Thirty-four hundred economists and counting, including 4
former chairs of the Federal Reserve, 27 Nobel Laureates, 15 former chairs of
the Council of Economic Advisers, and 2 former secretaries of the treasury,
have signed a statement proposing a carbon tax to combat global climate change.
A carbon tax would be imposed at, say, an initial price of
$40 a ton and increased every year until emission reduction goals are met.
To maximize fairness and the political viability of a rising
carbon tax, all the revenue would be returned directly to U.S. citizens though
equal lump-sum rebates. The majority of
American families, including the most vulnerable, would receive more in carbon
dividends than they pay in increased energy prices (making the carbon tax
progressive).
There are two serious flaws in this proposal.
The first is the exclusion of legal residents, green card
holders, who will pay higher energy prices but not receive the carbon dividends
as an offset. Illegal residents, among
the poorest of American residents, will be hit the hardest, paying higher
energy prices and missing out on the dividends.
The second flaw is the denial of political reality. Sure, returning the tax as dividends could
build support for the project. But what
happens in the case of a threat to national security and the need to increase
military expenditures. President Clinton
ran three consecutive surplus budgets, but President George W. Bush’s invasion
of Afghanistan and Iraq transformed the prospect of continuing surpluses into
colossal deficits, doubling the national debt during his 8 years in
office. Ditto that for a financial
crisis or recession. Does anyone doubt
that Congress and the president would divert those carbon taxes into higher
spending instead of returning them to American citizens? Even without a new war or financial crisis,
Members of Congress will find vital needs that require more government spending,
especially with a new pot of revenue at their proposal. Medicare for all, college tuition for all,
and other handouts?
During my 50 years in the academy. I have learned that
economists are generally weak on politics and public choice (apart from the
Buchanan school). But the former
government officials who wrote and signed the “carbon contract with America”
should know better.
If you believe that reducing carbon emissions is essential
to preventing climate change, then this carbon tax and dividend proposal is as
good as it gets. But in the end, it’s a
recipe for an increase in taxes and more government spending. Wishing it were otherwise doesn’t make it so.
I’d give it more credibility if the carbon tax/dividend plan
is adopted as a constitutional amendment.