False Choices
Ross Douthat and David Frum argue about whether the GOP needs to do better at targeting relatively prosperous educated professionals (Frum) or economically struggling cultural conservatives (Douthat). Ross frames the dispute:
But for the national party, Frum is right that there are real choices to be made. If you follow the Douthat-Salam model, which Reihan has dubbed “lower-middle reformism,” you’re going to be crafting a message aimed at the place where the non-college educated and college-educated categories bleed into one another – one pitched to the exurb-living college graduate who picked up a degree from a regional public university (or jumped from school to school and didn’t finish in four years, like Sarah Palin), and who probably has more in common, culturally and economically, with a lot of grads of community colleges and technical schools than he does with someone who went to, say, Swarthmore. This approach requires talking a lot about the famous “kitchen table” issues – public education and transportation, crime and health care costs – and trying to expand the definition of what it means to be “pro-family” without abandoning the GOP’s core pro-life convictions. If you follow the model Frum recommends in his column, on the other hand – call it “upper-middle reformism” – and pitch your message to the Obama-voting, ex-Rockefeller Republicans making $150,000 a year, then you’re talking to a “post-material” group of people who worry less about day-to-day economic concerns and more about causes like global warming – making Frum’s vision of a pro-choice, pro-carbon tax GOP a more plausible fit.
On the environment, I think there’s a heavy dose of false choice here. Say the Republican Party did whatever it is Ross thinks it ought to do on economic issues. That would require the government to raise some level of revenue. And if there were a carbon pricing scheme adequate to avoid the worst consequences of catastrophic climate change, that would bring in some level of revenue. The level of revenue would be high, but it would also be lower than whatever quantity of revenue is necessary to run government à la Douthat. So carbon pricing could cover some portion of the costs, with other taxes being lower than they otherwise would have been. It would be win-win — a Republican Party that has a reality-based view of climate change to appeal to upscale postmaterialists and also one that does more on kitchen table issues.
The point is that while I think there are serious arguments on both sides of the question of to what extent should carbon pricing be revenue neutral (i.e., offset by corresponding reductions in other taxes, or else rebated to the population somehow) or instead used to finance green investments, there’s no serious argument that failing to price carbon is preferable to pricing it.
In a political debate undistorted by the influence of special interest money, the left-right ideological dispute would take place along that dimension with people on the right arguing that the revenue should be used to cut taxes and the left arguing that the revenue should be used to hike spending. Indeed, note that even if environmentalists are massively overstating the risks of climate change, a revenue neutral carbon price would still make us no worse off economically than we currently are, and would probably have substantial public health benefits. But instead, there are various politicians (from both parties, I hasten to ad) in the pocket of energy or auto interests and plenty of funds going from oil and coal firms to think tanks that hire people to pooh pooh the problems of climate change and so forth. And that, in turn, creates this false sense of a need to choose between an agenda to appeal to the working class and an agenda to appeal to the sort of upscale types who are more likely to care about the environment.
33 Responses to “False Choices”
Register
RSSLogin
Topic Cloud
ArchivesBlog RollAbout Matt YglesiasContact Me
Donate
November 7th, 2008 at 2:32 pm
I favor a carbon tax, but I disagree that a revenue neutral carbon tax has no economic impact. Suppose, for the sake of argument, that coal is half the price of all other forms of energy, but produces much more carbon. Putting a much higher tax on coal to offset its carbon footprint will result in the average cost of energy being higher to produce the same amount of revenue. Taking this example to an extreme, so I don’t have to explain the algebra, look at the following two possible policies:
1. carbon tax: no energy comes from coal
2. no carbon tax: all energy comes from coal, at half the cost, allowing for more energy to be produced to get the same revenue
November 7th, 2008 at 2:48 pm
I second Jim. Its just not true that a carbon tax has no economic impact. At the very least you have to pay for the administration of the tax, and there is the opportunity cost of the revenue taken out of circulation for a period.
November 7th, 2008 at 3:30 pm
Any tax is going to have a cost in terms of administration, distorting economic decisions, and so on. But I agree the social costs of a carbon tax are often way overstated because people seem to forget those revenues can be used for something.
November 7th, 2008 at 3:32 pm
a revenue neutral carbon price would still make us no worse off economically than we currently are
Ha! This only makes sense in Matt’s post material fantasy land. This is wrong for both a global and domestic carbon pricing scheme. In a global and domestic scheme a higher price will reduce the amount of carbon used. If this price is only domestic then some domestic output will be shifted overseas. So total output could decline. In a global pricing scheme the effects will be felt greatest on welfare. For instance before we could have maximized welfare by buying a car and a movie. Now if we still want a car we must have a little less movie. We might have more income but the negative price effect will unambiguously outweigh the positive income effect (Eco 101).
Also, from reading your other posts it sounds like poor immigrants and minorities are the ones Republicans should be after. And considering how similar Latinos and blacks are to social conservatives and even economic conservatives on certain issues Douthat strategy makes a lot more long term sense. All Republicans have to do is give them a reason for why urban-centered progressivism goes against their desire to raise a family in a safe low-density community. I can already think of several.
November 7th, 2008 at 4:34 pm
And its not just on the rebate versus invest dimension … there is ample opportunity to invest in sustainable resource development in Appalachia that is politically beneficial to a party pursuing a New Energy Economy, beneficial to national security, and and beneficial to the environment.
November 7th, 2008 at 4:59 pm
Personally I hope Republicans never get elected again as long as they continue thinking about who they need to appeal to/target. The first sign that the Republicans are an actual political organization rather then an organized crime syndicate would be if they started talking, in private, about how they can HELP people.
November 7th, 2008 at 5:19 pm
Indeed, note that even if environmentalists are massively overstating the risks of climate change, a revenue neutral carbon price would still make us no worse off economically than we currently are, and would probably have substantial public health benefits.
This is just wrong. Whether a carbon price would be harmful or beneficial depends crucially on how closely the price reflects the true uninternalized cost, regardless of the impact on overall revenues. If it’s priced too high as a result of inflated estimates of climate change risk, it will have an adverse economic impact.
But instead, there are various politicians (from both parties, I hasten to ad) in the pocket of energy or auto interests and plenty of funds going from oil and coal firms to think tanks that hire people to pooh pooh the problems of climate change and so forth. And that, in turn, creates this false sense of a need to choose between an agenda to appeal to the working class and an agenda to appeal to the sort of upscale types who are more likely to care about the environment.
November 7th, 2008 at 6:49 pm
I agree with Mixner. Furthermore, from the standpoint of economic efficiency, a cap and trade program with 100% auctions (as Obama’s plan does) combined with lowering of other marginal tax rates is better because a plan that gives many permits away because A) giving away permits does not result in appropriate exit from carbon-emitting industries and B) because setting aside the environmental benefits, there is a cost to taxing the factor of production associated with carbon emissions and if the government raises revenue it can offset this by lowering other distorting taxes.
Revenue neutrality for the government could be accomplished by giving away carbon permits without lowering taxes. That wouldn’t be a good plan compared to revenue neutrality involving auctions. You want a number of permits such that the cost of a permit approximately equals marginal damage from an extra unit of emissions, auctioning all of these permits, and using the revenue to lower appropriate distorting taxes as best suits efficiency/equity.
Matt, talking to an environmental economist or two wouldn’t be a bad idea…
November 7th, 2008 at 9:20 pm
The economics 101a view is that a revenue neutral excise tax will lower welfare by distorting decisions. The cost is second order in the tax rate which means … absolutely nothing practical. The 101b view is that a revenue neutral carbon tax will help us if 1) Global warming is a large problem (not just a huge problem as it clearly is) 2) the other taxes that are cut cause more distortions than the carbon tax.
All of this assumes that market prices are the same as they would be if everyone had rational expectations (if you believe that I have some Lehman Brothers shares to sell you). If fossil fuel prices are absurdly low given how high they are going to be in the not so distant future, a tax on fossil fuels would help us by distorting our choices from error towards our medium term economic interests. A carbon tax, however, could make us consume less coal (plenty of that left) and more petroleum and natural gas so a first order cost.
Also Frum is so totally full of it. Global warming is not like endangered species and people are coming to know it. Keeping the sea level below my basement is not a luxury. Also your exurban red staters like to hunt and fish and love nature. Of course it is easy to criticize plans for Republican resurrection — right now it looks like their goose is cooked.
November 7th, 2008 at 9:34 pm
The economics 101a view is that a revenue neutral excise tax will lower welfare by distorting decisions. The cost is second order in the tax rate which means … absolutely nothing practical. The 101b view is that a revenue neutral carbon tax will help us if 1) Global warming is a large problem (not just a huge problem as it clearly is) 2) the other taxes that are cut cause more distortions than the carbon tax.
A carbon tax is potentially harmful in multiple ways. It would be harmful if it were set too high, independently of any harm attributable to trying to maintain revenue neutrality in the tax code. If we tax carbon at $100/ton when its true cost is only $30/ton, we are reducing welfare.
Simply declaring global warming to be a “huge” problem does not tell us what the tax should be, or prevent us from causing harm by setting it too high.
November 8th, 2008 at 1:49 am
A lot of people think that man-caused global warming is confirmed by the data… but even if that’s true, is a little global warming worse than another cyclical ice age that would bury Chicago (and other major cities) under a mile of ice?
November 8th, 2008 at 2:33 am
JMitzman is correct. As long as the GOP keeps worrying about who to try to “target” instead of worrying about actual reform, they will remain in the wilderness.
Oh, and insinuating that a BA from Directional State University is somehow more like a certificate in automotive repair than it is like a BA from Swarthmore won’t help win votes.
November 8th, 2008 at 10:44 am
Robert Waldmann,
Speaking of endangered species, I remember reading that protection of endangered species (at least the ‘charismatic’ ones like pandas and buffaloes) is actually fairly popular among working class people and religious conservatives. The big division on that question isn’t based on class or religion but on region. People in Western states with lots of natural areas, who have to pay the opportunity cost of giving up on using any of those lands, tend to be more skeptical of environmental protection, whereas people east of the Mississipi tend to be more conservationist.
I’ve worked with youth in inner city and poor rural areas before and found that they were pretty sensitive to environmental concerns.
November 8th, 2008 at 11:11 am
Global climate change is an even bigger problem than the economic problem we are facing right now. The tsunami of our economic difficulties, however is hitting shore now and threatens to swamp us in the next couple years, while the environmental tsunami which really does dwarf every other catastrophe we might face, is slower moving and farther out. What conservatives will have to do in upcoming years is to defuse their demogogues that instill hyperbolic and mean spirited reaction to those in disagreement with them, own up to the failures in their ideologies that have contributed mightily to the problems we face, and become problem solving oriented. Cheap shots across the bow of their opponents combined with consistent incompetence whether it be in administering the nation or running a campaign for the Presidency with nothing more than ad hominem attacks will not cut the mustard in the world we face, and they will find themselves increasingly condemned and irrelevant if that’s all they have to offer.
February 27th, 2009 at 10:31 am
I just found your blog on google. I really liked it and now I will share it with my friends.
March 2nd, 2009 at 4:29 am
levitraGreat site. Good info
March 11th, 2009 at 4:15 am
Excellent site. It was pleasant to me.
March 17th, 2009 at 2:20 am
Very interesting site. Hope it will always be alive!
tramadol
March 22nd, 2009 at 5:53 am
tramadol
If you have to do it, you might as well do it right
March 23rd, 2009 at 4:20 am
viagra
I want to say – thank you for this!
April 2nd, 2009 at 4:54 am
It is the coolest site,keep so!
buy cheap viagra
April 3rd, 2009 at 3:59 am
Excellent site. It was pleasant to me.
cheap brand pfizer viagra
April 9th, 2009 at 4:44 am
It is the coolest site,keep so! viagra
April 9th, 2009 at 11:29 am
I can tell that this is not the first time at all that you mention this topic. Why have you decided to write about it again?