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Smug Alert: House May Pass Cap-and-Trade, the 21st Century Version of Smoot-Hawley.

Powerline has a depressing post (tip to Instapundit) suggesting that House Speaker Nancy Pelosi may have obtained the votes to pass cap-and-trade by making concessions to farm state congressman. It seems that they are willing to support the bill if the government is willing to continue its anti-environmental policy of promoting ethanol.

Before the last few years, scholars used to say that we couldn't get a depression today because policymakers wouldn't make mistakes as bad as the ones they made in the 1930s. Though we've made some great moves in the last year — increasing the money supply and guaranteeing money markets funds — we're also repeating many of the same mistakes as Hoover and FDR (propping up failing industries; raising taxes; wasting money on unneeded public works projects; corruption; expensive new anti-business government programs).

Certainly, the Smoot-Hawley bill of 1930 was dumb; it imposed huge tariffs on foreign goods imported into this country, which backfired when those countries raised their tariffs too. In a sense, cap-and-trade looked like it would be even dumber; it seemed that it might impose a tariff on our own US manufactured goods, but not on foreign goods. But the House realized this and decided to require the administration to impose tariffs on goods imported from countries that don't restrict their own emissions to the same extent as the US (tip to Maguire and OandO. This 21st century version of Smoot-Hawley will probably take years before the tariffs will be imposed.

The cap-and-trade bill, if passed by the Senate and actually implemented over the next few decades, would do more damage to the country than any economic legislation passed in at least 100 years. It would eventually send most American manufacturing jobs overseas, reduce American competitiveness, and make Americans much poorer than they would have been without it.

The cap-and-trade bill will have little, if any, positive effect on the environment — in part because the countries that would take jobs from US industries tend to be bigger polluters. By making the US — and the world — poorer, it would probably reduce the world's ability to develop technologies that might solve its environmental problems in the future.

If this bill were very likely to pass the Senate and if the restrictions were to be phased in quicker in the early years of the program than the bill provides, then a double-dip recession would be a near certainty. But because the Senate may reject such an anti-business bill altogether and because in future years the strictures of the law may well be postponed just when they might bite businesses, it is hard to predict what might happen to the economy in the short run.

Nonetheless, if the House and Senate were both to pass cap-and-trade, the chance of a double-dip recession, which was a remote possibility just last week, would be converted into a substantial possibility, though probably still less likely than not.

What cap-and-trade accomplishes besides causing businesses to make decisions that would otherwise be inefficient is that it makes its proponents feel morally superior.

This phenomenon was explored in the classic South Park episode, Smug Alert.

Here is Matt and Trey's official commentary to this episode:

Unfortunately, the price of "smug" is likely to be staggering.