Carbon Tax Analysis

It depends is the most reliable answer to almost any question other than is socialism a good idea?  It is particularly true as an answer to the following: should the US have a carbon tax?  Our starting points are that first, the left wants a carbon tax so there is space to negotiate with them.  Second, a carbon tax is conceptually a good idea because there is some relationship between carbon and global warming and we would, all other things being equal, like to reduce carbon emissions.  Third, a carbon tax is a good way to do that.

Paul Mirengoff at PowerLine has a discussion of carbon tax that we would like to review. We agree with much of his analysis but not his final decision.   Paul is correct that that the cost would be borne by consumers:

First, the cost of the carbon tax would be passed on to consumers:

While oil, natural gas, and coal companies would be responsible for paying the fee, they would likely pass a significant share of the associated cost on to their customers.

Yup, no doubt.  We are willing to agree that 100% will be passed on to consumers.  The GOP should see that low income folks are not sacrificed.  There are many ways to do this but the most obvious would be to reduce FICA, the biggest tax for most low income folks.  Make the first N thousand dollars of income not subject to FICA where N is the number that eliminates the impact of the carbon tax.

Sidebar: We could make this complicated and decide that only N at the first job applies.  We don’t think so.  If somebody works several different jobs we are OK with them benefitting from reduced FICA several times.  We think it is not exactly “fair” but the costs are not worth the benefits.  End Sidebar.

Like tariffs, sales taxes, and VATs it will fall more heavily on low income individuals:

Second, a carbon tax would have a disproportionate impact on low-income households:

As with the increase in energy costs, the increase in the cost of nonenergy goods and services would disproportionately impact low-income households.

Yup, no doubt.  Again, this can be fixed.  FICA is part of the solution.  Another part is to eliminate the gas tax that is currently 18.4 cents per gallon.

Paul might be right that is is not popular but we think presentation might matter:

Not surprisingly, the carbon tax is unpopular with voters. Indeed, Americans for Tax Reform notes that carbon tax advocates haven’t been able to get a carbon tax passed in a single blue state.

Two items are worth mentioning here.  First, carbon taxes by state are a really bad idea.  Second, in a purple USA, we can get a carbon tax that is modest and allows us to do good things like eliminate subsidies to alternative energy.  As our tweeter-in-chief might say, it all depends on the deal.

Again, in summary, a modest carbon tax, say, $20 per ton, that eliminates the gas tax and alternative energy subsidies while reducing low income FICA is a good idea.  We don’t know if the Democrats are willing to make the deal.  It might even be good politically even if they are not willing.

 

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Carbon Tax Again

There has been some discussion if the CNN Climate Change Town Hall was more boring that the Bears-Packers game that opened the 100th season of the NFL.  The game had 17 punts, 20 penalties, and one touchdown.  Holman W. Jenkins, Jr. at the WSJ watched enough of the Town Hall to weigh in.  He ties it to a Harvard professor and some science stuff that the Town Hall folks allege they worship:

It comes just days after the shocking suicide of Harvard climate economist Martin Weitzman, rightly praised in obituaries for an insight lacking in the CNN town hall: A climate disaster is far from guaranteed. It’s the low but not insignificant chance of a “fat tail” worst-case disaster that we should worry about. (Mr. Weitzman put the odds at 3% to 10%.)

We had not heard mention of it before but it appears that one of MWG favorite topics came up briefly at the Town Hall.  Holman tells us

As the New York Times also noted, “For the first time, Ms. Warren explicitly embraced a carbon tax before quickly pivoting away . . .”
What’s Ms. Warren afraid of? A carbon tax would hardly be prohibitive. Weitzman advocated $40 a ton—the equivalent of 36 cents per gallon of gasoline. Such a tax could be implemented without raising the overall tax burden; it could be used to trim taxes on work, saving and investment, improving the economy overall. It could be embraced and copied by other nations out of self-interest rather than self-abnegation (unlike the absurd Green New Deal). [Emphasis added]

A carbon tax of $40 is twice what we have suggested but it is on the upper end of modest range.

Sidebar: We are really pleased that our back-of-the-envelope computations agreed with Holman and, perhaps, Martin.  We estimated that $20 per ton would be equal to the current federal gas tax of 18.4 cents per gallon.  The part in bold shows that we had the relationship right.  Wheeee!  End Sidebar.

It also matters what else is done.  We like Holman’s suggestions.  The gas tax goes and then there would be some negotiation.  We would like to see alternative energy subsidies go too.  At $40 a ton we might be able to eliminate all tariffs but that would require a new administration.  An alternative could be a permanent reduction in FICA taxes so the tax burden for low income folks does not increase.

Why didn’t all the Democrats embrace a carbon tax?  Why weren’t they asked?  And asked to provide specifics?  The answer, as many suspect including Mario Loyola at NRO, seems to be that attacking capitalism is the real goal.  A carbon tax would be part of a capitalistic solution.  It is an idea that conservatives should seriously consider.

Good News, Bad News, Good News

We have been enjoying not being a paid pundit.  Those folks had to watch CNN Climate Change Town Hall.  Did we mention that it was seven hours long?  David Harsanyi at the Federalist has a nice summary: It was insane.  Elsewhere at the Federalist they have created their list of the ten craziest things at the Town Hall.  They didn’t even declare this the winner.   The folks who did that are way, way underpaid.  Then, while we were enjoying our week, Robert Mugabe died.  Our initial reaction way very much like Jim Geraghty: What a joy it is to be able to use the past tense for Robert.

Of course, the bad news is that the folks featured on the Town Hall are running for the Democrat nomination for president in 2020.  The “serious” candidates tend to be the most worked up about climate change.  Here is a tweet from the ten craziest things that ranks the candidates on their climate change proposals:

Tonight’s the . Here’s @greenpeaceusa‘s grades for the participating 2020 candidates.

Bernie Sanders: A
Elizabeth Warren: A-
Cory Booker: A-
Kamala Harris: B+
Joe Biden: B+
Julián Castro: B
Pete Buttigieg: B
Beto O’Rourke: B-
Amy Klobuchar: C+
Andrew Yang: C+

Amy gets a C+ for wanting to spend two to three trillion dollars (and we are certain that all cost figures are wildly understated) on climate change.  To get an average or above grade, as all the leaders in the polls did, you have to spend serious money and have serious infringement of freedom.  Nukes?  No thanks (nice song reference John).

The good news is that Big Oil seems to be ignoring all of this.  Of course, most of the fracking is done by smaller outfits and they don’t need to worry about being woke.

Sidebar: We were trying to confirm the last sentence by searching “Who does fracking?”  Almost all of the responses we got were about the “dangers” of fracking.  We still think Big Oil does not lead the fracking parade.  End Sidebar.

But Big Oil is always worried, watch their ads, about where they stands politically because their size makes them vulnerable.  Yet (from the above link):

Major oil companies have approved $50 billion of projects since last year that will not be economically viable if governments implement the Paris Agreement on climate change, think-tank Carbon Tracker said in a report published on Friday.

This is great news as we don’t need to worry about the frackers.  We shall see what happens.  Will the Town Hall insure another term for The Donald?  Will some Democrat be reasonable and popular?  When?  And why did our paragraph change?

Losing Robert and seeing that Big Oil is not too scared makes it net out to a good week.  We are still worried about climate change policy but are happy that our paragraph form changed back.

 

 

Expected Good News

One of the many great things about markets is that they encourage learning.  Isaac Orr at The Center of the American Experiment has an excellent article with a great title:

Capitalism is Saving the Planet Part Six: Minnesota Forests Are Flourishing

It is expected good news because capitalism and markets learns what generates profits and what the consumer wants.  You should, of course, read it all to get the details.  And you can savor the title again.  We will give you Isaac’s conclusion:

Using these technologies [see here] is not only good for the timber industry’s bottom line, they are good for the forests themselves. Rather than being an opponent of healthy forests, the capitalist timber industry is more invested in forest health than any other stakeholder, and therefore they have the most incentive to ensure Minnesota forests are healthy and vibrant.

Although Isaac uses environment as a category he doesn’t remind us that trees are natural carbon eaters.  The link tells us:

As a tree matures, it can consume 48 pounds of carbon dioxide per year (among other greenhouse gases like ozone), and releases enough oxygen for you to breathe for two years!

So the one billion additional trees in Minnesota will be eating 48 billion pounds of CO2 per year.  According to Wikipedia, Minnesota produces just under 90 million metric tons of CO2.  A metric ton is 2205 pounds so this is a big deal in term of arresting CO2 growth even if we are not entirely convinced of all the numbers.  We are working to find Isaac’s other five parts.

One Intersection And One Not

We just finished Kevin D. Williamson’s The Smallest Minority and as we were finishing that up we heard about Clemens Tonnies, the chairman of the Bundesliga soccer team Schalke who was attacked by the social media mobs that Kevin is writing about.  Let’s start with Kevin.

We really enjoyed The Smallest Minority.  Kevin creates some amazing comparisons.  It is hard (probably impossible) to find as literary a political book where Dante, Milton, and Shakespeare are crucial to understanding the text.  It is in turn nasty (Minos was a Cretan, Matthew Yglasias is a cretin), hilarious, insightful and crazy.  Sometimes it is all of those at once.  It is easy to guess who is the mad dog of Mad Dogs and Englishmen.  Be sure to real all the footnotes.  Twice.

Sidebar One: We rarely comment on why folks do things.  Rather we are more interested in what they do.  We are convinced that this book is the real Kevin.  We understand that it is easy to get fooled and that is why we rarely comment on why.  We often wonder why folks behave like they do on TV and radio.  Kevin is really enjoying the conflict about social media.  End Sidebar One.

The backstory is that Kevin was hired by The Atlantic and shortly thereafter fired because of a social media storm.  The book is Kevin’s generalization of the problems with social media.  Kevin is correct when he says we need discourse, a real discussion, to discuss our pressing problems.  Social media gives us anti-discourse.  We get slogans and attacks to stop discussion.  People do it because it works.

The book was a joy to read.  The literary bent, character assassination, and asides are great fun.  The Smallest Minority just didn’t resonate with us.  We didn’t buy the Shakespeare analysis but that wasn’t it.  Twitter, Facebook and other social media just isn’t that important to us. There is a lack of an intersection been MWG and Kevin’s book.  We don’t follow the recommendations to improve the MWG penetration following by tweeting and pictures.  We really appreciate our followers but we blog for our own benefit and so we don’t fill up Facebook (our only social media) with political stuff.  We are not sure social media is that important to the wider world.  Kevin didn’t do much to convince us on that account.

Then came Clemens and Schalke that made more of a connection or intersection for us.  These events didn’t completely change our mind but they did make us reconsider.  Here is  a summary of what happened:

Many fans had been calling on the 63-year-old [Clemens] Tönnies to resign over the comments he made on Aug. 1, when he told a public meeting in Paderborn that tax increases to fight climate change were wrong and claimed it was better to finance 20 power plants a year in Africa.

“Then the Africans would stop cutting down trees, and they would stop making babies when it gets dark,” Tönnies said in comments first reported by the Neue Westfälische local newspaper.

Tönnies, Schalke chairman since 2001, apologized for his comments

Of course, Clemens has stepped on at least three third rails of social media.  First, he fought climate change recommendations.  Second, he talked about Africa and (gasp) Africans.  Third, he apologized to try and sate the mob.  They cannot be sated.

OK, he is not exactly right.  What Africa needs is capitalism and Germany could use a little more.  Here is part of a story on Tanzania:

The real cause of that reduction is pretty straightforward: economic freedom. Tanzania has gradually dismantled the socialist or “ujamaa” economic policies enacted by the dictator Julius Nyerere, since he stepped down in 1985. Nyerere was widely praised by leftist intellectuals in developed countries for his sincere belief in socialism, relatively low level of corruption, and not intentionally slaughtering his own people like so many other dictators.

Dang. We got rid of the tab before we made the link and now we can’t find it.  To get back to Clemens, we agree with him that tax increases to fight climate change don’t make sense in Germany or elsewhere.  We also agree with him that economic improvement in Africa would be a good thing and it will require carbon emissions.

Sidebar Two: We have argued that a revenue neutral carbon tax that eliminates the gas tax is a good idea.  It is not a tax increase.  Sidebar Two.

Africa could use more and better power.  Our first priority would be economic structure rather than actual structures but Clemens has a reasonable idea.   Reducing the cutting down of trees is probably a good idea a way for Clemens to try to connect with the climate change folks.  It is not unreasonable to argue for more trees.  He spoke of the number of African babies.  So what are the fertility rates in African countries?  Glad you asked:

The vast majority of the countries in the world with the highest fertility rates are in Africa, with Nigertopping the list at 7.153 children per woman, followed by Somalia at 6.123 children per woman. The Democratic Republic of Congo, Mali and Chad follow at 5.963, 5.922 and 5.797 children per woman, respectively.

So the top five countries in term of fertility are all African.  Germany, on the other hand, has a fertility rate of 1.586.  We are not convinced that overpopulation is a problem but the climate change folks often suggest it is.  Clemens is using their rhetoric against them.  They should respond rather than call him names but, as Kevin points out, a name calling ochlocracy is effective in silencing people these days.

The Clemens story has not made fighting the ochlocracy a front-burner item for us yet. We could be trending in that direction.

 

Interesting Title Disappoints

We were intrigued by Paul Mason’s title at Unherd: Can [Jeremy] Corbyn Learn From The Greek Tragedy?  Jeremy is the socialist leader of the Labor opposition in the United Kingdom.  Because Unherd has a variety of voices it could have been interesting.  We thought the Greek tragedy was that they elected a socialist government and, as always, it turned out badly.  As always, the people eventually throw the socialists out if they can. Paul thinks the tragedy is the socialist lost.

We thought it was unlikely that Jeremy, a long-time socialist, would learn the lesson that socialism never works. We don’t know Paul so we were worried that Paul would suggest the obvious (but evil and often implemented) solution that the socialists need to get elected once and then take control of the media or the elections or both to maintain control.

Instead, Paul offers some coalition building suggestions.  He starts his suggestions with the problem for him and the mildly good news for us:

In general, overtly anti-capitalist Left parties have peaked below 20% as the memory of the financial crisis fades, while a shift to the Left by traditional social democrats has stemmed their own decline.

His main solution is to work with the Greens.  Does he think that they are not overtly anti-capitalistic already?  Paul then gives it away, climate change is a method to political power.  He says:

The sheer scale of the climate crisis will, as the 20th century recedes and the IPCC’s decarbonisation targets become pressing, change the priorities of the Left. The far-Left is now either in reluctant coalition with its social democrat and Green allies, or resisting even that. For me, the 21stcentury equivalent of the Popular Front would be an alliance of all forces prepared to commit to spending the hundreds of billions we’ll need to combat climate change, plus the absolute defence of democracy and the rule of law, plus the reversal of austerity. The renationalisation of energy and transport infrastructure is implicit in any radical plan to halve net carbon over the next ten years. {Emphasis added]

Sidebar: We don’t believe the sentence in bold above.  It is inconsistent with socialism and climate activism.  We do believe the work in bold (renationalisation) in the next sentence. It is clear evidence that the rule of law is already out.  End sidebar.

Folks turn Climate Change on its head to get political power.  The best solutions are inaction and mild action because of the high costs and low benefits.  We have often suggested a modest carbon tax combined with removal of “alternative” energy subsidies as a useful step to move us to a more market based economy.  Lots of people can learn from the Greek Tragedy even if Jeremy and Paul won’t.

Attacking Straw Men

George Will at NRO has a great article on the silliness of politics.  He mostly indicts would-be Democrat presidential nominees but he shows his displeasure for their likely opponent.  Benjamin Zycher from the American Enterprise Institute is also at NRO with the wildly misnamed The Confusions of The Conservative Carbon Tax showing how silly the right can be.  The first misnaming is in the title.  What would be “the” conservative carbon tax?  We hope it is the MWG proposal but that seems presumptuous.  To remind you, the MWG carbon tax proposal is a modest one, $20 per ton, that includes eliminating the the gas tax and federal support of alternative energy.  After skewering some straw-men

Sidebar: Would straw-men mind being skewered?  We think, like in the Wizard of Oz, they would be worried about fires rather than blades.  Still we are sticking with alliteration.  End Sidebar.

Benjamin starts his conclusion with an exactly wrong sentence:

Once conservatives have endorsed a carbon tax, they will have no principled answer to the endless pressures for more government intervention.[Emphasis added]

The answer is exactly the opposite.  Since we endorse a carbon tax then we have principled answers for reducing government intervention.  Particularly, we have the opportunity to reduce the current government support of “alternative” energy.  In fact, the joy is that we could do both as one deal.

The rest of his conclusion is sensible:

Conservatives cannot defeat climate alarmism and the fundamental threat to freedom that it represents unless we defend first principles. In the context of climate policy, watchful waiting and adaptation over time are the only sensible approaches consistent with them.

One of the first principles of conservatism is to get incentives right or at least move them in the right direction.  A modest carbon tax that eliminated the gas tax and reduced [yes, the principled answer is eliminate every bit of support but we need space to negotiate] alternative energy support would be a conservative step because it gets the incentives closer to right.  If the left is unwilling to make a deal then we do what Benjamin suggests.