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Carbe Diem November 18, 2010

Posted by Amir Roth in climate, economy, football, taxes.
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Shortly after the midterm election, a chastened POTUS Lightning said that he was looking forward to working with Republicans on moving the economy and the country forward. He didn’t mention the Bush tax cuts. He didn’t mention healthcare. Or immigration. Or the deficit. He mentioned education. And he mentioned energy. Is Obama planning something major? I hope so, but probably not given that he’s an actual practicing politician and not “just a blogger.” Will Republicans go for whatever it he has in mind? Stranger things have happened. Okay, they haven’t. But here’s an idea—start phasing in a carbon tax. The time is ripe. Let me explain.

Ichi: A carbon tax will create jobs. Opponents of energy taxes claim they kill jobs. This is true for any tax! Taxes on consumers reduce disposable income and demand for goods and services. Taxes on businesses reduce the amount of money available for employee salary and benefits. Income taxes kill jobs! Sales taxes kill jobs! All taxes kill jobs! But some taxes can create jobs too. How? By fixing a price signal to a commodity or activity that creates a market for substitutes for that commodity or activity. A carbon tax will create a market for alternatives to and more efficient use of carbon-based energy. What do sales taxes create a market for? Alternatives to sales? What does income tax create a market for? Alternatives to income? Actually, sort of. It creates a market for ways to hide income. The US government doesn’t need to inject billions of taxpayer dollars into energy efficiency and clean energy research, a carbon tax will draw that money from the private sector much more efficiently. Taxes are necessary. With no taxes, there is no government and no social services—actually, there can be government without taxes but this requires massive amounts of oil and Sharia law. If we have to fund our government through taxes, shouldn’t we use taxes that create jobs in addition to killing them as opposed to taxes that only kill jobs?

Ni: A phased-in carbon tax will not kill any jobs, at least not immediately? A carbon tax will kill some jobs immediately, or—assuming that most precarious jobs are already gone and that most remaining jobs are robust—will restrict the creation of new jobs. But a phased-in carbon tax will not. An effective carbon tax needs to be something on the order of $200 per metric ton of CO2. That works out to about $1.83 a gallon. Yes, if a $1.83 per gallon gas tax goes into effect January 1, the economy will wretch. But if a $1.83 per gallon gas tax gets phased in over the next five years at six month increments, then on January 1, the tax would only be $0.18. It would go to $0.36 on June 1. And so on. The economy will adjust to a slow climb like that—in a way that a frog adjusts when you boil the pot of water it is swimming in—especially if it’s predictable. So if the carbon tax is initially too low to kill any jobs, how can it create jobs? Aha! The investment, and jobs, will be drawn to the certainty of the future tax not to the present tax!

San: There is a window of opportunity to restructure the tax code. With the Bush tax cuts—here is a piece by the Brookings Institution that summarizes the Bush tax cuts and their effects—set to expire when the apple drops on 2011, Republicans and Democrats are angling and wrangling over whether to let them expire, extend them, or create a hybrid solution split at an “upper-middle-class” earning level like $250,000 a year. It looks like Republicans are going to insist that upper class tax cuts are part of any deal—attention, middle class! the Republican party is holding your tax cut hostage just so that the 2% of American families making more than $250,000 a year can have a tax cut too! Remember this in November 2012—but they seem willing to put other parts of the tax code like deductions and exemptions on the table. Perfect. And perfect. Perfect I. Democrats can use a phased-in carbon tax in a tax hostage exchange! Republicans, you want the upper-class tax cuts? Accept a phased-in carbon tax! Perfect II. A carbon tax is regressive in the sense that it taxes consumption and lower-class households consume a larger fraction of their income than upper-class ones. However, Democrats can protect lower class households using exemptions and deductions—the parts of the tax code Republicans put back in play! How about an automatic $1,000 carbon deduction? Or an automatic $1,000 carbon refund?

Chi: Philly Bluejay will start incorporating bold run-in headers. Following the lead of proto-Bluejay TMQ and the 15 rules of good blogging, Philly Bluejay will begin introducing bold run-in headers to make posts more “skimmable” and to allow casual readers to absorb the major points without tiring their batting eyes by forcing them to digest a thousand plus words. Coming in 2012, a photo! Maybe.

Go: We will not make any dent in climate change without it. No amount of good will towards polar bears and residents of lowland regions in developing countries and Florida will get us off of carbon. When push comes to drive, people just don’t care about polar bears that much. Not to mention developing countries. You want people to get off of something? Tax it! Note, this applies only to things people are already doing. I’m not talking about California Prop 19, although I personally would have voted for it. By the way, if you still don’t believe that climate change is going to be off the chain, read ClimateProgress sometimes. And if you still don’t believe that climate change is real, why are you reading my blog?

Roku: We will not make a dent in the debt without it. In order to reduce the federal debt, the US government has to start running at a surplus rather than a deficit. The US government is currently running at a deficit of about $1.5 trillion. $1,500,000,000,000. Can you find $1,500,000,000,000 to cut here? It’s not easy unless you significantly cut both defense and social security. And don’t go after other discretionary spending. For one thing, it’s only about a third of the deficit. For another, it includes “discretionary” outlays like education and roads. Basically, there is no way to do it without raising taxes.

Shichi: goto ichi.

P.S. Want to know what voters really care about? Ask two weeks after an election! On November 2, Democrats lost 60 House seats, 6 Senate seats, and 10 state houses because voters were upset that government spending was exploding the deficit. Voters replaced many of these Democrats with Republicans who propose to grow the deficit further—but that’s a small detail. Less than two weeks later and with the mid-term behind them, only 4% of the same voters care about the deficit suggesting of course that they never did, that deficit hawking was convenient Republican misdirection. In a previous post, I asked whether any Republican candidate knew why a deficit was bad, and not just that it was bad. Predictably, the answer is a resounding ‘who cares?’ Hey Wisconsin/Pennsylvania/Indiana/Illinois/Arkansas/South Manitoba, can we have those seats back now?

P.P.S. How much is the decline in fertility rates in industrialized countries due to increased working opportunities for women and how much is due to increased laptop use by men?

P.P.P.S. Philly Bluejay gets about 20-30 hits a day. Some of these are from subscribed readers. Some are from aggregators that pick up on tags. But more than half are from searches. Specifically, from five particular searches. Evidently, Philly Bluejay is now an authority on the following topics, in frequency order: 1) Aron Ralston, 2) “the birthday problem,” 3) volcano lightning, 4) Salvador Dali butterfly pictures, and 5) Amir Roth.

P.P.P.P.S. The Mrs. and I were at FedEx field Monday night as the visiting Philadelphia Eagles administered a beat down for the ages to the Washington Redskins. The ink was not yet dry on Donovan McNabb’s head-scratching $78,000,000 contract—somewhat less head-scratching now that full details of the deal have come out—and Billy Ray Cyrus was not done singing the anthem before Michael Vick connected with DeSean Jackson on an 88 yard touchdown! And the route was on. By the middle of the second quarter, with the Eagles leading 42-14 and steady rain coming down, most of the Redskins “faithful”—including the douchebag who flipped Mrs. Bluejay off—had departed, leaving a scattered sea of green to watch the rest of the game in drenched peace. Must-see-TV Michael Vick—the NFL’s top rated passer and maybe its top runner too—blew through Washington’s “wet paper bag” defense to the tune of 413 total yards and six touchdowns. Was it only four weeks ago that I said that Kevin Kolb should stay the starter for the rest of the season? How “must see” is Vick? NBC has already flexed next weekend’s Eagles-Giants game to Sunday night—Vegas has Eagles -4. Really? Is that all? How did Eagles -3 work out for you boys this past Monday night?—and Fox has already moved the following week’s Eagles-Bears game to the 4pm “national game” slot. Next up—the NFL will launch a Michael-Vick only network.