Carbon Tax and Carbon Dividend To Combat Global Climate Change

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.

Inequality: The New Growth Industry in Higher Education

Taxation has jumped to the forefront of 2020.  Democrats and their intellectual allies, including the mega-rich themselves, are calling for a blizzard of higher taxes on the rich and wealthy.  Some advocate higher marginal income tax rates up to 70-80% on those earning over a million dollars while others propose wealth taxes on centi-millionaires and billionaires, higher estate and gift taxes, higher property taxes on trophy properties, and higher consumption taxes.

Why now and why not during the last two elections?  Partly in response to President Trump’s tax cuts?  Partly in response to huge runup in the stock market since the bottom of the financial crisis in 2010, which disproportionately enriched the top 1% of equity holders?  Partly in response to the emergence of a hard new redistributionist left in the Democrat Party?  Partly in response to the declining influence of aged supply-side economists in universities and think tanks?

Four keystones underpin higher education.

First is Diversity.  Diversity (and Inclusion) is now settled doctrine.  Colleges and universities are moving at full speed to implement the agenda.  Older cohorts of White professors are steadily being replaced by women and under-represented minorities, who support and benefit from Diversity.

Second is Environmentalism.  Environmentalism (global warming, climate change, extreme weather events) is almost settled doctrine.  The vast majority of professors and think tankers contend that greenhouse gas emissions threaten the survival of the planet and life as we know it. They warn that irreparable damage will be done unless expansive measures, regardless of cost, are taken now to reduce carbon emissions (Green New Deal).

Third is Democracy (democratic governance), which has petered out.  After a flurry of gains in the past few decades, democratic governance is on a downhill slope in Europe, Asia, Africa, and Latin America.  Some scholars put the United States under Trump on that downhill trajectory.  Fellows and professors staffing centers for democracy in think tanks and universities have little to say about this discouraging trend except to bemoan it, with no new ideas to counter the trend.  All the older ideas they proposed have been tried and failed.

Fourth is Inequality, the topic du jour.  This fourth theme has given rise to demands for higher taxes on the rich and wealthy.

The Institute for Policy Studies has an aggregator site on Inequality.  It identifies 10 academic centers, 8 think tanks, 6 public interest groups, and 8 organizing projects focusing on inequality.  The site identifies 6 kinds of inequality (income, wealth, global, health, racial, gender) and 25 inequality topics (ranging from executive pay and taxation to social mobility and the racial divide).  As of late February 2019, it included 830 articles and essays on various aspects of inequality.  In the coming years, studies on inequality and political action to reduce it (poverty reduction, threats to democracy) will likely grow to match the scope and size of Diversity and Environmentalism.  A generation of undergraduate and graduate students are being educated on inequality and its detriments.  The pipeline of new Ph.D.’s will fill faculty slots for decades, who will advise politicians and publish papers supporting higher taxes.  Inequality studies threaten to overwhelm real world experience proving the benefits of low taxes and the harm of high taxes, a battle that has been fought since the beginning of recorded civilization.

Diversity, Part 8. Summing Up

Demography is Diversity.  Diversity is being driven by demography.  The dramatic change in the U.S. population from 88.3% White in 1940 to a projected 42.6% White in 2060 (Whites will cease being a majority sometime around 2042-45) must necessarily change the composition and leadership of nearly every American organization and institution.

I have raised a number of issues with the process of Diversity and Inclusion.

There is considerable arbitrariness in the racial/ethnic classification of Americans, which means that any descriptive statistics on Diversity are not conclusive.

Measurement, an agreed-upon numerical scale and the appropriate level (s) to which it applies in any organization (the degree of granularity), is critical to claims about progress towards Diversity.  To date, measurement has received little consideration.

The current working definition of Diversity and Inclusion is that no all-White entity can exist.  Every group with Whites must include non-Whites.  Any group of non-Whites need not include Whites.  Whites cannot self-segregate and must be Inclusive.  In contrast, minorities must have the right to integrate and self-segregate as they wish.  Minorities can be Inclusive and/or Exclusive.  Women can be Exclusive of men, but not all-White.

There are no simple criteria for deciding who between and within the People of Color should be at the front of the Diversity and Inclusion line.  Those who have been here the longest?  Those who descend from American slavery?

Diversity and Inclusion are both process and outcome.  The process of Diversity is a steady increase in the number of underrepresented minorities (URM) and women in all organizations (e.g., higher education, media, business, non-profits, government).  The process of Inclusion requires an increase in the number of URM and women in the higher echelons, the decision-making levels, of organizations.  On this supposition, the process of Diversity and Inclusion should continue until a reasonable approximation of parity is achieved, namely, half for women and proportional for URM to their share of the population.  Will certain patterns that have emerged in the process of Diversity and Inclusion obstruct a color- and gender-blind America?  Will women and People of Color (POC) be allowed (should they be allowed?) to retain Exclusive organizations--even after they have attained proportional membership in all organizations?  Will Whites and men be forbidden to establish all White and/or all-male organizations?  Will URM enjoy legally or constitutionally permanent preferences?

How will children of interethnic and interracial marriages be classified as their multiethnic and multiracial composition becomes more complex, first counted in halves, then quarters, and then eighths?  Will America move away from racial/ethnic classification or will these potentially divisive categories become entrenched in social, economic and political life?

Diversity and Inclusion as the basis of organization composition and leadership rest upon several important assumptions.  One is demographics.  But a dubious second assumption underpins current measures to achieve Diversity and Inclusion well ahead of the actual demographic timetable.

The dubious assumption is that creating a Diverse community, bringing together different viewpoints of minorities and women, improves decision making, increases productivity, advances excellence, and prepares individuals to work more effectively with different cultures around the world.

Maybe so, maybe not.  The gains from Diversity and Inclusion are easily highlighted, but the potential costs from Excluding some of the most qualified, competent individuals (Whites) are unobservable.  What great medical discoveries and scientific advances will not be made?  The counterfactual cannot be proved.  So, we continue with the process.

Which leaves us, perhaps, with the issue of day.  How can we improve the process to maximize benefits and minimize costs?  Welcome to the debate!

Diversity, Part 7. The Who, What, Why, When, Where, and How

In 1967, the U.S. Supreme Court ruled that marriage across racial lines was nationally legal.  That year, only 3% of newlyweds married a spouse of a different race or ethnicity.  The percentage increased almost six-fold to 17% in 2015.

Before considering the implications of this rise in interracial/interethnic marriage, it is useful to distinguished interethnic from interracial marriage.  Newlyweds of Whites and Hispanics are interethnic; those between Asians, Whites, and Blacks are interracial.  This distinction is important because Hispanics are the most rapidly increasing demographic in the United States.

The most common pairing among newlyweds involving spouses of different ethnicities/races is 42% White/Hispanic, 15% Asian/White, and 12% Multiracial/White.  Between 1980 and 2015, the share of Black newlyweds marrying another race/ethnicity rose from 5% to 18%.  For Whites, from 4% to 11%.  In 2015, 29% of Asian (more Asian women than men) and 27% of Hispanic (roughly equal between women and men) newlyweds married a spouse of a different race/ethnicity.

Of all U.S. born Hispanics, 39% now have a spouse of a different race or ethnicity.  Of Asians, 46%.

OK.  Now we come to the children of those multiethnic/multiracial marriages.  In 1980, 5% was born of multiethnic/multiracial unions.  In 2000, it reached 10%.  In 2015, it reached 14%.  Of that 14%, 42%, a bit over 2/5ths, was the union of a White and Hispanic, 22% of multi-racial parents, 14% of White/Asian, 10% White/Black, 5% Hispanic/Black, 3% Asian/Hispanic, and 1% Asian/Black.

For the purposes of this essay, the plurality of children of White/Hispanic marriages is the most important.  In simple arithmetic, 42% of the children born of the 14% of multiethnic/multiracial spousal combinations amounts to 5.9% of all children born in 2015 being half-White, half-Hispanic.

Since the Census Bureau and the Common Data Set use the category of non-Hispanic White, by default, the half-White, half-Hispanic child is classified as Hispanic.  Hispanic is not a racial category, therefore these children are not multiracial.

Let’s take this to the next level.  Assume our White/Hispanic couple has two children.  One marries a White, whose children become 3/4ths White.  How is this child to be classified?  The other marries a Hispanic, whose children become 3/4ths Hispanic.  We can be sure that this child will be classified Hispanic.

Let’s go one more generation deeper, with children 7/8ths White and 7/8ths Hispanic.  It become ludicrous to consider the first anything other than White.  But the powers-that-be, for political or ideological motives, might want to count a 1/8th Hispanic a Person of Color.  Who knows?  In the late  1980s, a friend’s daughter, 1/8th Cherokee, was admitted to UC Berkeley on a scholarship to increase the number of American Indians.

The above data are for newlyweds.  They do not include children of temporary or long-term cohabitation.

On current trends, Intermarriage is likely to increase as the White fraction of the U.S. population further declines and the Hispanic share continues to increase.  In California, this is already the case with 39% White and 37% Hispanic.  How will their children be classified?

In the French Caribbean territories of Saint-Domingue (Western Hispaniola), Guadeloupe and Martinique, the proportion of Blackness in an individual is defined in fractional terms as minute as 1/64th.  Sacrata are 15/16ths Black.  Capre are 3/4ths Black.  And so on up and down the fractional line.

For now, proponents of Diversity and Inclusion do not have to concern themselves with ethnic/racial definitions.  It will take another generation of intermarriage to magnify the problem.

Diversity, Part 6. The Who, What, When, Where, Why, and How

Diversity and Inclusion are both process and outcome.  The process of Diversity is a steady increase in the number of underrepresented minorities (URM) and women in all organizations (e.g., higher education, media, business, non-profits, government).  The process of Inclusion requires an increase in the number of URM and women in the higher echelons, the decision-making levels, of organizations.  These two processes, to achieve full Diversity and Inclusion, should continue until a reasonable approximation of parity is achieved, namely, half for women and proportional for URM to their share of the overall population.

On January 23, 2019, CalPoly announced the hiring of a consultant to help promote Diversity and Inclusion until the student body resembles the demography of California.  CalPoly is the only university with White majority enrollment among the California State University 19 campuses. Whites are 39%, Hispanics 37%, Asians 13%, with Blacks, American Indians, and other minorities making up the remainder of California's population.  To achieve proportional representation, White student enrollment will have to decrease by 15% of the student body.

Given geography, the URM share will vary between states, cities, towns, rural areas, and so forth.  California and New Mexico require higher percentages of Hispanics among top decision-makers than do North and South Dakota.

At some point, decades from now, Women and URM in organizations will match their proportions in the population.  Does this become the ideal outcome of Diversity and Inclusion?  Or will historical legacies continue to favor Whites?  Is there an end to Diversity and Inclusion that diminishes and ultimately ends role in American life?  Will the day come when America will be color-blind and gender-blind?

Or, will certain patterns that have emerged in the process of Diversity and Inclusion obstruct a color- and gender-blind America?

Will women and People of Color (POC) be allowed (should they be allowed?) to retain Exclusive organizations even after they have attained proportional membership in all organizations previously majority White or all male?  Will Whites and men be forbidden to establish all White and/or all-male organizations?  Will URM enjoy legally or constitutionally permanent preferences (e.g., as do Malays for civil service jobs in multi-racial Malaysia, or low-caste Dalits in India)?  Should financial reparations be a part of the outcome?

What will the equilibrium outcome of Diversity and Inclusion look like? Will stagnation fuel hostility among rivals?  Will continued change increase the numbers of one group versus the other(s)?  How will Blacks and Hispanics cope with change that increases the share of Hispanics in the population from parity with Blacks to triple their number?  Will demography upset any possible equilibrium outcome?

For the next few decades, process will dominate Diversity and Inclusion.  From mid-century on, however, an increasing number of individuals may begin to question, even challenge, the process if there is no end in sight.  This is a recipe for conflict and political instability, which has been and remains the case in many multiracial/multiethnic countries.