Gregg Easterbrook

One way to help the national debt: a carbon tax

April 13, 2011

The budget compromise that averted a federal government shutdown nearly foundered upon the rocks of Republican riders, one of which would have stripped the Environmental Protection Agency of authority to regulate greenhouse gases. Speaking as someone who favors greenhouse restrictions, I wish the Republican rider — dropped just before the clock struck midnight — had succeeded.

The EPA is trying to restrict greenhouse gases using a 41-year-old statute intended for another purpose. Republicans are right to object to this.

Of course, most Republicans don’t want any greenhouse gas regulation at all — though greenhouse regulation is now justified by a strong body of science, including by statements from George W. Bush’s Climate Change Science Program. Greenhouse regulation probably will not cost anywhere near as much as current estimates. All previous programs to control air emissions have proven significantly cheaper than expected. Republicans are correct, though, that the EPA is going about this in the wrong way.

Only a global warming program enacted by Congress will have political validity. A backdoor attempt — federal bureaucrats using strained interpretations of old laws, leading to solutions imposed by judges — will be illegitimate in the eyes of voters. Americans are sick of bureaucrats and judges trying to dictate policy. Laws passed by Congress, on the other hand, clearly are legitimate politically. You may not like any particular law passed by Congress — but that’s where the Constitution vests the power in our system.

Thus Congress must speak on greenhouse gases. Backdoor bureaucratic attempts will only discredit climate change action.

Here’s the fast-forward version of the current EPA controversy:

The Clean Air Act of 1970 regulates pollutants that cause smog and acid rain. The Act has been a spectacular success: smog and acid rain have declined rapidly, without harm to the economy. Indeed, the economy has mainly boomed since smog and acid rain rules became stricter; an improving natural environment may be a cause of economic growth. The Clean Air Act has strong political legitimacy, because Congress clearly spelled out the specific compounds that were to be restricted.

Congress has never enacted any regulation of carbon dioxide, the primary greenhouse gas. Frustrated, advocates proposed that the Clean Air Act be used. It contains a clause saying the EPA may impose rules on gases not named in the statute, if they are found to “endanger public health or welfare.”

Do greenhouse gases threaten “public health or welfare?” Saying they threaten public health is quite a stretch — there is no evidence of this in the United States, though it might be happening in equatorial nations. Perhaps they threaten public “welfare,” since that term is amorphous. But considering the general welfare of the United States has steadily improved during the postwar period, even as greenhouse gas accumulation has risen, this one vague word seems hardly sufficient to hang a broad regulatory authority on.

In 2003 the EPA, under Bush, declared that the health-or-welfare clause of the Clean Air Act did not apply to greenhouse gases. Massachusetts sued, and in 2006 the Supreme Court said this. Totally obvious what the decision means, right? Like many recent Supreme Court opinions, the justices’ decision could scarcely be understood by monks standing on their heads in a monastery.

Many politicians and pundits, to quote former Speaker of the House Nancy Pelosi, said the Supreme Court “ordered the EPA to impose greenhouse gas regulations.” The decision did not. Rather, the court found the EPA was wrong to assert that it could not regulate greenhouse gases. Get the maddening double negative? The Supremes weren’t definitive on whether the EPA has authority: rather, they told the EPA to go back to the drawing board and articulate a “reasonable basis” for deciding one way or the other.

When Barack Obama, who favors greenhouse rules, was elected, senators John Kerry and Joe Lieberman put together a Senate bill. It failed, and that’s good — the Kerry-Lieberman global warming bill was a nightmarish mélange of top-down controls, special exemptions and giveaways to campaign donors. (Here’s the 987-page “discussion draft”). Knowing the bill was goin’ nowhere even when Democrats controlled the House, Obama’s EPA reversed Bush’s EPA and declared that the Clean Air Act can be used to regulate greenhouse gases.

That brings us to the present. Two weeks ago, the Republican-controlled House voted to amend the Clean Air Act, to clarify that it does not apply to greenhouse gases. The Democratic-controlled Senate would not match. Then the Tea Party took the issue to the budget showdown, without success. Now it’s settled? Hardly. There’s no guarantee the EPA’s pro-regulatory finding will amuse the Supreme Court any more than its anti-regulatory finding did. Additional litigation seems assured.

This tussle has brought out absurd degrees of exaggeration from theologians of both extremes. The Wall Street Journal editorial page, representing the Church of the Perpetual Denunciation, declared that having no regulation of greenhouse gases would trigger “growth and job creation”. Wait, there was already no regulation of greenhouse gases during the recession!

Paul Krugman, representing the New Jersey Synod of the Latter-Day Limousine Liberals, ridiculed the mere suggestion that steady improvement of public health during the era of greenhouse accumulation shows greenhouse gases don’t harm public health. Wait, that makes sense! It’s 2011, must the left still shout down its critics rather than engage their arguments?

Bottom line: all three branches of the federal system (legislative, executive and judicial) have spent eight years arguing about the meaning of a single sentence in an statute. And we’re still not sure what the sentence means.

Solution: ditch the EPA’s backdoor regulatory attempt, then enact legislation to reduce greenhouse gases. Such legislation would have political legitimacy; could be simple and practical; and can be conservative!

In 1992, Martin Feldstein, who had been Ronald Reagan’s chief economist, proposed that greenhouse gases be reduced via a carbon tax. In 2007, Gregory Mankiw, who had been George W. Bush’s chief economist, proposed the same. Rather than impose some super-complex regulatory scheme with decisions made in Washington, a carbon tax would allow individuals and businesses to make their own decisions about carbon dioxide reduction — while creating a profit incentive to invent low-cost control technology. That’s why conservative economists like the idea.

The national-debt monster is looming: why not combat it with a tax on air pollution? That’s preferable to higher taxes on income or corporate profits. Taxing income and profit only discourages labor and capital, both of which are good. Taxing pollution would discourage pollution — while helping balance the books.

So Tea Party, I hope you succeed in stripping the EPA of Clean Air Act-based authority regarding global warming. Then enact the reform the country needs: a carbon tax, to reduce the deficit and protect the climate.

10 comments so far | RSS Comments RSS

I agree that EPA regulation is not the best case scenario, but we still must do something to stem the tide of global climate change and we must do it now. It’s time to stop putting political expediency ahead of good public policy and take a look at the alternatives to a fundamentally-flawed cap and trade system and to EPA regulation. A revenue-neutral carbon tax not only avoids the evasion and market manipulation of cap and trade, it would reduce emissions, incentivize “green” R&D AND return the revenue to families already struggling under the weight of the current economic downturn. It’s a win for the economy and for the environment.

Posted by CTF | Report as abusive

Yes, yes a thousand times yes. A carbon tax would be so good on so many different levels. Cut greenhouse gases, pay off debt, encourage efficiency, spur alternative energy development.

Tax carbon, not income.

Posted by jeff81201 | Report as abusive

Well, I’m not quite as eloquent as Mr. Crimsondrac, but the sentiment is correct. Easterbrook, if you’re in favor of a carbon tax, fine, make the case, but don’t claim it’s going to help the nat’l debt. Taxes restrict growth. There is only a finite amount of capital in the economy and when the gov’t hogs more than necessary, the private sector has LESS, period. A smaller economic base produces less revenue for the gov’t to confiscate, and so forth. Higher taxes are the start of a death spiral. Chopping down gov’t debt must be done through lower spending coupled with economic growth in the private sector, which in turn depends on the availability of capital… get it? Obviously not.

Posted by mheld45 | Report as abusive

Gasoline tax is already in place and is the best carbon tax there is. However, slapping on another tax that will just be paid by the US consumer is stupid. Already the US middle class is paying out nearly over 50% of their income in taxes (Fed, state, local, sales, real estate, etc.).

What we need is a wealth tax of 2% on all net worths over $10 million. That would balance the budget very quickly and rectify the stupid tax give aways started by Reagan and continued by Bush2 and Obama.

Posted by Acetracy | Report as abusive

@BCCritic: “Each new dollar created also generates a dollar of debt”?? I don’t think so. The Fed is monetary authority. It “prints” money by adding zeros to each bank’s account at the Fed. In other words, it “creates” money just by saying so, nothing more. It’s not like we have to borrow money from the Chinese in order to put liquidity into the system. We could get out of debt tomorrow by simply “creating” (electronically by adding zeros) as much money as is needed. Of course, that would make the currency worthless, but it would not incure any new debt, as you claim.

Posted by mheld45 | Report as abusive

Agree w/ Gregg on this. We are using the same fossil fuel technology that we used 100 years ago. A carbon tax creates an incentive to move to cleaner fuel sources. if we don’t do make the change, some other country will. i don’t like lagging behind India and China. as for taxes, GE just paid no taxes on 14 billion in profits. we raised taxes on high earners in the mid 90s and the economy took off. the idea that reforming the tax code for high earning corporations and restoring the income tax rates to pre-2001 levels would restrict growth is just false. by the way, we were promised that employers would start hiring again if the tax cuts were extended last November. unemployment is still just under 9 percent. progress is incremental, right?

Posted by TownDrunk | Report as abusive

Just because you can tax something does not mean that you should.

In this case, there is no legitimate case for taxing carbon as CO2 is a benefit, as plant food, and thermodynamically leads to little bit of cooling. It is only the EPA, backed by the fallacious reports by the IPCC, that claims the need and the ability to control CO2. This is nothing but a power grab by a rogue government agency. They would literally control our economy. This was not what they were set up for.

The EPA exists at the will of Congress and will eventually be castrated by Congress.

It is also unethical and illegal to tax something to generate funds to fund something totally unrelated. The inability of the government to do this keeps them from just plain taxing anything they want. They have to present a rational case for taxing something before it can be made into law. AND, thus, the government has to reign in spending rather than simply creating new revenue streams to cover their profligate spending.

Posted by CharlesHigley | Report as abusive

I agree totally that a greenhouse gas tax is the only way to go. Other solutions increase burocracy and the already huge target area for Congressional “deals” for industry. However, it should not be used as a major cash-generation scheme for Uncle Sam. Any greenhouse tax must be offset by income tax breaks for low-to-moderate earners. Otherwise, it would be horribly regressive. Such a tax will inevitably increase the price of EVERYTHING as fuel and energy costs are passed on to consumers. (That’ll be offset over time as innovation palliates the effect, but that will probably take at least a decade.)

Posted by nadie | Report as abusive

Some of the commentators to Mr. Easterbrook’s column obviously do not like taxes. However, while Mr. Easterbrook wrote about a carbon “tax”, the point he was making, that is, putting a price on carbon pollution, does not necessarily require a traditional tax (where the money collected goes to the government). One alternative is a carbon fee and dividend program. A levy is applied to carbon pollution (the fee portion of the program). The funds collected do not go to the government. Instead, they are distributed to the general population (the dividend portion of the program). If the distributions are paid out equally on a per capita basis, then those who pollute more end up as overall losers, while those who pollute less end up a overall winners (financially that is). This is but one alternative, and there are others. For those who do not like taxes, this is a reasonable alternative for pricing carbon pollution.

Posted by DanToronto | Report as abusive

According to the Genevan convention, hunting down and assassinating a named individual is a war crime. What you sow, thereof shall you reap . And “burying” his body at sea is not going too help much, but I guess when you murder someone, his body is your property and you can do what you want with it.

So Obama thinks that the world “will be a better place without Osama bin Laden”. I hope that I am not on Obama’s “the world will be a better place without” list of names. Also there are many people in this world who hold the same opinion about Obama (I happen to be one of them, but I’m not in favor of murdering anyone).

I’ve read tons of information about 9/11, but I’ve never heard a word about why they did it–what was their motivation? My fellow Americans and I have no real idea of what’s going on.

Sure, too many innocent Americans were killed in 9/11, but many innocent Afghan and Pakistan woman, children, and babies have been killed by US guided drone bombardment. I remember that a bridal group of about 50 woman were going down the road when the group was hit by a drone that killed over 30 (including the bride); but the bombings continued and who cares about the consequences, right? The numbers are suppressed, but I’ve never heard the phrase “collateral damaged” used in a 9/11 context. I think that the number of innocent killed in Pakistan and Afghanistan far exceeds that 0f 9/11, but that’s just my opinion–I really don’t know.

Posted by gAnton | Report as abusive

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/