President Obama’s merry band of corporate allies recently suffered serious defections. Top drug lobbyist Billy Tauzin, a point man for health care reform, quit last week. Tuesday, we learn ConocoPhillips, BP and Caterpillar quit the U.S. Climate Action Partnership, or USCAP, the corporate lobby backing Obama’s cap-and-trade climate proposals.
The crumbling of Obama’s corporatist network undermines one pillar of Obamanomics: the notion that with enough cooperation between business and government, everyone can win.
Alternating with his disingenuous populist anti-big-business rhetoric, Obama has also offered the opposite: Hope & Change, the-wolf-will-live-with-the-lamb talk of cooperation between business and government.
This cooperation talk is not new. During and after World War I, business giants sought to perpetuate the War Industries Board. WIB member and historian Grosvenor Clarkson described the “contempt” industry leaders had for “the huge hit-and-miss confusion of peacetime industry, with its perpetual cycle of surfeit and dearth” — replacing competition with government-guaranteed profit.
USCAP was another such effort. Oil companies, manufacturers and financial companies claimed they could craft an “everyone wins” climate control plan. In truth, USCAP’s corporate membership spans the spectrum from scoundrels to fools.
The scoundrels knew they would profit — at everyone else’s expense — from cap and trade. General Electric started Greenhouse Gas Services, or GHGS, to trade and generate carbon offsets — a nearly worthless product today that would be mandatory under cap and trade.
GE’s partner in GHGS, power giant AES Corp., recently joined USCAP — a fact USCAP’s spokesmen touts in response to the recent defections. AES, though, operates coal-fired power plants in the Third World, where they will benefit from a policy that gets the United States off of coal, lowering the world coal price.
Caterpillar, ConocoPhillips and BP realized they were on the wrong side of the scoundrel-fool divide. Conoco stated in a press release: “House climate legislation and Senate proposals to date have disadvantaged the transportation sector and its consumers, left domestic refineries unfairly penalized versus international competition, and ignored the critical role that natural gas can play in reducing [greenhouse gas] emissions.”
Competitive Enterprise Institute energy policy director Myron Ebell translated this:
“In other words ConocoPhillips isn’t going to make out like a bandit if the Waxman-Markey or Kerry-Boxer cap-and-trade bill is enacted. Conoco Phillips is a major oil and gas producer and owns major oil refineries. Cap and trade set up in the right way (that is, so as to benefit ConocoPhillips) would hit coal first because burning coal produces more carbon dioxide emissions per unit of energy produced than does gas or oil.
Caterpillar, as a U.S. manufacturer, would be hit hard by cap and trade. But many politicians have promised to pair cap and trade with protectionist policies taxing products from countries not regulating emissions.
But other USCAP members — such as Nike and Alcoa — are making the opposite play. Nike, which makes its shoes and golf clubs in Malaysia and China, would be untouched by cap and trade, unlike its smaller competitors, who make shoes in New England. Alcoa’s energy-intensive manufacturing is in Australia, where it helped kill cap and trade. But its lightweight (and expensive) aluminum car frames are made more economical in the U.S. by Waxman-Markey.
These details — who gets free credits, whose emissions we measure — are where these coalitions crumble. Once legislative language emerges, it’s clear not everyone can win — some will lose.
This is inevitable in Obamanomics. Big government, unlike the free market, doesn’t create wealth — it redistributes it. In a free market, a rising tide can lift all boats. Under Obamanomics, businesses can rise only by pulling someone under — usually taxpayers, competitors, consumers or workers.
As this has become clear, Obama’s corporate partnerships, in energy and health care, have begun to melt down.
Timothy P. Carney is The Washington Examiner’s Lobbying Editor. His K Street column appears on Wednesdays.
