"Simplistic and Misleading"
How do Republicans figure American households will be out $3,100? The figure is based in part on a 2007 study by the MIT Joint Program on the Science and Policy of Global Change. The study estimated that a cap-and-trade market for 2015 would be worth $366 billion in revenue. Republicans, figuring that that amount would be passed from the energy companies to consumers, calculated the average cost per household by dividing $366 billion by 117 million households (a population of 300 million divided into households of 2.56 persons) to get $3,128, or roughly $3,100.
However, one of the authors of the MIT study disputes that figure.
In a letter sent to House Minority Leader John Boehner (R-Ohio) on April 1, John Reilly, associate director for research at the MIT Joint Program on the Science and Policy of Global Change, said that the study he coauthored had "been misrepresented in recent press releases distributed by the National Republican Congressional Committee." He said the GOP's calculation fails to account for Obama's stated intent to provide rebates to consumers to cushion the effect of increased prices: "[M]any of the proposals currently being considered by Congress and as proposed by the Administration have been designed to offset the energy cost impacts on middle and lower income households and so it is simplistic and misleading to only look at the impact on energy prices of these proposals as a measure of their impact on the average household."
Reilly at first estimated the average annual cost of implementing a cap-and-trade program to each household to be about $340, but he later wrote a follow-up letter to Boehner on April 14 correcting what he said was an error in his calculations and increasing his estimate to about $800. He said his corrected estimate "includes the direct effects of higher energy prices, the cost of measures to reduce energy use, the higher price of goods that are produced using energy, and impacts on wages and returns on capital."
Despite Reilly's objections, Republicans continue to use the $3,100 figure. An April 2 "Leader Alert" on the House Republican Leader's Web site reads: "An MIT professor has questions about the $3,100 figure but his letter makes assumptions that are factually inaccurate." Boehner disputes Reilly's assumption that revenue from a cap-and-trade program would be returned to households: "[W]e all know that Democrats have no intention of using a cap-and-trade system to deliver rebates to consumers; they want the tax revenue to fund more government spending."
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So, $800 is a lot of money but it's a lot less than $3100. And this figure includes indirect costs, as well. Certain other factors could bring this figure down to $98/household. Any increase is bad, I can understand that, but some of the doomsday soothsaying has been a little over the top.
