The Biggest Tax Increase In World History

The House Energy and Commerce Committee on the evening of May 21 passed the biggest piece of the Obama administration and Congressional Democrats’ agenda to put the federal government in charge of the American economy. On a 33 to 25 vote, the Committee approved the “American Clean Energy and Security Act,” H. R. 2454. The 946-page energy-rationing bill is better known as Waxman-Markey, named after its two chief sponsors, Committee Chairman Henry Waxman (D-Calif.) and Rep. Edward Markey (D-Mass.), Chairman of the Subcommittee on Energy and the Environment.

Thirty-two Democrats were joined by one Republican, Mary Bono Mack of California, in voting for Waxman-Markey, while four moderate Democrats joined twenty-one Republicans against. One Republican missed the vote.

If enacted, H. R. 2454 would be the biggest government takeover of the economy since the Second World War, which is the last time energy, food, and other basic commodities were rationed. It would also be the biggest tax increase in the history of the world and would cause a colossal transfer of wealth from consumers to big businesses.

The ostensible purpose of Waxman-Markey is to contain global warming by reducing carbon dioxide and other greenhouse gas emissions. The cap-and-trade scheme at the heart of the bill would do this by limiting severely the amount of energy derived from the three carbon-dioxide producing fuels — coal, oil, and natural gas — Americans would be allowed to use. Currently, over 80% of U. S. energy comes from these three fuels simply because they are the least expensive fuels available. Waxman-Markey would require cutting emissions by 17 percent below a 2005 baseline by 2020, 42 percent by 2030, and 83 percent by 2050.

The Republican minority, ably led by Representative Joe Barton (R-Texas), put up a determined fight over four grueling days of committee deliberations to try to set limits on the economic damage the bill could do. They offered amendments that would suspend the legislation if gasoline prices reached five dollars a gallon, or if electricity prices doubled, or if unemployment exceeded fifteen percent. Each amendment was defeated on a near-party-line vote.

Also defeated on a straight-party-line vote was an amendment to suspend the act if China and India don’t agree to cut their own greenhouse gas emissions. China’s annual emissions have surpassed those of the U. S., and India’s have begun to increase at a fast rate. If China, India, and other major developing nations don’t reduce their emissions, then the drastic cuts required by Waxman-Markey would do little to reduce total global emissions.

President Barack Obama supports a cap-and-trade plan that would auction the ration coupons necessary to burn coal, oil, or natural gas and use the trillions of dollars of future revenues to fund his massive expansion of government programs. But Waxman found out that he couldn’t get his bill through committee without the votes of most of the moderate Democrats who represent districts that produce coal or oil or have energy-intensive manufacturing that depends on low-cost electricity from coal. They were demanding that the industries in their districts be given ration coupons for free.

So in a series of backroom deals, Waxman started trading coupons for votes. By the time he was done, 85% of the ration coupons had been given away to special interests for the first fifteen or so years of the cap-and-trade program. The big winners were electric utilities, which get 35% of each year’s allotment of coupons for free. Even here, however, some utilities do much better than others.

Waxman and Markey claimed that the purpose of giving away the coupons rather than auctioning them is to protect consumers from higher energy prices. This explanation does not pass the laugh test. Cap-and-trade can only reduce emissions if prices go up. Higher prices force consumers to use less energy and bring otherwise uncompetitive alternatives, such as wind and solar power, onto the market.

Everyone involved in the debate knows that the real purpose of giving away the coupons is to buy support from big businesses. As Dr. Peter Orszag, now director of the White House Office and Management and Budget, testified before Congress: “If you didn’t auction the permits [that is, ration coupons], it would represent the largest corporate welfare program that has ever been enacted in the history of the United States. All of the evidence is that what would occur is that corporate profits would increase by approximately the value of the permits.”

The giveaway worked. The Edison Electric Institute, which represents the major investor-owned utilities, endorsed the bill before it had even been introduced on May 15. All but four Democrats fell into line to support the bill. Rep. Phil Gingrey (D-Ga.) offered an amendment to auction 100% of the ration coupons, but it got only four votes (all Republicans), which shows that Republicans are nearly as beholden to corporate special interests as Democrats.

The environmental pressure groups, such as the Pew Center on Global Climate Change, Environmental Defense Fund, and Natural Resources Defense Council that function largely as fronts for big business went along with the free allotment of ration coupons. However, it was too much to stomach for far-left environmental groups led by Greenpeace USA, Friends of the Earth, and Public Citizen. They came out swinging against Waxman-Markey.

The committee debate did have its amusing moments. When Rep. Marsha Blackburn (R-Tenn.) offered an amendment to take carbon dioxide off the list of pollutants that can be regulated under the Clean Air Act, Markey replied, “We might as well say that the Earth doesn’t revolve around the sun or dinosaurs never roamed the Earth as say that carbon [dioxide] isn’t a pollutant.” Apparently, the gentleman from Massachusetts has been promoting global warming as a crisis for two decades without learning that carbon dioxide is a naturally-occurring trace gas without which life on Earth would not be possible.

Other Members who put up a good fight during the four days of committee deliberations, besides Barton, Blackburn, and Gingrey, included John Shimkus (R-Ill.), Mike Rogers (R-Mich.), Michael Burgess (R-Tex.), Steve Scalise (R-La.), Mike Ross (D-Ark.), Greg Walden (R-Oreg.), and Lee Terry (R-Neb.). I wasn’t able to watch all 36 hours of committee deliberations on C-SPAN, so I’ve probably missed several others worthy of mention.


Waxman-Markey’s prospects are unclear. House Majority Leader Steny Hoyer (D-Md.) said that the bill could go to the House floor by late June or early July. My guess is that if the Democrats can get it to the floor before the August recess, they can probably pass it on a close vote. But I wouldn’t bet on passage if the vote is delayed until fall. That’s because it’s a ramshackle mess that will start to fall apart as people start to poke at it and see what’s inside. Right now, the momentum is provided by the big corporations, such as Duke Energy, Dow Chemical, General Electric, and PNM (a New Mexico and Texas utility), that hope to make out like bandits. But there are losers as well, and they are going to begin to complain about it. For example, the entire real estate and building industries are big losers under certain provisions in the bill.

Moreover, the longer a vote is put off, the more time the general public will have to discover that Waxman-Markey is all about raising their energy prices. Rep. John Dingell (D-Mich.), former Chairman of the Energy and Commerce Committee, let the cat out of the bag during an April 24 hearing. He directed this comment at one of the witnesses testifying, former Vice President Al Gore: “Nobody in this country realizes that cap-and-trade is a tax, and it’s a great big one.” Higher energy prices are already deeply unpopular even when the purpose is to save the planet from global warming. A poll conducted in early April by Lauer Johnson Research for the National Rural Electric Co-operative Association (and posted at discovered that 58% of respondents were opposed to any program to address global warming that would raise their electricity bills by any amount at all. In 2007, that figure was only 35%.

How far might energy prices rise under Waxman-Markey? It’s hard to tell, but it’s clear that committee Democrats think it may require more than doubling electric rates and gasoline above five dollars a gallon. President Obama agrees. When Obama was running for President, he told the San Francisco Chronicle on January 17, 2008, “Under my plan of a cap-and-trade system, electricity prices would necessarily skyrocket.”

The activist Left has also recognized that the cost issue is key. To quote an April 17 fundraising e-mail by Adam Ruben of, “If Republicans convince voters that clean energy legislation amounts to a new tax, Obama’s plan is toast.” Assuming that fewer than ten of the House’s 178 Republicans vote yes on Waxman-Markey, the Democratic leadership is going to have to work hard to keep enough moderate and Blue Dog Democrats in line to pass the bill.

Sen. James Inhofe (R-Okla.), the chief opponent of global warming alarmism and energy-rationing legislation in Congress, has already predicted that Waxman-Markey has no chance of passing the Senate. He may be right, but past experience suggests that momentum sometimes changes quickly in the Senate or House when the other chamber passes a bill.

Even if Waxman-Markey is dead in the Senate, the Senate could still pass a much less ambitious and economically-damaging bill and then go to a House-Senate conference with both the Senate bill and Waxman-Markey on the table. Conservatives always lose in conference committees — for one thing because they meet in secret and for another because they always come down to horse trading. Thus I conclude that stopping the Waxman-Markey energy-rationing bill is still going to take an enormous effort by conservatives in Washington and across America.