Obama's Secret Slush Fund
The big news in last year’s budget release was the revelation that the Obama administration planned to use cap-and-trade to raise $646 billion dollars over ten years to finance its big spending programs. At the time I wrote here in the Fox Forum that estimate was a lowball of what actually constituted the biggest tax increase in U.S. history, something White House economist Jason Furman later admitted when he revealed the real revenue would likely be triple the official estimate. So the first thing I checked in this year’s budget was how much revenue was expected from the cap-and-trade energy tax, to which the president reiterated his commitment in his State of the Union address last week. The surprising answer is the budget actually has, literally, a blank line for the cap-and-trade tax. A black box. A slush fund. A secret budget-within-the-budget. Talk about a lack of transparency.
The blank line is labeled: “Allowance for climate policy.” There is no disclosure in the new budget of the revenue expected, but as recently as August 25, 2009 (in Obama’s 2010 Mid-Session Review) the administration counted on $627 billion in “climate revenues” between 2012 and 2019.
The 2011 budget tries to explain away the costs of cap-and-trade a footnote (p. 4) that says all of the revenue will be spent -- claiming climate policy is therefore deficit neutral:
“A comprehensive market-based climate change policy will be deficit neutral because proceeds from emissions allowances will be used to compensate vulnerable families, communities, and businesses during the transition to a clean energy economy. Receipts will also be reserved for investments to reduce greenhouse gas emissions, including support of clean energy technologies, and in adapting to the impacts of climate change, both domestically and in developing countries.”
But deficit neutrality is beside the point. This is a budget; it’s supposed to show us the total amount of revenue planned and what it’s going to be spent on. The blank line with the above footnote is simply a promise to spend every penny of this huge new tax hike. That’s not very comforting to the millions of Americans who will pay the price for this tax, and deserve to see an honest budget that shows how much the tax will raise and precisely how it will be spent.
The blank line for hundreds of billions or trillions of dollars in higher taxes and spending flies in the face of every promise this administration has made about transparency and accountability, and conceals the true scope and cost of Obama’s budget plans.
For years President Obama and White House Budget Director Peter Orszag have made clear that the cost of any cap-and-trade program must be written into the budget as revenues, whether emissions permits are auctioned or given away. In testimony before the Senate Finance Committee, then Congressional Budget Office Director Orszag insisted that the cost of cap-and-trade allowances must be shown as budgetary revenues:
“The federal budget should record the value of allowances that are given away by the government if the recipients of the allowances could readily convert them into cash. In particular, the budget should record the value of those allowances, when they are distributed, as both revenues and outlays. That procedure, which CBO has already applied in its estimates for S. 2191, underscores that giving away allowances is economically equivalent to auctioning the allowances and then dedicating the proceeds to the recipients.”
Now, for the sake of political expediency and to create a façade of fiscal responsibility, Orszag has presented a budget that does exactly the opposite. Obama and Orszag have thrown transparency out the window and created a black box for taxes and spending on climate change hidden inside its 2011 budget. They are still proposing the biggest tax increase in U.S. history, but instead of lowballing the revenue estimate the way they did last year, they are concealing it entirely.
Phil Kerpen is vice president for policy at Americans for Prosperity. He can be contacted through PhilKerpen.com. Follow him on Twitter and Facebook. His free two-minute Podcast is available daily. He is a frequent contributor to the Fox Forum.