As with virtually all Big Government programs, the medicine is bad, but it's the side effects that kill.  And, the Grim Reaper of Obama's litany of government-first programs is H.R. 2454:  American Clean Energy and Security Act of 2009.  In case you're not familiar, this is the legislation that proposes to institute a cap and trade system for reducing CO2 emissions.

Irrespective of which side of the climate change debate you come down on, it's difficult to avoid the simple scientific fact that the U.S., acting unilaterally, can do nothing to materially impact the amount of greenhouse gases released into the atmosphere.  As of 2004, the U.S. emitted roughly 22% of all CO2, and that percentage represented a very substantial decline from previous years.  As China, India, Russia, Eastern Europe, Brazil, and other rapidly industrializing countries/regions experience monumental growth and dramatic standard of living improvements, the United States' share of the total continues to decline precipitously.

As scientists know, CO2 acts globally, thus, its impact on the environment is similar wherever around the globe it is released.  So, potential U.S. reductions will be overwhelmed by the considerable increase in emissions from other parts of the world.

Given the aforementioned, some still argue that the U.S. must lead and set an example for the rest of the world.  But, at what cost?  Should we absorb what will arguably be the largest tax increase in history for the honor of capturing the global moral high ground—particularly when there are much more economically friendly, even stimulative, solutions?

Obama himself commented last year in the San Francisco Chronicle that "Under my plan of a cap and trade system, electricity rates would necessarily skyrocket.  They (utilities) would have to retrofit their operations.  That will cost money.  They will pass that cost onto consumers."

It should not be hard to recognize that the impact of inflicting consumers with these new costs will be economically ruinous.  Obama's own numbers point to a roughly $650B tax hike over the first eight years (CBO places it above $820.  The CBO estimates it could cost the average household $1600 per year.  Other estimates point to a figure as low as $175.  Nevertheless, the hardest hit will be those least able to pay—the poor and near poor who spend a disproportionately large share of their income on energy.

To be fair, there is an argument that such a system can be revenue neutral.  After all, much, if not all, of the direct costs may be offset by the billions of dollars the government will collect from selling/auctioning carbon credits.  While that very well may be true on the surface, think of the larger implications.  Those hundreds of billions will be sucked directly out of the private sector—thereby decreasing innovation and eliminating the free market multiplier of privately spent dollars.

Even more frightening than the cap and trade system itself, is the bill's contemplated tariff on countries that don't sign on to a global carbon-reducing regime.  So far, President Obama has appropriately spoken against such protectionism.  Unfortunately, those in Congress are worried more about the politics than the economics of such a measure.  In particular, those who represent industrial (i.e. energy-centric) states, will sell the tariff to their constituents as a means of protecting them from the devastation that will rain down on their economies from this unfriendly legislation.

Should such a provision make its way into a final bill, that's where the dominoes will really start to tumble.

Imagine China's reaction to such a tariff.  Do you think they'll sit still?  Of course not.  They'll respond in any number of ways, including pulling back on their purchases of U.S. Treasuries.  And, by the way, that's how we're funding Obama's enormous social agenda and concomitant deficits.  Fewer purchases of Treasury securities by the Chinese will mean a sizable increase in interest rates.  A sizable increase in interest rates translates to a much slower U.S. economy, which, in turn, will slow the global economy.  Slower world economies will put a drag on consumer spending which will drive reduced purchases of Chinese goods.  And so goes the un-virtuous cycle of Big Government in action.  As should be apparent, nobody wins.  The negative consequences reverberate in ways well beyond a singularly bad policy.

I'm willing to concede it's possible, maybe even probable, that greenhouse gases are a threat to the environment.  I am not, however, willing to sign on to feel-good policies that don't materially address the problem and, in the process, greatly reduce our economic sovereignty and competitiveness. 

As usual, this administration looks instinctively to the government, rather than the private sector, for a solution.  The only way to get the world on board is through U.S.-led innovation.  We have to stop thinking that countries will act contrary to their economic interests.  They will not. 

The sooner we can get to cost-effective renewable sources of energy, the sooner China, India, and others will do so in order to be competitive.  Cap and trade is diversionary at best.  The government has much more effective and less regressive means at its disposal for accelerating the migration away from fossil fuels.  Rather than establishing another stifling bureaucracy, it should be focused on incenting the private sector to innovate.   Let's get the electric grid to operate as soon as possible 100% on nuclear, solar, wind, and other renewables (as they become viable)...and produce vehicles that are pluggable into that grid.

That's real change...not catastrophically illusory transformation.