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Clinton's Energy Tax: Now That's A Scorched Earth Policy


Economic Viewpoint

CLINTON'S ENERGY TAX: NOW THAT'S A SCORCHED-EARTH POLICY

Republicans were dying on the vine until Senator William V. Roth (R-Del.) had the wits to hold hearings on the Internal Revenue Service. Having reestablished resonance with the public, Republicans are promising major overhauls of the IRS and the tax code. But while Republicans prepare for an intraparty debate over the flat tax vs. a sales tax, Bill Clinton and his environmentalist allies are devising a regressive tax on energy.

The energy tax Clinton has in mind is five times larger than the BTU tax he tried to push through in 1993. Clinton needs this massive tax because he has foolishly committed to a U.N. "global-warming" treaty to be signed in Japan this December. The treaty requires the U.S., Japan, and Western Europe to drastically reduce their use of coal, oil, and gas to cut carbon-dioxide emissions. The only way this can be achieved is by pushing up energy prices with taxes to curtail consumption.

When the Republicans get their flat tax/sales tax show on the road, the left will aim its indignation cannons at the callous "party of the rich" for advocating regressive taxation. Yet the selfsame political left has nothing to say about Clinton's energy tax, which will have a far greater impact on the poor than any restructuring of the income tax.

A Clinton Administration interagency task force study concluded that an energy tax high enough to reduce emissions by Clinton's goal of 20% would cut economic growth in half by 2005, causing substantial unemployment. Real median household income, which has never recovered from Bush-Clinton tax hikes to reach its Reagan-era high of $36,575, would be devastated by skyrocketing gasoline and home energy bills, as well as by generally higher prices passed on by energy-using producers. The study concluded that the Clinton energy tax would keep consumers' real purchasing power below the current level for the foreseeable future.

SUNSPOTS? Clinton's top economic advisers are concerned about the economic and political fallout from the energy tax. They have been trying to arouse congressional and media concern by leaking the conclusions of the Administration's studies. But the media are in thrall to "global warming"--witness Ted Turner's censorship at CNN of paid advocacy ads against the treaty. Preparing for the worst, Clinton's economic advisers are working on ways to impose the tax through indirect means, so that consumers will blame businesses rather than government and environmentalists. The more the tax can be imposed through existing regulatory authority and fees on energy produced from government lands, the less Congress will enter the picture.

If Republicans had cooked up a hidden energy tax as a replacement for the income tax, the screaming would be heard at the outer edges of the galaxy. The difference is that Clinton acts in the name of the environment. Environmental extremists allege that "greenhouse gases" from energy use are causing the world to warm, with bad effects. This is disputed by other scientists, and recently The New York Times reported that sunspot cycles might be the culprit in any warming. The only clear fact at this time is that Clinton's energy tax rests on speculation about global warming, hardly a legitimate basis for decking the poor.

INTIMIDATION. Moreover, even if the global- warming presumption is true, Clinton's tax does nothing to avert it. It will merely redirect energy, capital, technology, and industry away from the U.S., Europe, and Japan to China, India, Mexico, and other Third World countries. These nations are not required by the treaty to reduce their energy use. With the rest of the world able to take up the slack, there will be no reduction in greenhouse gases, only in living standards in the few industrialized democracies.

From the U.S. standpoint, there are only two ways to understand this treaty. One is that Clinton has moved on from domestic redistribution to international redistribution. The other is that environmentalists allied with Clinton-Gore want a pristine playground and don't care what it costs the American people.

Republicans are too intimidated by the Greenshirts to save us from the energy tax. Again outmaneuvered, Republicans require the bold stroke. They should jettison their flat-tax/sales-tax ideas and accept Clinton's energy tax--but as a replacement for the income tax. If this doesn't cause Clinton to abandon his treaty, at least the negative economic effects of his energy tax would be offset by positive effects from abolishing the income tax. There is no other way for Clinton to indulge environmental fantasies without harming American jobs and living standards.BY PAUL CRAIG ROBERTS


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