In his original budget proposal, President Obama envisioned a cap-and-trade program that would raise hundreds of billions of dollars by selling emissions credits to businesses. He then proposed spending $504 billion of these revenues on a making-work-pay tax credit, and $120 billion on new energy research spending. However, the House has since passed a cap-and-trade bill that would give away most if not all of the emissions credits, leaving no more than $165 billion for other spending (most of which the bill allocates to low-income energy rebates).
It is also worth noting that these giveaways to utilities, manufacturers and others were necessary for the bill to pass (by a narrow margin) the House. Even more will likely have to be promised for this measure to garner a filibuster proof majority in the Senate.
Yet despite Congress’ signal that these excess revenues will not materialize, the President’s mid-session budget update has once again proposed to spend over $620 billion on the make-work pay credit and new energy spending. The White House has not clarified whether these expensive policies are contingent on these enormous cap-and-trade revenues somehow materializing, or whether the President is willing to simply add $620 billion to the budget deficit for these proposals.
If these proposals are not contingent on cap-and-trade revenues, then they represent yet another attempt to expand government at budget deficits even beyond the staggering $9 trillion in new debt that the White House has forecast over the next decade. Washington will spend a peacetime-record 26 percent of GDP this year, and President Obama has proposed a budget that would permanently spend between $5,000 and $8,000 per household more than under President Bush. By refusing to set priorities and streamline spending, President Obama is setting the stage for historic tax increases that would devastate families, businesses and the economy. At the same time, the cap-and-trade bill would add significantly to energy costs, whether or not the emissions credits are given away or sold.
Brian Riedl contributed to this post