concluded that the cap-and-trade law" would cost $1,761 a year. Beck falsely claimed on his radio program that the Treasury memos are a "buried" "study" or a "report" about the "bill." Beck stated that "the Obama administration has privately concluded that the cap-and-trade law would cost American taxpayers up to $200 billion a year. That is an equivalent of hiking your personal income tax by 15 percent. The U.S. Department of Treasury said the total in new taxes would be between 100 billion and 200 billion a year, the upper end of the administration's estimate. The cost to American households would be an extra $1,761 a year." Beck added, "This is analysis they did not want you to know about." [The Glenn Beck Program, 9/17/09]
IBD misleadingly compared Treasury memos to cost estimates of House bill. Praising CEI and citing McCullagh, an Investor's Business Daily editorial noted that "the bill's defenders" said the Waxman-Markey cap and trade bill" would not impose a significant cost on households, adding, "While the House debated and eventually voted, filed away within the walls of the Treasury Department was an internal estimate that projected a cap-and-trade law would cost Americans up to $200 billion a year in new taxes." The editorial also quoted Horner's assertion that the Treasury memos show "what they're admitting to each other, while telling you a, ah, different story -- to your face." The subheadline of the editorial states, "A Treasury Department analysis says a cap-and-trade law could cost American families more than $1,700 a year. No wonder administrators tried to keep the study secret." [Investor's Business Daily, 9/16/09]
Amanda Carpenter: Treasury officials "think cap-and-trade legislation would cost taxpayers hundreds of billion in taxes." In her report on the memos, Carpenter said of the House climate change bill, "The ultimate cost of the bill to taxpayers has been the subject of fierce debate between supporters and opponents of the legislation. CEI, a free-market think tank that opposes the bill, thinks the Treasury documents prove the legislation would pose a significant burden to the economy." Carpenter also reported, "A memo prepared by Judson Jaffe, who works in the Treasury's Office of Environment and Energy, referenced President Obama's remarks on energy policy in his State of the Union Address and said, given the president's plan to auction emissions allowances, 'a cap-and-trade program could generate federal receipts on the order of $100 to $200 billion annually,' " and quoted Horner, who stated that the Treasury memos revealed "what they are telling each other and what they won't tell you." [The Washington Times, 9/15/09]
Bill actually under consideration is not the proposal discussed in the Treasury memos
Memo discusses "[a]dministration's proposal to auction all emissions allowances." The memo by Treasury official Judson Jaffe -- which was reportedly written in March -- stated, "In his February 24, 2009, Joint Session address, President Obama called for a greenhouse gas cap-and-trade program," and that "given the Administration's proposal to auction all emission allowances, a cap-and-trade program could generate federal receipts on the order of $100 to $200 billion annually" [emphasis added]. This estimate of a proposal to auction all allowances is the apparent source of McCullagh's assertion that cap and trade legislation could "cost $200 billion a year" or "an extra $1,761 a year" per household.
Actual House bill: majority of allowances "distributed without charge." According to a summary of the American Clean Energy and Security Act (ACES) passed by the House, "approximately 80% of allowances are distributed without charge during the early years of the program to ease the transition to a clean energy economy. This transition period starts to phase out after 2025." At no point do the Treasury memos obtained by CEI mention or analyze the existing cap-and-trade legislation.
CBO: ACES projected revenues lower than Treasury estimate of a scenario with 100 percent auction. In a June 26 letter to Rep. Henry Waxman, the Congressional Budget Office, which treats allowances created by the federal government "as an increase in revenues" regardless of whether they are given away or auctioned, stated that the House bill "would increase revenues by $873 billion over the 2010-2019 period" -- not between $100 billion and $200 billion per year, as estimated in the Treasury analysis of a full auction.
Treasury memo: "[C]ost of climate policy is highly sensitive to its design." A November 2008 Treasury memo obtained by CEI notes that "the cost of climate policy is highly sensitive to its design." The CBO has similarly stated that "[t]he ultimate effects of the cap-and-trade program on U.S. households would depend crucially on policymakers' decisions about how to allocate" the allowance revenue.
House bill distributes revenues to reduce cost to households -- and Obama's proposal would have, too
House summary: legislation includes provisions to "substantially reduce the impact of ACES on American consumers." According the bill summary, "ACES establishes five programs to protect consumers from energy price increases: one for electricity price increases; one for natural gas price increases; one for heating oil price increases; one to protect low- and moderate-income families; and one to provide tax dividends to consumers. In combination, these programs substantially reduce the impact of ACES on American consumers." The bill achieves these reductions on the cost to consumers through the distribution of allowance value.
CBO: Average cost to households in 2020 is $175 per year. In a June 19 analysis, CBO estimated that the net impact to households from the bill in 2020 would range between a benefit of $40 per year and a cost of $340 per year, with an average cost of $175 per year. The net impact reflects "both the added costs that households experienced because of higher prices and the share of the allowance value that they received in the form of benefit payments, rebates, tax decreases or credits, wages, and returns on their investments." CBO further stated that in the aggregate, "most" of the costs resulting from the bill "would be offset by income or other benefits provided to households as a result of the distribution of the value of the emission allowances."
EPA: Average household cost of $80-$111 per year over 2010-2050. In a June 26 analysis of the House bill, the Environmental Protection Agency estimated that under the "core scenario," "[a]verage annual household consumption is estimated to decline by $80 to $111 dollars per year relative to the no policy case." The estimate includes "the effects on higher energy prices, price changes for other goods and services, impacts on wages and returns to capital, and importantly .. the value of emissions allowances returned lump sum to households, which offsets much of the cap-and-trade program's effect on household consumption."
EIA: Average household cost of $83 per year over 2012-2030. In its August analysis of the economic impacts of the House bill, the Energy Information Administration estimated that under a "basic case" the average yearly change in consumption per household resulting from the bill over 2012-2030 is $83 in present value. The analysis stated that "until 2026, the value of increased residential energy expenditures (including transportation costs) is roughly equal to the amount of allowance revenue transferred to low-income consumers. After 2026, the consumer climate change funds rebates in personal taxes, allowing for muted consumer impacts of the rising energy costs."
Obama proposed that "aucution revenues will be returned to the people." While the Treasury memos analyzed a plan that would include a "100 percent auction" cap-and-trade program, Obama himself stated in his February budget outline that the revenues of the auction would "fund vital investments in a clean energy future totaling $150 billion over 10 years, starting in FY 2010. The balance of the auction revenues will be returned to the people, especially vulnerable families, communities, and businesses to help the transition to a clean energy economy." In asserting that the revenues estimated in the Treasury memos reflect the likely cost to taxpayers of Obama's proposal, conservative media figures ignored that much of the revenues would be returned to taxpayers. A cap-and-trade system that would auction 100 percent of the allowances is not under consideration by Congress.
From the September 16 edition of Fox News' America's Newsroom:
KELLY: New legislation that could cost taxpayers hundreds of billions of dollars. Remember the cap-and-trade bill? No one's been paying attention to this cause we've been focused on health care, but some startling documents have been obtained from the Treasury Department by the Competitive Enterprise Institute. And these documents detail the so-called cap-and-trade bill, which has already passed in the House. The documents reveal, quote, "A cap-and-trade program could generate federal receipts on the order of 100 billion to $200 billion annually." What does that mean? Stu Varney of the Fox Business Network joins us now. Does that mean $100 billion to $200 billion of money out of the pockets of Americans going to the fed?
VARNEY: Ultimately, yes. This is just like health care -- the cost upsets everything. Who pays suggest whether this thing lives or dies. Now, here's the story: Under cap-and-trade, industry buys a permit from the federal government allowing it to issue forth, emit CO2. The more you emit, the more that you pay. These internal Treasury documents obtained by the Freedom of Information Act suggest that Treasury officials getting together put cap-and-trade at a cost of $100 to $200 billion a year. Now, before we go any further, let's say the House has passed a much-watered-down bill under which 80 percent of these permits are given away, but you are still left with a 20 percent -- that's 20 percent of 100 or 200 billion dollars. That's a lot of money, tens of billions. And that rate could be upped in the future. So what you have got is cap and trade -- really, it's cap and tax. Great cost to you and I eventually.
From the September 16 edition of Fox News' Hannity:
HANNITY: And coming up, a memo from President Obama's Treasury Department has been uncovered that reveals the true cost of cap-and-tax. They have known it all along, folks, but they didn't tell you the truth.
HANNITY: Now, the cap-and-tax bill could be next on the Democrats' agenda, and they want you to believe it won't cost you a dime. But President Obama's own Treasury Department disagrees. Thanks to a Freedom of Information Act request, the Competitive Enterprise Institute obtained a shocking Treasury Department prediction. And it says average American families could pay an extra 1,761 bucks a year in taxes. Hey, Democrats, good luck explaining that at your next town hall.
From the September 17 edition of Premiere Radio Networks' The Glenn Beck Program:
BECK: I'm glad you're here. There's -- there is a lot on the table today, one of which is the Obama administration has privately concluded that the cap-and-trade law would cost American taxpayers up to $200 billion a year. That is an equivalent of hiking your personal income tax by 15 percent.
The U.S. Department of Treasury said the total in new taxes would be between 100 billion and 200 billion a year, the upper end of the administration's estimate. The cost to American households would be an extra $1,761 a year.
STU: Now, remember, they were trying to sell this plan that it was only going to cost $175 a year. And if I remember right, this analysis by the Obama administration is actually worse than the Heritage Foundation's analysis.
BECK: Yes. Yes.
STU: Think about that for a sec -- I mean, that's how bad this bill is.
BECK: OK, so this bill was out, and we're tracking down -- we're tracking everything down, and we just got this this morning so we're tracking it all down for television tonight, and we'll give you the audio and everything else for tomorrow. But this study was released because of the Freedom of Information Act. So -- right?
STU: Yeah. I was just kind of reading the second half of this article which I hadn't read yet and we should see if we get Chris Horner on this, because I guarantee he was involved in this, and I mean -- that's amazing. This is analysis they did not want you to know about.
BECK: Yeah, no, they buried it. And it went -- through the Freedom of Information Act, it was uncovered. Now, what we're doing is tonight on television, you are going to see the people that defended the White House's stance that, "That Heritage Foundation, that's ridiculous, that's not even true. Gonna cost each person about a hundred dollars a year. Don't you love the planet?" They -- they had the information from the Department of Treasury, and we're going to show you the date of the report and when they buried it and who said what after the report tonight. It is -- it's phenomenal. Now, the question is, did the people, the members of Congress know about what the administration had done or, fitting another theory of mine, this president doesn't care about Congress. He'll throw them under the bus every step of the way. That's part of the czar theory. That Congress is becoming irrelevant -- Stu, do we have any tape of me? We should look for the tape of me saying -- warning to Congress how many months ago -- "Congress, wake up!" This administration is gobbling the other branches. In fact, do I have the book? How long ago did this -- where is the -- you know, in the book that comes out next week, gosh.