Carbon Tax

We are in favor of a limited carbon tax.  Our preference is that we eliminate all tariffs, the gas tax, and a few other things and replace it with a carbon tax.  There is no need to develop a complicated rebate program because all of the taxes involved are regressive so there is no change in the tax structure.

The WSJ has had a proposal for a more extensive carbon tax.  They are kinda against it and explain why:

A carbon tax would be better than bankrupting industries by regulation and more efficient than a “cap-and-trade” emissions credit scheme. Such a tax might be worth considering if traded for radically lower taxes on capital or income, or is narrowly targeted like a gasoline tax. But in the real world the Shultz-Baker tax is likely to be one more levy on the private economy. Even if a grand tax swap were politically possible, a future Congress might jack up rates or find ways to reinstate regulations.

We support a small carbon tax.  We do not support a large carbon tax with a “dividend” to some folks.  It is inadvisable to make carbon exhorbitantly expensive as it will supply energy for the foreseeable future.  It is advisable to tax all forms of carbon equally rather than just gasoline.  It is advisable to trade a small carbon tax for a reduction in regulations.

We have some, but not much, sympathy for the WSJ’s concerns about actions in the future by Congress.  The Democrats have wanted to increase taxes for the last 50 years.  The Republicans wax and wane.  The fight against higher taxes and onerous regulations will go on forever regardless of what taxes exist.  The Democrats want to increase payroll taxes, increase marginal rates, and create new taxes.  They seem likely to continue with these proposals.

Conservatives need to be bold to find solutions.  We need to consider a carbon tax and a VAT in reaching our economic goals including lower taxes,  less complicated taxes, and fewer regulations.  There is a risk in creating a new tax but there are opportunities including eliminating the gas tax and reducing energy regulations.  It is time to be bold but not foolish.  A step towards a more rational energy policy would be replacing the gas tax with a revenue neutral carbon tax.  Regulation reform might be connected to the switch.  It is one of many possible deals.  Let’s consider them.

 

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Speaking Of Bad Ideas

As we were just speaking of bad ideas, here is one from Wisconsin.  The WSJ says:

Wisconsin state regulators seem determined to outdo him [The Donald] by making themselves as unpopular in Ireland by banning state grocery stores from selling one of the Emerald Isle’s most popular (and tasty) products: Kerrygold butter.  [Kerrygold and Irish soda bread is worth the trip]

Tariffs are not the only impediment to trade.  Regulations can be equally effective.  In this case, according to the Daily Mail, it is a lovely piece of regulatory Catch -22:

A state law instituted in 1970 prohibits anything other than Grade A milk products from being distributed in Wisconsin.

Because Kerrygold is made from grass-fed cow’s milk in Ireland, it isn’t graded by the USDA – leaving loyal fans in Wisconsin out in the cold. [NB: the only relevant parts are Ireland and USDA]

It is a neat regulatory trick but one we should eliminate.  In a GOP controlled state we need to have this undone quickly.  Perhaps the lesson will translate to Washington but we, like the WSJ, have our doubts.

Anyone Can Have Good Ideas

Jim Geraghty at NRO’s The Corner and on his Morning Jolt newsletter has this quote from Tom Perez, the new DNC Chairman (what term do the Democrats use?):

I was in the U.K. and Germany and went to Volkswagen and learned about their apprenticeship model—young people become paid apprentices in trades. It’s not a coincidence that youth unemployment is far lower in Germany than the United States because there are paid opportunities for young people to get experience. So, yes we need to and do investigate [internship violations], but I think the broader solution will help more people faster to transform the culture of America around this earn-while-you-learn idea.

Jim rightly takes Tom to task because the DNC uses unpaid interns, including those that work 40 hours per week.   We doubt that Tom is really serious about his support for such a system but it is an idea worth supporting and it has a couple of conservative implications.  Two obvious ones are the minimum wage and government control of K-12.  Raising the minimum wage is inconsistent with taking the [realistic] view that individuals develop skills and earning power over time.  On the job training (OJT) is inconsistent with a government monopoly on K-12 and our current obsession with college.  OJT can work with K-12 and college but it changes both and can be a separate thing on its own.

Sidebar: We are a big fan of college.  It is great for some folks but not for everyone.  We support a variety of ways to learn skills consistent with the variation in those skills and folks.  End Sidebar.

Almost every candidate has good ideas and bad ideas.  We are working on a longer post on voting that recognizes we are buying or rejecting among two portfolios of ideas when voting.  Tom has at least one good idea although we doubt he has thought out the implications of OJT.  As a comparison, The Donald has some bad ideas about trade.  In part to get elected and in part from bad thinking, every candidate has a portfolio of ideas and emphases that attract us and repel us.  There is rarely a perfect vote.  Tom’s positive idea amongst a plethora of bad ones [read all of Jim’s post] shows us that.

Well Said Kevin

[This didn’t publish earlier so here it is out of sequence.]   Kevin Williamson talks about capitalism at NRO.  His conclusion:

Not long ago, the great dream and aspiration of most of the people walking this Earth was to have enough to eat, for themselves and for their children, and to be liberated from worrying about whether they would eat again tomorrow or the next day. Capitalism can be a great deal of work, but it works if you let it work.

It is important to point out the obvious with a bit of gusto from time to time.

Almost

Larry Kudlow at NRO is quoting John Taylor (good choice)

He [Taylor] concludes, “To turn the economy around we need to take the muzzle off, and that means regulatory reform, tax reform, budget reform, and monetary reform.”

Then Larry says:

Well, aren’t those exactly the reforms that President Trump is promoting?

The issue is whether The Donald’s growth expectations, that are higher than current but lower than most recent past president, will be met.  The answer to Larry’s question is: Almost.  He can check off a good start on regulatory reform.  Monetary and budget are pretty far off.  Tax reform is a work is progress with one big caveat.  The Donald wants to tax international trade.  The question is how big of a negative will that be?  We think the uncertainty might be a bigger an impact than the direct effect.  Taxing international trade is just another regulation to hinder business.  Larry is right that growth is the key to many political outcomes.  We think it will improve on The Donald’s watch but it will be hindered by his obsessions with taxing and restricting international trade.

 

Don’t Forget Division!

Ramesh Ponnuru writing at Bloomberg starts by summarizing a recent working paper by Edwards and Ortega.  He doesn’t mention it was funded by the Center For American Progres (CAP), a progressive group.

It’s an eye-opening finding: If the U.S. no longer had any illegal immigrants, its GDP would be $5 trillion smaller over 10 years. That’s the conclusion of a recent study. But while the number is big, it’s not clear it tells us much about what to do about illegal immigration.

Normally, the expectation that a policy would shrink our economy by that much would be a very powerful argument against it. But that’s because normally, we would expect this shrinkage to take the form of lost jobs and lower living standards for Americans.

It is unclear why this data is eye-opening.  If we take a large number of folks out of the economy the size of the economy will go down.  What is interesting is division.  What will happen per capita?  Here is the real money quote from Edwards and Ortega considering the source of their funding:

Our results show that the economic contribution of unauthorized workers to the U.S. economy is substantial, at approximately 3% of private- sector GDP annually, which amounts to close to $5 trillion over a 10-year period. These effects on production are smaller than the share of unauthorized workers in employment, which is close to 5%. The reason is that unauthorized workers are less skilled and appear to be less productive, on average, than natives and legal immigrants with the same observable skills.

Just to be clear, according to the study, unauthorized workers are 5% of the workforce and contribute 3% of private sector GDP.  Later Ramesh cites a CBO study that finds the per capita economy would be 0.2% after two decades [emphasis added].  So we have two studies.  One suggests that eliminating unauthorized workers would improve the economy and the other suggesting a tiny positive change.  Conclusion: no overall economic harm will come from exporting unauthorized workers.  As Ramesh says, it is not the only issue to consider but it could be an important one.  It turns out that it is not important.

What else should be considered: There could be specific areas of the economy that might harmed or improved.  There might be specific groups or areas of the country  to consider as well.  The impact on law enforcement needs to be considered.  Just don’t worry about the overall economy.

Campus Free Speech

We completely agree with Kurtz, Manley, and Butcher (KMB) that campus free speech is a critical issue.  Viewpoints, mostly conservative ones, are being silenced on campus by pressure and regulation.  Even the progressives like Nikki Usher recognize that:

[M]any of my progressive students are using the assignment to tweet deeply emotional, bitingly sarcastic, or sharply critical comments about the Trump administration and the Republican Party more generally.

We do not agree with KMB that additional legislation is necessary.  We are, however, deeply envious of what appear to be a rare set of Chuck Taylor All-Stars (Chuckies) worn by the young man in picture.

Sidebar: We collect Chuckies and have never seen such a pair.  We have leather and wool pairs but nothing like that.  There is no star.  Was it removed?  End Sidebar.

Our opposition to KMB’s proposal is making it a legal solution.  A good analogy is the what was referred to as the Equal Rights Amendment.  Conservatives fought it for a variety of reasons but they mostly boiled down to  (a) it was not necessary and (b) the outcomes were uncertain.  We think those reasons are valid to the KMB proposal.  The First Amendment is still there despite its detractors.  The outcome of passing the KMB proposal is uncertain.  A better solution is more speech rather that legal solution.  The problems are that there is a demand for action and that more speech will take time.  We see the risk but think the principle wins in this case.

We are strongly supportive of FIRE’s efforts to enforce the First Amendment but we see adding more legislation as the wrong solution.  We have seen what happens when the state or the university tries to right every wrong with legal or quasi-legal solutions.  It isn’t pretty.  Nikki and other folks suggest free speech is making progress.  It will be be long and slow but better if we do it this way.