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By Amanda DeBard and Stephen Dinan (Contact) | Tuesday, May 19, 2009

Congress’ chief scorekeeper says the global warming bill moving through Congress will either be scored as a major tax increase or a massive expansion of the federal government – and either one could give opponents substantial ammunition to complicate Democrats’ efforts to pass a bill.

The Congressional Budget Office (CBO), in a letter sent last week to House Energy and Commerce Committee Chairman Henry A. Waxman, said Democrats’ approach of creating allowances for emitting greenhouse gases requires developing from scratch a market worth hundreds of billions of dollars.

Whether the allowances are sold, as President Obama wants, and scored as a tax increase, or given away, as House Democratic leaders have suggested, and scored as “cash grants” to businesses, opponents are lining up to use CBO’s conclusions as ammunition in the public relations battle over the bill.

“This is a tax increase, and what you’re giving away to businesses are tax breaks,” said Michael McKenna, a Republican energy lobbyist involved in planning strategy for the bill. “Who’s paying for all of this? It couldn’t possibly be clearer – the consumers of the United States of America. Talk about feeding into a story line.”

Republican leaders in Congress have argued that Democrats’ approach to global warming will impose a large new cost on businesses, which will be passed on to consumers in the middle of a recession. Democrats say action is needed to avert the effects of warming and say they can mitigate some costs.

Democrats and environmentalists both said the letter is not the last word from the CBO, and Democrats said they hope to work with the agency to try to bring down the cost of the bill to the government.

The CBO letter sent Friday was obtained by The Washington Times. It marks the second time in a week that CBO has complicated the path for those who want to control greenhouse-gas emissions through a so-called “cap-and-trade” plan.

Last week, CBO issued a paper prepared for Senate Energy and Natural Resources Committee Chairman Jeff Bingaman, New Mexico Democrat, that said global warming controls cannot guarantee any outcome and said the Earth’s temperature will continue to rise – possibly 0.5 degrees to 1.6 degrees Fahrenheit this century – even if greenhouse-gas emissions never exceed today’s levels.

Several analysts said CBO’s letter to Mr. Waxman could undermine Democrats’ schedule to get the bill on the House floor because it gives the Ways and Means Committee a strong argument to claim jurisdiction as well.

The six-page CBO letter also listed repeated examples of situations in which, for purposes of the federal budget, it will assume that the cap-and-trade approaches will dampen businesses’ income, meaning less revenue to the federal government.

To be budget neutral, Democrats will have to come up with other spending cuts or revenue increases.

A Democratic committee aide, speaking on the condition of anonymity per committee policy, said they are going to continue working with the CBO on the scoring.

“One of our key principles is to make sure the legislation is budget neutral. We are consulting closely with CBO to ensure we meet this principle,” the aide said.

Dan Lashof, director of the Natural Resources Defense Council’s climate center, said the CBO will still have to issue a final score on the bill when it passes the committee, and NRDC hopes the letter is not the last word.

“What they have left out of their analysis is the benefit to consumers of energy efficiency – that actually lowers their bills. I don’t see anywhere in this long set of examples this accounts for that,” Mr. Lashof said.

Mr. Waxman’s committee began to debate Democrats’ bill Monday and will begin to consider amendments today. He said he plans to pass the bill out of committee by the end of the week.

The bill, titled the American Clean Energy and Security Act, would impose a declining carbon-dioxide emissions limit on utilities, oil companies and industry while also imposing a mandatory emissions permit system and a renewable energy requirement on utility companies.

Mr. Obama has called for the licenses to be sold, which CBO said would be a big revenue-raiser and scored the same as a tax increase. But House Democrats’ bill would give away most of the licenses to emit, which CBO said would be scored the same as “cash grants.”

“Allowances in a cap-and-trade system would be valuable financial instruments, so CBO thinks that the creation of allowances by the federal government should be recorded as revenues,” CBO Director Douglas W. Elmendorf said in the letter.

It’s clear that the CBO is poised to play a major role as Mr. Obama pushes for his big domestic policy items of expanded health care and combating global warming.

Last week, Sen. Kent Conrad, North Dakota Democrat and chairman of the Senate Budget Committee, told the Hill newspaper that Democrats’ planned schedule to vote on a health care bill before the end of the summer may slip in part because of the demands on the CBO.

“Look, I think it’ll be very difficult to keep to that schedule,” Mr. Conrad said. “Just getting scoring done from CBO is taxing the ability of that agency to deliver. We’re certainly seeing that already. So I think it’ll be hard.”

As the nonpartisan chief scorekeeper for spending, the agency is the referee for Congress’ decisions on budget matters.

And just as in sports, both parties work the referee to try to secure favorable calls – and butt heads with the scorekeepers.

When they controlled Congress, Republicans butted heads with the CBO over major bills such as adding prescription-drug coverage to Medicare, which took a lot of wrangling to get under the $400 billion allowed by the budget resolution, and over the 2003 tax cuts, which were manipulated to get to the $350 billion level allowed by the budget.

Republicans were silent on the new CBO letter. Neither the office of Rep. Joe L. Barton of Texas, the top Republican on the energy committee, or the office of Rep. Dave Camp of Michigan, the top Republican on the Ways and Means Committee, returned messages seeking comment.

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