Government Studies, Postage Stamps and the True Cost of the Waxman-Markey Energy Tax

In the world of Washington policymaking facts and figures are regularly thrown around to frame arguments in support of or against a particular policy. In the case of the Waxman-Markey energy tax, one such figure made a late-hour entry, gaining broad currency for its catchy tune and visual: the largest regulatory intervention in U.S. history, a plan expressly designed to "bankrupt" one-half of our nation's energy supply and cause your energy prices to "necessarily skyrocket" (Barack Obama, January 2008), will actually increase your household energy prices by just $175 per year. Before you breathe a CO2-filled sigh of relief that your government is forcing you to shell out a mere $15 bucks more per month to save the planet, it's worth taking a look at the fine print.

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First, the drama. Shortly before the Waxman-Markey energy tax passed the House of Representatives, the Congressional Budget Office (CBO) released an analysis of one specific portion of the 1400-page bill. Responding to a specific information request from Representative Dave Camp (R-MI), the CBO found that the cap-and-trade section of the measure could cost American households $175 per year in 2020. Based on this snippet, proponents of the scheme, including President Obama, repeatedly claimed that the Waxman-Markey bill would cost consumers a mere "postage stamp a day." And while it is unlikely that we will ever know the bill's exact overall hit to our pocketbooks, the claim that Waxman-Markey bill will only cost $175 per household withers under scrutiny. As mentioned, the CBO very specifically estimated the cost of the cap-and-trade component of the bill at a very specific point in time--the year 2020. There are many other aspects critical to the overall proposal adding further costs to businesses and making households poorer, and the cap-and-trade restrictions become far more onerous after the year 2020. (We'll come back to this point later on.) This was of course by political design, despite cloaking the bill in the ritual mantra of "we must act now." But the fact that the CBO study only looked at one section of the bill was lost in media reports on the bill. Time Magazine, for example, stated that "the bill would cost the average U.S. household $175 in higher energy costs" and a similar claim was made by the New York Times, stating that the provision might cost "just" $175 per year.