My new-Congress wishes for the new year are first, that the Senate abolish the filibuster in toto, which is unlikely but not unreasonable — why shouldn’t it act in accordance with majority rule like the House does, and other legislative bodies, subject only to the super-majorities specified in the Constitution? The second is that Congress enact a carbon fee to raise the price of fossil-fuel energy relative to noncarbon energy in recognition of the many negative externalities of all fossil fuels, particularly with respect to greenhouse gas emissions that are changing the climate.
Apparently, a carbon tax is gathering steam in Congress since it would also make a big dent in the budget deficit. It would also make a big dent in a lot of people’s budgets who are living close to or under the poverty threshold. Therefore I favor instead a financial transaction tax that would make a dent in Wall Street’s bottom line but probably not one that you could notice without a magnifying glass, though it might reduce the volume and velocity of high-speed trading, which is its other purpose. Not a bad thing.
As Keynesian economists never tire in telling us — fortunately since an awful lot of people in power act like they’ve forgotten the message or more likely never got it in the first place — the government should run a deficit when the economy is in a recession with high persistent unemployment, negligible core inflation and short-term nominal interest rates at the lower bound (at or close to zero) where the Federal Reserve is unable to lower them further to stimulate the economy. Too many consumers are spending too little (from the economy’s point of view) because of the housing bust, un- and under-employment, the risk or reality of foreclosure and their lack of liquidity, and business is under-spending and under-investing in our consumer economy, waiting, essentially, for consumers to get back to consuming.
So who’s picking up the slack to get the economy moving again? Not exporters, much — our currency is still overvalued in the world judging from the long-standing deficit in our current international trading account. That leaves the federal government. It’s spending, blown out of proportion to its revenue by the Bush tax cuts that eliminated the Clinton budget surplus, two unfunded wars and the increased costs of unemployment insurance, supplemental nutritional assistance (food stamps) and other counter-cyclical spending to soften the impact of the recession on people who got caught in its cross-hairs, is increasing the deficit. As it should. This is not the time to reduce the deficit by cutting spending or raising taxes on people that would have to reduce their own spending to pay them. Leave those measure to the day when the economy and employment have fully recovered.
So am I advocating for or against raising the cost of fossil fuels now? Against a tax. For a carbon fee. For, specifically, the carbon fees and rebates proposed by climatologist James Hansen and now called Fee & Dividend. The fee would be a gradually increasing one collected (like a tax) from fossil fuel companies as they bring the fossil fuels out of the ground or import them, but all proceeds of the fee would (unlike a tax) be refunded on a monthly basis equally to all U.S. households. Thus the increase in the price of fossil-fuel products such as electricity and automobile, truck and airplane fuel caused by the fee would be offset in the aggregate when consumers purchased them. Consumers who drive to work and shopping and back might come out ahead. Consumers who drive to their vacation homes or fly around the world might come out behind.
So everyone comes out even? Well, yes, more or less— until consumers start finding noncarbon alternatives to fossil-fuel products or perhaps just start economizing. That’s the real purpose of the Fee & Dividend, of course, weaning the economy off fossil fuels, not reducing the deficit like a carbon tax. And then the companies that are still producing fossil fuels instead of noncarbon energy wouldn’t come out even.
In a short (5,000 words!) ebook I’m finishing up that (to quote its description)
examines the history of global overheating caused by industrialization, distinguishing it from natural global warming, and then describes an innovative but little-known technology for providing endless clean energy and the relatively simple steps that the U.S. needs to take to begin stabilizing the climate before global overheating undermines human civilization
the Fee & Dividend is the only one of the five “simple steps” that asks Congress to do anything (except get out of the way). The five steps are:
1. The President publicly acknowledges U.S. responsibility for having emitted by far the largest quantity of greenhouse gas (more than 2½ times that of #2, China) since the onset of industrialization and commits the U.S. to full participation in global efforts to stabilize the climate.
2. Congress enacts the Fee & Dividend.
3. The Government fast-tracks the licensing of the Integral Fast Reactor, the “innovative but little known technology for providing endless clean energy” that I’ve described previously.
4. The Government uses its authority to regulate greenhouse gas emissions to require noncarbon alternatives to equipment and processes that emit greenhouse gases when such alternatives are available at reasonable prices or costs.
5. The President uses his (or her) bully pulpit to help us understand why these actions need to be taken and climate stabilization needs to begin.
Pretty simple, no?