Since Congress has attention deficit disorder, a new president has to select one major change to champion to establish his place in Washington. President Clinton chose universal health care but overreached and got nothing.  Similarly, President Bush chose privatizing socials security and came up empty. President Carter chose the excess profits tax on oil & gas, got congressional approval, then discovered that the normal evolution of the market economy made the new law irrelevant. Only Presidents Reagan and Kennedy were successful.  Both got major cuts in tax rates and quickly got credit for improving economic growth.

Let’s suppose that Obama crafts an omnibus bill that incorporates what appear to be the dominant themes of his campaign now: reduce CO2 emissions, reduce dependence on oil, punish evil oil companies and increase the purchasing power of low and moderate income households. This can be done with only two items. A cap and trade system for
CO2 emissions can reduce our “carbon footprint” and provide funding for renewable energy capacity investments.  And a capital levy on oil companies can punish the evil companies and provide funds to transfer to low and moderate income households.

Since Obama is at his best as a visionary and has no managerial or executive experience, he would probably opt to do both at once.

The cap and trade approach to CO2 emissions is coming into use now in Europe and soon in Ontario, Canada. But there is too little experience with it to draw conclusions about its impact. Supporters claim it will save the planet.  Other say it is soviet style government economic planning that is doomed to fail.

The essence of a cap and trade system is “someone” decides how much CO2 the environment can stand, sells emissions quota to all emitters and then permits them to sell an excess quota to someone with too small a quota.  The sale of the quota funds government investment in renewable energy and energy savings technology, including building renovations.  This will require a parallel accounting system with CO2 substituted for money. Of course, you will still have to deal with the money based accounting and system. You will have to balance a money and a CO2 budget simultaneously. Wall Street will love this.  It doubles their trading opportunities.

The capital levy on oil companies is much simpler.  A few companies are directed to turn over a percentage of their assets to the IRS which then send it out in nearly a hundred million checks similar to the process for the 2008 tax rebates. This massive income transfer provides the popular support for the much harder to understand cap and trade system when the two items are bundled together.

Obama may not get everything he asks for. Indeed, he may not even get the change to ask for it. But be prepared.  Even a scaled down cap and trade plan covering only the largest emitters could force your cement, asphalt or steel supplier to close, forcing you to find imported substitutes and pay for their delivery. At the same time, be ready to bid on perhaps a $100 billion of government or government controlled contracts ranging from biofuel distilleries to insulating older homes to site preparation for wind farms. There are unlikely to be any contracts for new homes, commercial buildings or highways.

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