Wherein I Almost Agree With Thomas Friedman on a Climate Issue

Thomas Friedman outlines what he would do first to attack climate change

Well, the first thing we would do is actually slash income taxes and corporate taxes and replace them with a carbon tax so we actually encourage people to stop doing what we don't want, which is emitting carbon, and start doing what we do want, which is hiring more workers and getting corporations to invest more in America.

Friedman is a bit disingenuous here, as he proposes this in a way that implies that deniers (and probably evil Republicans and libertarians) oppose this common sense approach.  Some may, but I would observe that no one on the alarmist side or the Left side of the aisle is actually proposing a carbon tax that 1:1 reduces other taxes.  The only person I know who has proposed this is Republican Jeff Flake, who proposed a carbon tax that would 1:1 reduce payroll taxes.

As I said back then, I am not a big fan of taxes and think that the alarm for global warming is overblown, but I could easily get behind such a plan.  Payroll taxes are consumption taxes on labor.  I can't think of anything much more detrimental to employment and economic health.  So Flake's proposed shift from a consumption tax on labor to a consumption tax on carbon-based energy sources is something I could get behind.  I probably would do the same for Friedman's idea of shifting taxes from income to carbon.  But again, no one is proposing that for real in Congress.  The only plan that came close to a vote was a cap and trade system where the incremental payments would go into essentially a crony slush fund, not reduce other taxes.

Of course, since this is Friedman, he can't get away without saying the government should invest more in infrastructure

 the federal government would borrow money at almost 0 percent and invest it in infrastructure to make our cities not only more resilient, but more efficient.

In TARP and the stimulus and various other clean energy bills, the government borrowed almost a trillion dollars at 0% interest.  How much good infrastructure got done?  About zero.  Most of it just went to feed government bureaucrats and planning studies or ended up as crony payments to well-protected entities (Solyndra, anyone?).  The issues with government infrastructure investments, which Friedman has never addressed despite zillions of articles on infrastructure, are not the borrowing rate but

  • The incentive and information problems the government has in making investments of any sort.
  • The vast environmental, licensing, and NIMBY factors that make it virtually impossible to do infrastructure projects any more, at least in any reasonable time frame.
  • mahtso

    I do not believe a 1 to 1 exchange (carbon tax for other tax) will work for the simple reason that as people use less carbon revenues will drop and the government will increase other taxes. By analogy, as people have used less gasoline, there is talk of mileage based taxes.

  • Sam L.

    Infrastructure: Talking about building it is so much simpler than doing it, and by golly, that's the Obama Way!

  • sean2829

    A carbon tax is regressive. Think about what percentage of a families budget goes to energy if they are lower middle class vs. wealthy. Then think about white collar vs. blue collar jobs. How much energy is used in an information job vs. a manufacturing or construction job. Carbon taxes get the blue collar workers coming and going, it eats up a greater proportion of their income and reduces the economic competitiveness of his work. Enough is enough.

  • Curtis

    This is simple and overall free method of reducing carbon dioxide and increasing labor. Therefore it has no backers and no chance of passing congress. There will be some loser (high energy users) and some winners (low energy users and high labor user) but it is overall free.

    @ Sean2829 - If we replace one regressive tax (social security) with another (carbon tax) it does not adversely the poor.

  • http://devilish-details.blogspot.com/ mesaeconoguy

    I think our lack of infrastructure is causing global warming.

    To Friedman’s point, we should begin building as much 0% financed infrastructure as humanly possible.

    This can be the only explanation, and therefore remedy to this problem. Once we have enough infrastructure, temperatures will stop rising, and may even begin to fall.

  • stanbrown

    Actually, we don't know what interest rate we can borrow extra cash at. As long as the Fed absorbs the "extra" debt by paying for it with Monopoly money, we don't know the rate until they replace the Monopoly money with real money some time in the future. I suspect that the retirement of the Fed's monopoly money will not happen at near 0%. And in any event, the Fed's QE has already come at a significant cost to the private economy. It may not have cost the US Treasury directly, but it has surely had a cost in reduced tax receipts. Does it really matter if the hit to the Treasury comes as interest paid or receipts foregone?

  • http://devilish-details.blogspot.com/ mesaeconoguy

    Ah yes, but Stan, Tom Friedman’s extensive scientific and economic studies have revealed that infrastructure solves things.

    Which things aren’t important, but the message is infrastructure.

    Infrastructure = good

    Warming = bad

    Very, very bad.

    Bad warming.

  • Q46

    A tax reduces 'carbon' emissions (these actually are soot, so what is meant is carbon dioxide, but I digress) does so by reducing consumption.

    Consumption (Adam Smith) is the sole and end purpose of production.

    So production is reduced.

    So need for employment is reduced.

    So... economic collapse and back to pre-industrial society scratching a subsistence living off a patch of land.

    There is a difference between stopping behaviour and changing behaviour... an obvious distinction so I won't explain it.

    So-called 'carbon tax' is a Pigou Tax which in essence is used to change behaviour and be overall revenue neutral.

    But change is explicitly about stop doing X and start doing Y; assumption being Y is virtuous whereas X is not.

    And in that lies the problem: there is no viable alternative to fossil fuel/nuclear generated electricity and when people talk about 'energy' for the most part it is electricity of which they speak.

    Current technology does not make wind and solar a viable alternative; it is really no more than a marginal and unnecessary substitute for conventional.

    The notion that we can invent 'clean' energy just by concentrating really, really hard and throwing money at it is unrealistic. No amount of creativity and funding would have invented radio in the 18th Century. Technological advance is incremental; one thing follows on from another or combinations of what went before.

    But if the idiots in charge were really serious about all this, we would, starting over a decade ago, have used the technology we already have IS safe, is viable, is affordable, can be developed IS safe, and emits no 'carbon... nuclear.

    France has 59 nuclear stations, a programme started in the 1960s, which produces 85% of all France's electricity needs.

    In other words we have the solution, but the aim is nothing to do with 'Global Warming' real or imagined, it is about global government according to socialist principles.

  • Canvasback

    I went into construction in 1987. By 1988 I figured out that people can talk faster than I can build.

  • Canvasback

    The problem with a carbon tax is the same as with most taxes: the people who implement it.

  • Joe_Da

    As sean stated below, a carbon tax is very regressive, hurting the poor much more so than the rich. Likewise a sales tax or consumption tax is also very regressive. One point that most can agree on is that our overall tax rate, federal income, estate and excise taxes, state income, sales tax, property tax, etc is way to high. I do however agree with a progressive tax rate, partly because the wealthier earn more money, but also because in many respects they benefit more via the orderly structure of the economy creating more opportunity for their investments and the rule of law which helps protect their investment.

    Warren's other comment regarding the payroll taxes greatly reducing the incentive for work is also true. A married couple earning 70-80k each pay an effective flat rate approaching 40% -45%. (not the marginal rate, but the effective flat rate on the total income.

  • skhpcola

    Believing that CO2 is a pollutant or that it is deleterious to the earth in any fashion, shape, or form is retarded and anti-science. It makes a great focal point for leftists trying to bilk the public fisc, but it means absolutely nothing of any substance. Believing that "carbon" must be taxed or controlled is evil and anti-human. But hey, leftists and liberaltarians think that they know best.

  • FelineCannonball

    Tyler Cohen and a number of progressive economists have favored a carbon tax. I don't think cap and trade has much going for it by comparison. Mostly the simplicity and less wealth transfer to countries sitting in cheap oil. http://m.nber.org//papers/w19338.pdf

    Even if you don't believe global warming is a problem, you might believe in conservation of non-renewable natural resources and greater independence from Saudi Arabia and Iran. There is no rate of use target, but rate of use doesn't matter as much as how much is left in the ground in say 2100. Our grandkids won't care what was burned in 2014.

    It would be a decent replacement for other regressive taxes.

  • FelineCannonball

    Mileage taxes have to be the stupidest idea since cap and . . . hmmmm. Nope, probably quite a bit stupider. Intrusive, expensive implementation, addresses no non-political problems, perverse market effects.

  • Magua1952

    The best alteration to the income taxes system is to reduce taxes which requires cutting spending. Any remake such as a carbon tax or flat tax will cause as much, or more, disruption as leaving it be. All these deductions and subsidies have been baked into the cake for decades, even a century or more. Steady tax cuts will gradually defang these monstrosities. Innovations like value added or carbon taxes will become additional, not replacement taxes.

    We could thrive with half the current spending. We could maintain a more than adequate military. We lived with much smaller government as recently as the 1930s. It was the wars that generated the super bureacracies. Winning the war is much easier than dismantling the dead weight afterward. We managed to shrink the government after the Civil War and after WW I. The second Great War seems to have paralyzed generations with agencies and welfare.

    So long as we have a government debt ball and chain we will have limited achievements in the future.

  • rst1317

    User taxes are not stupid nor would a mileage tax need to be intrusive nor expensive to implement.

  • FelineCannonball

    Why would you put a transmitting GPS in every car when you can just adjust revenue for the HTF by moving the gas tax a penny one way or another. The latter costs exactly zero, and more closely tracks road impacts of vehicles in the resulting tax.

  • Mike Powers

    "The issues with government infrastructure investments, which Friedman
    has never addressed despite zillions of articles on infrastructure..."

    Remember that Friedman is the guy who thinks that the ideal construction of government is something like China, because boy howdy they sure can get things done when they decide to. He just *loves* they just send some guy out to crack the whip and things *happen*, none of this whining about "rights" and "private property".

  • effinayright

    It may be a mistake to tax income derived from labor, but taxing "carbon", the essential element of all life, is just plain stupid.