David Warsh: Addition by subtraction in climate debate
SOMERVILLE, Mass.
An op-ed in The Wall Street Journal last week, “Economists’ Statement on Carbon Dividends,’’ appeared under a headline reflecting the latest conventional wisdom on how to frame the issue of coping with atmospheric pollution (don’t call it a “carbon tax”). The bipartisan endorsement called for a revenue-neutral tax on carbon emissions, its proceeds to be returned to citizens in equal quarterly rebates, ensuring a progressive structure, administered by the Social Security Administration as an entitlement.
The proposal was signed by 27 laureates, including Robert Solow, Robert Lucas, Amartya Sen and Thomas Sargent; all four living chairs of the Federal Reserve Board (Paul Volcker, Alan Greenspan, Ben Bernanke, and Janet Yellen), and fifteen former chairmen of the Council of Economic Advisers, including Michael Boskin, Martin Feldstein, N. Gregory Mankiw, Glenn Hubbard, Jason Furman, Austan Goolsbee, Christina Romer, and Laura Tyson. Former Treasury Secretary Lawrence Summers signed on as well.
Too fresh from their recognition last month to join in (or too obvious) were William Nordhaus and Paul Romer, both supporters. The signatories thus joined forces with a blue-ribbon group of multinational corporations and public interest organizations formed last summer as a Climate Leadership Council.
The economists’ list naturally invited a search for the missing.
Conspicuous by their absence among laureates were Joseph Stiglitz and Paul Krugman. Krugman earlier explained that he favored more salable policies. That the plan for carbon taxation was devised by George Shultz, Secretary of State under Ronald Reagan, and James Baker, who succeeded him under George H. W. Bush, may also account for some of their lack of enthusiasm.
A little less obviously missing were laureates James Heckman (absorbed in early childhood investment), and Vernon Smith (energy saving and CO2 sequestration, per the recommendation of the Copenhagen Consensus Center). Oliver Williamson, approaching 90, is less of a force than formerly. Christopher Pissarides and Jean Tirole stayed away from the issue, Tirole because he favors regulation by systems of cap-and-trade.
That leaves Robert Mundell, of Columbia University, recognized in 1999 for his work on exchange rates regimes and currency areas; and Edward Prescott, of Arizona State University and the Federal Reserve Bank of Minneapolis, who shared the economics prize in 2004 for work on business cycles. Both are favorites of the WSJ, having often expressed the view that raising taxes discourages economic growth, but neither has been involved to any great extent in the climate controversy. That leads in turn to WSJcolumnist Holman W. Jenkins, Jr., who has taken on the job of skeptic-in-chief.
Jenkins, 59, is a dependably lively presence on the editorial pages, a frequent skirmisher against views on climate change he considers wooly-headed or worse. Last week he was at it again, under the headline Big Names Bake a Climate Pie in the Sky. He disparaged the view that carbon emissions pose an immediate threat to global well-being; expressed skepticism of the motives of politicians and corporate lobbyists alike; and hinted at the existence of a proposal for tax reform, including a carbon tax, “to replace taxes that depress work, saving,” such that new technologies would develop to do things in less carbon-intensive ways. Presumably that is the subject of a future column.
At the moment, the editorial board of the WSJ is pretty much the only voice among the mainstream press, of skepticism about climate change in general; in opposition to carbon tax proposals in particular. In The Global Tax Revolt last month, the editorialists took note of the rejection of various attempts to impose a local carbon tax – in France, in Canada, in Washington State – and concluded,
[A]fter decades of global conferences, forests of reports, dire television documentaries, celebrity appeals, school-curriculum overhauls and media bludgeoning, voters don’t believe that climate change justifies policies that would raise their cost of living and hurt the economy.
On its weekly show on Fox New, editorial page editor Paul Gigot went further: he acknowledged elliptically that that “some of our friends” think that strong measures are required to address atmospheric pollution, “and even in theory, if you think about it from a free market point of view, a carbon tax would be the most efficient way of trying to actually slow down carbon emissions… but that seems to be something that the public really isn’t buying.” There is, he said, “a disconnect between elites and average voters that don’t trust the elites”
As usual, editorial page columnist Kimberly Strassel went further still. “Yes, intellectually, from a very wonky point of view,” she said, a carbon tax “may be an efficient way of raising revenues. But no one buys that you are actually get rid of other taxes if you institute a carbon tax, so they see it as an additional tax … There also not a belief that money raised from such a tax would actually be put into any kind of renewable energy or investment strategy for a smarter climate; they know it going to get redistributed and be a new pot for the Washington spenders to put into their own priorities…
What would a carbon tax actually cost ordinary consumers? That’s a question for another day – for many other days, starting with the 2020 elections, and in the decade beyond. In the meantime, the populist editorial page of the WSJ stands pretty much alone amongst elite opinion in America against carbon taxation as the major instrument of climate policy. Over the long haul, we’ll see what difference that makes. Reports of the demise of the establishment Republican Party may have been exaggerated.
David Warsh, an economic historian and veteran columnist, is proprietor of Somerville-based economicprincipals.com, where this first ran.
David Warsh: Democrats and the carbon tax
Amid the widespread vandalism in Washington over the last month – committed about equally by the White House and the Republican Congress – the carbon-tax initiative propounded last week by a small group of centrist Republicans stands like Parnassus above a swamp.
George Shultz and James Baker III (secretaries of state to Ronald Reagan and George H.W. Bush, respectively) billed their proposal as a “conservative” response to climate change, presumably because it calls for returning the proceeds of $40-a-ton carbon tax to citizens in the form of quarterly “dividends,” rather than turning over its enormous new revenues to the government to spend.
Sponsoring the measure would “be good for the long-term prospects of the Republican Party,” wrote Baker and Shultz in The Wall Street Journal.
It would be even better for the Democrats.
There are two broad approaches to reducing atmospheric pollution – the carbon tax, and the current regulatory approach. The former prices the carbon content of fossil fuels, at the well-head or the mine, and expects corporations to find efficient ways to reduce their energy bills. The latter sets emission quotas, and requires companies to buy permits from the government, which they may then trade among themselves (“cap-and-trade.”)
Democrats are facing a stark choice in 2020. They can hope that a suitable candidate appears out of the mists, and risk the kind of circular-firing-squad primaries that produced President Trump. Call this the Lochinvar strategy
Or they can seek to persuade some centrist figure to accept a draft from the party, a fusion candidate who might govern from the center in the White House while both major parties reorient themselves. Call this the receivership approach.
Receivers usually are appointed; elected trustees are rare. But receivership worked well for the Republican Party, and for the nation, in 1952. Fragmented after 20 years of Democratic rule, shocked by Harry Truman’s victory in 1948, GOP leaders offered the party’s nomination to Dwight David Eisenhower. Having served, among other big jobs, as president of Columbia University and as commander of the Western European theater in World War II, Eisenhower had no strong party affiliation. He defeated Illinois Gov. Adlai Stevenson, twice, and served two mostly successful terms.
There’s even a plausible candidate at hand today: former Defense Secretary and CIA Director Robert Gates, a thorough-going Midwesterner who served as defense secretary in the administrations of George W. Bush and Barack Obama. Gates would be 77 upon taking office, presumably a one-term president. An Eagle Scout in his youth, he is currently president of the Boy Scouts of America.
Both major parties are deeply divided. The White House after 2020 probably belongs to whichever succeeds in fashioning some strong appeal to the center. Polls show that climate change is the logical place to begin.
The Republican Party is dominated by climate-change skeptics; former Vice President Al Gore and major oil companies already prefer the carbon tax. It wouldn’t take much for an outsider among the Democrats to embrace the idea of revenue neutrality.
David Warsh, a veteran financial journalist and economic historian, is proprietor of economicprincipals.com, where this first appeared.
Carbon tax, Putin and the Islamic State
President Obama and many other people in the West would like to think that Vladimir Putin is basically a reasonable guy. By “would like to think,’’ I mean that they fear him and so their default is appeasement. Welcome to Czechoslovakia, 1938. Some in the West even lauded the “cease-fire’’ in eastern Ukraine engineered by the Russian dictator that left in place his occupation there, not to mention the seizure of Crimea. And the Russian-led violence continues in eastern Ukraine. But Putin is a relentless liar and schemer driven by a thirst for power for its own sake and a longing for the Soviet Empire.
The West has failed so far to send weapons to the Ukrainians so that they can properly defend themselves from the Russian invasion. And there’s little sign that European defense budgets will be rising substantially anytime soon to counter Putin, who can be summed up in his obscene remarks that that the collapse of “Soviet Union was the greatest geopolitical catastrophe of the 20th Century.’’ The Soviet regime killed many millions of Soviet subjects. But then, former KGB man Putin did very well under the Soviets. He also knows, as gangsters tend to know, how to manipulate his foes.
For example, he’s peddled, with some success, the lie that most Ukrainians in the Russian-invaded part of that sovereign nation want to be part of Putin’s regime.
The economic sanctions so far imposed by the West are mostly a joke to the likes of Putin and his entourage. If they cause some distress among the Russian population, who cares? Putin’s entourage will be okay.
Then there’s the Islamic State. It’s good to see that President Obama is finally trying hard to get other nations to join us in destroying it, but it will be difficult because of our Western allies’ disinclination to unduly exert themselves in military matters — the thing that counts most when it comes to the perverts staffing this “caliphate.” (As for such U.S. “allies’’ as Qatar, Kuwait and Saudi Arabia — they are deeply corrupt dictatorships some of whose people have helped finance and otherwise create the likes of the Islamic State and al-Qaida.)
For the longer term, we must defang the Middle East and the Putin regime by weaning ourselves and the world off the oil and gas that pay for their barbarism. One way would be a carbon tax to get people off fossil fuel in the United States, and thus reduce demand for it worldwide. And, for the immediate future, we can do what Thomas Friedman of The New York Times suggested — “lift our self-imposed ban on U.S. oil exports’’ to lower the world price of a commodity that disproportionately benefits dictators.
We might make fun of those Renaissance paintings in which little devils skitter around. We don’t like to accept that there’s something like evil in the world. But you look at something like the Islamic State and the Putin regime and you realize that those people in 1500 were on to something.
--- Robert Whitcomb