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A Project of The Annenberg Public Policy Center

Peters’ ‘War’ on Michigan Jobs?

A Web ad from Republican Senate candidate Terri Lynn Land claims her opponent, Rep. Gary Peters, backed “carbon taxes” that would have “killed up to 96,000 Michigan jobs.” But Peters didn’t support a carbon tax – which has never advanced to a vote in Congress.

Peters actually supported cap-and-trade legislation that independent analyses said would cause a small reduction in employment.

The 96,000 figure comes from the National Association of Manufacturers’ analysis of two possible carbon taxes, which are direct taxes on the carbon content of fuels such as coal, oil and gas. But the ad cites Peters’ vote for the 2009 American Clean Energy and Security Act, which wasn’t a carbon tax. Instead, the legislation Peters supported would have set a limit on carbon dioxide emissions and given companies the ability to buy and sell allowances, or permits, for their emissions. Peters says he prefers cap-and-trade.

Land’s online-only video begins with an ominous warning: “It’s a war on American jobs and paychecks. Who’s waging it? Gary Peters.” On screen, we see a citation for 2009’s H.R. 2454 as the narrator says: “Peters supported carbon taxes that would have hiked utility bills, raised gas prices by 20 cents a gallon and killed up to 96,000 Michigan jobs.”

And the campaign has continued to push the 96,000-jobs claim. Land spokeswoman Heather Swift wrote on the campaign website: “If Congressman Peters is successful in passing his radical agenda, it would kill 96,000 blue-collar jobs right here in Michigan.”

Even the NAM analysis of carbon taxes doesn’t say that type of emissions-reduction strategy would “kill 96,000 blue-color jobs.” Instead, the figure is a loss of worker income expressed as an approximation of jobs, and the report notes its number “does not represent a projection of the number of workers who may need to change jobs and/or be unemployed.” And again, NAM’s report didn’t analyze the legislation Peters supported.

H.R. 2454 is known as the Waxman-Markey cap-and-trade bill for its sponsors, Democratic Reps. Henry Waxman and Edward Markey. It passed the House in 2009 — and yes, Peters voted for it. But the bill died in the Senate. Instead of calling the bill what it is — a cap-and-trade plan — Land’s campaign uses the more politically toxic term “carbon taxes.”

An actual carbon tax, however, is so politically toxic it hasn’t even made it out of a committee. When Alaska Sen. Mark Begich was wrongly accused of supporting a carbon tax earlier this year, Charles Komanoff, director of the Carbon Tax Center, told us: “To my knowledge, there has never even been a hearing, even just an informational hearing on anything that is or resembles a carbon tax bill.”

There was a carbon tax bill introduced in 2009. It died in committee, and Peters did not sign on as a co-sponsor. That bill would have changed the tax code to put a direct excise tax on carbon — meaning producers of fossil fuels such as coal and oil would have paid it — and provided tax rebates or credits to individual taxpayers.

Peters recently confirmed his support for cap-and-trade legislation, drawing a distinction from a carbon tax and calling cap-and-trade a “market-based solution” that’s “certainly something to take a look at” in a radio interview on “Michigan’s Big Show” on May 28.

There are similarities and differences in the two policy approaches, as a March 2009 Congressional Research Service report explains: “Both a carbon tax and a cap-and-trade system would place a price on carbon. Both a carbon tax and cap-and-trade system are intended (and expected) to increase the price of coal, oil, and natural gas. Under either program, these price increases would ultimately be borne by energy consumers, both businesses and households.” The price increases lead to a change in behavior — lower usage of fossil-fuel energy and increased use of clean energy and more efficient energy. But, CRS explains, a carbon tax controls price, while cap-and-trade controls emissions quantity. With a carbon tax, the price is set, but emissions may fluctuate or be more difficult to control. With cap-and-trade, the reverse is the case: Emissions are controlled; the price of allowances, or emissions permits, fluctuates.

And there are many different ways to structure either method, making a comparison of such climate policies without specific details difficult, if not impossible: “The policy continuum demonstrates that a comparison between a carbon tax and an emissions cap is not a straightforward exercise,” the CRS report says. “Design details are critical for an appropriate comparison.”

(The Land campaign claims Peters is “on record” supporting a carbon tax because he voted against an amendment this year to deem a carbon tax a “major rule” by an executive agency that would require congressional approval. But that’s not clear support for such a tax — which the White House doesn’t back either — and the amendment was to a bill requiring congressional approval of “major rules,” including any rule made under the Affordable Care Act. Not surprisingly, the votes fell largely along party lines.)

Waxman-Markey would have required polluters to have allowances, or permits, in order to emit carbon dioxide. Unused allowances could be banked and used in the future or sold, and the money the government reaped from the permits would be used to offer rebates and other price protections to consumers, aid industries at risk, and invest in clean energy programs. Electric utilities and oil refiners would face caps on their emissions, with a system of trading allowances and offsets that could be purchased to go beyond the caps. Hence the name, cap and trade.

The plan Peters supported would have led to the loss of some jobs. We looked at Waxman-Markey back in 2009 when Democrats and supporters of the bill were claiming it would create jobs in clean energy industries and Republicans and opponents said it would kill jobs. Our finding: The bill would have caused a loss of jobs, but opponents — including the National Association of Manufacturers — were exaggerating the likely impact. Independent experts said the cap-and-trade legislation would have led to a small loss of jobs.

At that time, NAM claimed in an ad that the bill “will cost up to 2.4 million U.S. jobs,” a number that came from the most pessimistic of 11 scenarios analyzed by the Energy Information Administration. EIA said that worst-case scenario was based on assumptions that were “inherently less likely” than its other cases. EIA’s most optimistic case showed a loss of 388,000 jobs 20 years in the future, compared with what would have happened without the law. And its “basic” case found a loss of 597,000 jobs nationwide. So back then, NAM picked the most negative and “inherently less likely” number to tout in TV ads.

Meanwhile, the nonpartisan Congressional Budget Office said there would be “a little” job reduction, but didn’t put a number on it.

“[C]limate legislation would cause permanent shifts in production and employment away from industries that produce carbon-based energy and energy-intensive goods and services and toward industries that produce alternative energy sources and less energy-intensive goods and services,” CBO Director Douglas Elmendorf said at the time. “While those shifts were occurring, total employment would probably be reduced a little compared with what it would have been without such a policy, because labor markets would most likely not adjust as quickly as would the composition of demand for final outputs.”

A 2010 CBO report reviewed other research on the impact of policies to reduce greenhouse gas emissions and also concluded that “total employment during the next few decades would be slightly lower than would be the case in the absence of such policies.”

And John Reilly at the Joint Program on the Science and Policy of Global Change at the Massachusetts Institute of Technology told us in 2009 MIT’s modeling showed the Waxman-Markey legislation would cause a “small net reduction in total employment – but quite small.”

The 96,000-jobs figure used by the Land campaign comes from NAM again, but this time, it’s a 2013 analysis of two hypothetical carbon tax proposals, not Waxman-Markey. When NAM released the report, the group’s president, Jay Timmons, was quoted by Reuters as saying the manufacturers group wanted to show the negative effects of a carbon tax so it “never sees the light of day in Congress.” In fact, as we said earlier, it hasn’t.

NAM found that its two scenarios would lead to a “loss of worker income equivalent to 22,000 to 33,000 jobs in 2013 and 75,000 to 96,000 by 2023” in Michigan. And that high-end scenario had one thing in common with Waxman-Markey: It targeted a similar reduction in emissions, an 80 percent reduction from 2005 levels by 2053. But the NAM analysis makes clear there are differences between its carbon tax scenarios and Waxman-Markey, namely that the cap-and-trade legislation would have included offsets and the ability to bank allowances. Another difference: NAM’s scenarios use the carbon-tax revenue to reduce the debt and personal income tax rates, while Waxman-Markey called for using allowance revenue for consumer price protections, investments in clean energy projects and aid to industries affected by the bill.

As a May 2013 Congressional Budget Office report says: “The ultimate economic effects of a carbon tax, however, would depend on how the revenues from the tax were used,” with deficit or tax-rate reduction reducing the total cost to the economy and other methods directing relief to those who are disproportionately affected.

For a comparison, the NAM analysis said its high-end carbon tax would cause a loss of worker income equivalent to 2.8 million jobs nationwide in 2023, while the worst-case-scenario number it used in 2009 for Waxman-Markey was 2.4 million jobs in 2030. EIA’s basic case estimate, meanwhile, was a nationwide loss of 597,000 jobs under Waxman-Markey in 2030.

Another technical note: NAM’s figure is for reduced labor income, which it says will come because companies will have “higher costs and lower labor productivity.” (CBO says an increase in fossil-fuel costs, and subsequently goods and services, would “diminish the purchasing power of people’s earnings — that is, real wages would fall.” And that would cause people to work less, “reducing the overall supply of labor.”) NAM’s analysis divides the total reduction in income by the average annual income per job to come up with “job equivalents.” But it notes that’s not a direct loss of jobs: “This does not represent a projection of the number of workers who may need to change jobs and/or be unemployed, as some or all of the lost labor could be spread across workers who remain employed.”

Again, the NAM analysis — and the 96,000 jobs figure used by the Land campaign — doesn’t pertain to the cap-and-trade bill Peters supported. Independent experts did find the 2009 bill Peters did back would likely lead to a small loss of jobs. But we don’t know how a future cap-and-trade bill would be structured, details that would figure into any analysis of its potential impact on jobs.

When we asked the Land campaign about the 96,000 figure and the fact that it wasn’t from an analysis of Waxman-Markey, the campaign pointed to another study, from The Beacon Hill Institute, a conservative think tank at Suffolk University, that estimates a much lower loss of Michigan jobs — 28,384 in 2020. (NAM’s figure pertains to 2023.) The study converts Waxman-Markey into an “equivalent carbon tax” based on the emissions targets of the cap-and-trade legislation.

The campaign also pointed to a much higher job-loss estimate from the conservative Heritage Foundation, which said Michigan would lose 99,271 jobs in 2035. Heritage’s nationwide job loss estimate of 2.5 million by 2035 mirrors EIA’s “inherently less likely” scenario.

Michigan currently has 4.1 million jobs, according to the Bureau of Labor Statistics.

Electricity Bills and Gas Prices

As for the Land campaign’s claim that the policy Peters actually did support “would have hiked utility bills, raised gas prices by 20 cents a gallon,” there’s support for that.

Increasing the cost of fossil fuels would indeed increase the cost of items like coal-powered electricity and gasoline, leading to lower usage of such fuels and increased demand for clean energy products or energy conservation materials, such as insulation. Even with returning some of the government revenue to individuals to lessen the impact, costs were expected to increase under the Waxman-Markey bill.

The CBO estimated the cost to households would be $175 in 2020, nearly three times the Environmental Protection Agency’s estimate for that year. As for gas, the EPA estimated prices would go up $0.25 in 2030, and the Energy Information Administration said gas would cost about 20 cents more per gallon sooner than that — in 2020, according to its “basic case” scenario.

The Land ad also says: “It was called the largest tax increase in American history. And Gary Peters voted for it.” It was called that by the conservative editorial page of the Wall Street Journal, which said in 2009: “Americans should know that those Members who vote for this climate bill are voting for what is likely to be the biggest tax in American history.”

Land’s ad says Peters is “bankrolled by billionaire radical Tom Steyer.” A climate-change activist, Steyer, through his NextGen Climate Action group, has vowed to spend $100 million or more in the 2014 elections, focusing on seven races, including the Michigan Senate race. On the Republican side, meanwhile, the conservative Americans for Prosperity, backed by the billionaire Koch brothers, has repeatedly attacked Peters in TV ads.

— Lori Robertson