One of my favorite quotes about the state of U.S. politics was offered a couple years ago by Gerald Seib, a Wall Street Journal columnist, when he observed that “America and its political leaders, after two decades of failing to come together to solve big problems, seem to have lost faith in their ability to do so. A political system that expects failure doesn’t try very hard to produce anything else.” That’s us today – our entire political system is guilty of the “soft bigotry of low expectations” for ourselves.
I raise this now because it strikes me as crazy that one of the obvious solutions to our budget, energy and environmental problems – the one that would be the least painful and have the best long-term impact (a carbon tax) – is off the table. Meanwhile, the solution that is as dumb as the day is long – a budget sequester that slashes spending indiscriminately – is on the table.
Shrinking the tax deduction for charity is on the table. Shrinking Social Security, Medicare and Medicaid for the poor are on the table. But a carbon tax that could close the deficit and clean the air, weaken petro-dictators, strengthen the dollar, drive clean-tech innovation and still leave some money to lower corporate and income taxes is off the table. So the solutions that are lose-lose and divisive are on the table, while the solution that is win-win-win-win-win – and has both liberal and conservative supporters – is off the table.
Yes, to win passage of any carbon tax, Republicans would insist that it be revenue neutral – to be offset entirely by cuts in corporate taxes and taxes on personal income. But maybe they could be persuaded otherwise. In an ideal world, you would have 45 percent go to pay down the deficit so that we don’t have to cut entitlements as much – appealing to liberals and greens – and have 45 percent go to reducing corporate and income taxes – to encourage work and investment and appeal to conservatives. The remaining 10 percent could be rebated to low-income households for whom such a tax would be a burden.
According to the Center for Climate and Electricity Policy at the nonpartisan Resources for the Future, a tax of $25 per ton of carbon-dioxide emitted – through the combustion of fossil fuels used in electricity production, commercial and residential heating and transportation – “would raise approximately $125 billion annually.” This $125 billion “could allow federal personal income tax reductions of about 15 percent or corporate income tax reductions of about 70 percent, if all carbon tax revenues were used to replace current tax revenues. Alternatively, the federal deficit could be reduced by approximately $1.25 trillion over 10 years” – roughly what we are trying to do through the foolish sequester. Such a tax would add about 21 cents per gallon of gasoline and about 1.2 cents per kilowatt-hour of electricity. It could be phased in gradually as the economy improves.
Experts believe that the mere signal of a carbon tax would get companies to become more energy efficient. And that’s the point. As part of any grand bargain – which will have to include spending cuts and tax increases – introducing a carbon tax into the mix makes all kinds of options easier and smarter.
Alas, right now both sides are trying to inflict maximum pain on the other, rather than framing the debate as: “Here’s the world we’re living in; here’s what we need to thrive; and, if we cut and tax here, we can invest in these 21st-century growth engines over here.” Our goal is not to balance the budget. It’s to make America great.
As Nathan Gardels and Nicolas Berggruen note in their insightful book, “Intelligent Governance for the 21st Century: A Middle Way Between West and East,” we prefer a “Diet Coke culture – sweetness without calories, consumption without savings and safety nets without taxes.”
No wonder anything hard or smart is off the table. We pushed it there.