Monday, June 29, 2009

Declaring War on the American Economy

thomas-jefferson-bigJohn Steele Gordon


The Cap-and-Trade bill that passed the House yesterday will be a declaration of war on the American economy if it ever is enacted into law. It is ostensibly supposed to help the American economy transition from the old, carbon-based industrial economy to the broad, sunlit (and presumably unpolluted) uplands of a post-industrial one. According to an infomercial masquerading as an AP news story, the “climate bill may spur energy revolution.” Overlooked by the AP and other minions of the left is the fact that that revolution has been underway, largely without the federal government’s help, for more than a generation now. In 1970 a one-percent increase in GDP meant a one-percent increase in oil consumption. Today its means less than a third of one percent increase in oil consumption. It would be considerably less than that had the left not brought the development and exploitation of nuclear power to a screeching halt thirty years ago because too many of them went to see The China Syndrome. (The producers, to be sure, arranged, in a stroke of commercial genius, for the movie to open twelve days before the accident at Three-Mile Island occurred.)

And as Kim Strassel pointed out yesterday in the Wall Street Journal, the so-called science behind this massive bill is looking increasingly shaky.

If it’s enacted in its present form, what the cap-and-trade bill will certainly do is

1) Massively increase federal power not only over the economy but over daily life as well. Building codes have always been the province of the states, but this bill, according to one blogger, would require federally mandated energy audits before you could change a window in your home and specifies the number and location of electrical outlets to be permitted;

2) Start a trade war with India and China by slapping tariffs on goods from countries that don’t conform to US standards on carbon emissions;

3) Act like the governor on a steam engine, increasingly slowing down the economy through energy taxes whenever the economy accelerates. In other words, its virtually guarantees economic stagnation at best. And most economists who are not working for liberals think it will be far more economically pernicious than that.

This last, at least, is in the great tradition of the Democratic Party. The party’s founder, Thomas Jefferson, tried to deal with the high-handed ways of the Royal Navy and French privateers by a blockade–not of their ports, but of ours. Thomas Jefferson, in other words, went to war with the American economy. In a series of acts beginning in December, 1807, that Congress passed at Jefferson’s behest, American merchants were forbidden to trade with any other country on pain of fines of $10,000 and forfeiture of goods. The U.S. Navy was dispatched to help enforce the act by stopping vessels leaving American ports. Port cities (which at that time were all large American cities and many small ones) plunged into depression. Smuggling across the Canadian border grew so extensive that Jefferson actually declared parts of northern New England to be in a state of rebellion. The New England economy came close to collapse as it was then heavily dependent on foreign trade. (The American merchant marine at this time–mostly New England owned and built–was second in size only to Britain’s.)

The Embargo Act was, politically and economically, an utter disaster, as anyone who understood anything about commerce, economics, and human nature could have foreseen. Indeed, Jefferson’s Secretary of the Treasury, Albert Gallatin, did understand and wrote the president, “As to the hope that it may. . . induce England to treat us better, I think is entirely groundless. . . . Government prohibitions do always more mischief than had been calculated; and it is not without much hesitation that a statesman should hazard to regulate the concerns of individuals as if he could do it better than themselves.”

Good advice from a very wise man who did this country many a good service. Too bad Thomas Jefferson didn’t take it. Nor, alas, will his present-day successor if he gets a chance to sign this utterly misbegotten bill.

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