Energy legislation pending in Congress likely would have significant adverse effects on the economy and consumers – including nearly 5 million lost jobs and $1 trillion in lost economic output, according to a report released today by API. The study, prepared by CRA International and commissioned by API, found that the combined effect of seven legislative proposals would restrict the supply of energy available to the U.S. economy and would likely increase the cost of energy supplies to consumers and businesses.
The CRA report goes well beyond this by claiming that by 2030, the effect of this bill would be to: (1) reduce aggregate employment by 4.9 million relative to baseline; (2) reduce GDP by 4 percent of $1 trillion relative to baseline; and (3) lead to reductions in both consumption and investment.
Who knew CRA was in the business of macroeconomic modeling? I did find this presentation. NEEM seems to rely on CRA’s expertise in the energy sector whereas MRN focuses on the macroeconomic impacts of some policy change. The MRN stands for Multi-Regional National Model. The designer of MNR appears to be Thomas F. Rutherford who appears to be a professor of “Environmental and Resource Economics” and not a macroeconomist. So maybe we can forgive him and CRA for not understanding that the aggregate demand effects of policy changes are not generally believed to last for a couple of decades even in the most Keynesian of models.
It would appear that the API and CRA have put forth a rather nonsensical analysis to trick us into believer that changes in energy policies will lead to a prolonged recession.