Obama Taxes Could Alienate the Heartland

A coal war is about to break out in America—a regional conflict that will pit the coasts of the country against the Appalachian and Midwest heartland, where cheap power from coal is considered a birthright and a crucial economic necessity.

This conflict has been rising for a long time. Its John Brown is, of course, Al Gore, who has convinced most of the Democratic leadership (and most of America) that rising carbon dioxide levels are immoral and will leave the planet a hot, heaving mess.

Following the lead of Hill Democrats and some moderate Republicans, President Obama wants to "cap" the total amount of CO2 that American power plants emit across the country in any given year, and then require companies to purchase "pollution credits" if they want to send any of the chemical into the atmosphere.

The good news, from Obama's point of view, is that the cost of the credits should encourage companies to speed up work on alternative technologies. In the meantime, administration officials are predicting that sales of the credits will generate more than $600 billion in federal revenue over the next 10 years—money that Obama plans to use not only for energy research but also to give tax credits to the working poor and to support other programs.

But the new tax burden—and it does amount to a new tax—will be borne primarily in two regions of the country. The reason is simple enough: most energy-generated CO2 comes from coal-fired power plants, and most of them, and the "dirtiest" of them, are in a region that stretches along the length of the Ohio River, from St. Louis east to Pittsburgh, and in states on both side of the river.

The administration says that it will try to mitigate the hit to customers in those places and states by engineering tax-based rebates. But the rebate idea doesn't mollify politicians—many of them Democrats—in states such as Ohio, Pennsylvania, Indiana and Kentucky—who worry that the cost of the permits will raise energy costs for individuals and manufacturers already hard-hit by recession and job losses in power-hungry industries.

One concerned Democrat is Sen. Evan Bayh of Indiana, who sits on the Energy and Natural Resources Committee. Virtually all of his state's power is coal-generated, and he has voiced concerns about the Obama proposal. But Bayh won't get to ask questions in committee, because the "cap and trade" plan was taken from his jurisdiction and instead given to Sen. Barbara Boxer of California, a strong proponent of the idea. Sen. Harry Reid of Nevada, the Democratic leader and a strong supporter of the plan, ordered the change in committee jurisdiction.

Even though he won states such as Indiana and Ohio, Obama has yet to convincingly play to the heartland and Appalachian interior. Last fall, he infamously suggested that people in such places "cling" to their guns and their religion in troubled times. But they cling to coal power (and coal mining), too.

These places are caught in the riptide of change. They need a more rational health-care system and a cleaner environment. Yet they are disproportionately exposed to higher taxes because they rely on the (unhealthy) commodities Obama wants to tax.

Tobacco is another example. To expand health care for children under the State Children's Health Insurance Program (SCHIP, and pronounced S-chip), Obama proposed, and the Congress agreed, to raise taxes on tobacco by $30 billion. And yes, smoking rates are higher along the Ohio River and nearby states.

A state such as Kentucky gets hit from every direction: CO2 pollution credits, higher cigarette taxes in a state of heavy smokers and further loss of demand for tobacco—still an important local crop.

I know that Obama is essentially a big-city guy from various coasts: West, East and North (Lake Michigan). I know he is an urban guy: Stevie Wonder not Taylor Swift; NBA not NASCAR. But as he hurdles from one big proposal to another, he needs to remember the heartland voters who helped make his victory exceptional.

At this point, we're all "clinging" to something.