The Congressional Budget Office recently issued its report on the Waxman-Markey bill. The Washington Times soon trumpeted: “CBO puts hefty price tag on emissions plan: Obama’s cap-and-trade system seen costing $846 billion.”
This is quite misleading. Actually, the CBO report tells us virtually nothing about the economic costs of the bill or how much consumers will lose out of pocket. In fact, the way most people understand the idea of a budget deficit, it doesn’t really say much about that either. CBO’s analysis is based on some very technical accounting that can easily be misinterpreted. In particular, CBO treats the issuance of free carbon allowances quite differently than most people would expect.
CBO’s job is to project the bill’s effect on the federal budget. Here’s the bottom line from the report, which is what the Washington Times story was reflecting:
CBO estimates that implementing this legislation would result in additional revenues, net of income and payroll tax offsets, of $253.2 billion over the 2010-2014 period and $845.6 billion over the 2010-2019 period. We estimate that direct s... Read more