The Government Is About to Pull $3,000 Out of Your Pocket

The Government Is About to Pull $3,000 Out of Your Pocket
By Matt Badiali

On Friday, the House of Representatives passed H.R. 2454, the American Clean Energy and Security Act of 2009, by a vote of 33 to 25.

According to the bill's sponsors, it is "a comprehensive approach to America's energy policy that will create millions of new clean energy jobs, save consumers hundreds of billions of dollars in energy costs, enhance America's energy independence, and cut global warming pollution."

If you believe that, I hear Bernie Madoff is starting a new fund.

The bill will actually levy financial penalties against companies that produce carbon dioxide and other gases. Carbon dioxide is a byproduct of burning stuff – leaves, coal, gasoline, etc.

Coal and natural gas are the two cheapest sources of power at 1¢ per kilowatt hour and 1.4¢ per kilowatt hour, respectively.

Wind power is seven times more expensive than coal; solar is 35 times more expensive. You might as well try to generate the nation's electricity with a bunch of little Honda generators.

The law would require greenhouse gas emissions cut to 97% of 2005 levels, approximately 6.98 billion tons, in 2012. We produced 7.28 billion tons in 2007, the latest data available. It's a miniscule change, and it won't help the climate in the least.

By 2050, the figure jumps to an insane 17% of 2005 levels. There's no way that will work... In 2007, burning oil contributed 2.6 billion tons of carbon (35%). Burning coal contributed 2.2 billion tons (30%). And burning natural gas contributed 1.2 billion tons (17%). Those three sources contributed 70% of our electricity and all of our transport fuel. Where the hell are we going to come up with a replacement... even in 40 years?

Let's be clear: This 1,200-page bill isn't about saving the environment over the next few decades. This bill is about dollars – yours and mine – right now.

As soon as it's enacted, it will increase our electric bills by 32%. The costs will climb to an extra 62% within the first 18 to 24 months. Here's why:

Coal power plants that produce more carbon dioxide than they're allowed will have to buy the right to produce more. That additional cost will be passed on to consumers. According to the Congressional Budget Office, we'll pay about $846 billion to the federal government from 2010 to 2019.

That's not the only cost we're going to shoulder. Any energy-intensive business is going to get clobbered by this bill. In 2012, when the rules go into affect, oil refiners will be forced to add $0.77 per gallon of gasoline, $0.83 per gallon of jet fuel, and $0.88 per gallon of diesel fuel, according to the American Petroleum Institute.

Companies buying that fuel are going to pass that cost directly along to you and me. We'll remember 2012 as the year of $6 gasoline. Rex Tillerson, CEO of ExxonMobil, thinks it will actually increase imports of finished fuels, because foreign refined products will be cheaper.

U.S.-based steelmakers will also get crushed. Foreign steelmakers won't have to worry about the onerous energy taxes, and steel imports will remain cheap. So, unlike refiners, U.S. steelmakers won't be able to pass along energy costs. That will be the story for other U.S. metal industries like zinc, aluminum, silver, and gold.

But the worst-hit industry will be coal. Portrayed as the villain in the war on climate change, many coal companies (particularly on the East Coast) will go out of business.

According to analysis by the Heritage Foundation (a conservative think-tank), the combined cost of the bill would be $3,000 per family in 2012 and $20,000 per household by 2035. If you make $50,000, you're looking at an after-tax 7% paycut as soon as the legislation hits.

How can a family be expected to carry a $20,000-per-year burden, no matter how far in the future it's placed? When you add all the costs up, direct and indirect, it spells a major decline in our standard of living.

We have one more chance to stop this legislation, when the Senate takes up the bill. The problem is, few Democrats bucked the party in the House. On a party-line vote, this passes the Senate, too. Then we're in real trouble.

Good investing,

"good intentions that we will pay for