Job Creation vs. Ideology

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WASHINGTON-Nothing demonstrates the hollow nature of President Obama's promise "to do what it takes to create jobs," as he said at the White House, than the energy policy in the proposed 2011 Budget he sent to Congress. The president's energy policy, if adopted by Congress, would ship jobs to China and discourage job creation at home, even as the administration forecasts unemployment to remain above 8% through 2012.

In a section entitled "Creating the Clean Energy Economy of Tomorrow," the president asks Congress to enact policies that would reduce greenhouse gases by 17% by 2020 and more than 80% by 2050. This is breathtaking regulatory ambition-and dangerous for the American economy and workforce.

Mr. Obama believes that increases in greenhouse gases contribute to global warming, which purportedly hurts plants and animals by damaging their environments and harms humans by flooding. Even if true, unilateral emissions reduction by America, without similar action by China and India, would have a negligible effect on global warming. And with the revelation that scientists at the University of East Anglia in Britain destroyed original temperature data, the science of global warming is far from settled.

At a time of fragile or nonexistent employment growth -we'll know more when the Labor Department issues its monthly report on Friday - Mr. Obama's proposals don't match job concerns of average Americans. If his proposals are enacted, American greenhouse gas emissions, chiefly carbon dioxide, would decline on a per person basis to late 19th century levels. Businesses would be required to invest in energy efficiency and low-carbon or zero-carbon fuels, to offset emissions through investments in agriculture and trees, and to pour money into emission-offset activities abroad.

The administration claims that this would create jobs, as people would be employed to produce the new technology. But the funds for new expenditures have to come from somewhere, and money spent on new energy-saving products is money that cannot be spent for other activities. This would drive down employment in other industries.

Mr. Obama is proposing the same "cap-and-trade" mechanism that he suggested a year ago in his initial budget. An $846 billion cap-and-trade bill passed the House of Representatives in June in legislation sponsored by Democrats Henry Waxman of California and Ed Markey of Massachusetts.

Allowances to emit greenhouse gases within the United States would be issued by the Environmental Protection Agency at a steadily declining rate through 2050. If emissions exceed a firm's allowance, or cap, the company would have to buy allowances from the government or other firms. Such mandatory purchases would be a tax under another name, and like any tax would drive up costs, which would be passed on to consumers.

Not only do such proposals penalize American firms through higher costs, they give firms a financial incentive to move abroad to acquire "offsets," credits from activities that supposedly lower carbon emissions elsewhere. The offset provisions encourage firms to shift economic activity to countries with laxer emissions standards, further damaging U.S. job creation. A plant's emissions might exceed its U.S. allowances, yet its technology might produce lower emissions than the norm in a developing country, allowing relocation abroad to count as an offset.

Furthermore, requirements that alternative energy be used in the United States don't mean that the capital goods necessary to produce alternative energy have to be made here. China is ramping up production of wind turbines and solar panels, with the intention of exporting them to the United States. When President Obama speaks of green energy as creating new jobs, he is correct-new jobs for millions of Chinese manufacturing wind turbines and solar panels in China.

If global warming is indeed a problem - and it currently polls low on Americans' list of concerns, far behind jobs - it could be addressed in less expensive ways, such as injecting fine sulfur particles into the upper atmosphere to slow down the sun's warming, or spraying clouds with salt water to make them reflect radiation away from earth. These approaches could be successful without other countries' cooperation.

At the same time as the administration moves to lower greenhouse gas emissions, it also proposes getting rid of incentives for American workers to produce oil, natural gas, and coal in the United States. Over the next decade, oil, gas, and coal companies would lose almost $39 billion in exploration and production incentives if Congress adopts the Obama policy, including favorable treatment of new drilling techniques and write-offs for equipment. Less development of carbon energy in America translates into fewer American jobs. And the jobs generated by domestic exploration would necessarily remain in the United States, unlike jobs in alternative energy.

Developing our energy resources means more jobs for Americans. More environmental regulations and so-called green energy means more jobs for China and fewer jobs for America. Members of Congress who are serious about creating jobs in America for American workers will look closely at the energy sector. It is time for Congress to stand up for American workers and unshackle them from government edicts that send to foreign lands American investment, American growth, American progress, America 's future, and America 's jobs.

Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is senior fellow and director of Economics21 at the Manhattan Institute. Follow her on Twitter: @FurchtgottRoth.   

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