Anything that James Baker proposes…is wrong….from the time that he was a student….vile man…vile Secretary of State (1989-1992)…rsk
‘Cap and trade was just one way of skinning the cat; it was not the only way,” Barack Obama declared after Democrats’ disastrous losses in the 2010 midterm elections. That shellacking finally killed off the Waxman-Markey cap-and-trade bill. From it was born the EPA’s Clean Power Plan and the Obama administration’s war on coal, in turn a contributory factor to Donald Trump’s election and Republicans’ retaining control of the Senate. Now the grandees of the Old Republican Establishment, led by former secretaries of state George Shultz and James Baker, are calling for President Trump to put the new Republican majority at risk by enacting an escalating $40-per-ton carbon tax.
Where they are right is that a carbon tax is economically superior to cap-and-trade and EPA regulation. Their proposal addresses one of the big weaknesses of the latter two approaches by preventing “carbon leakage,” the migration of energy-intensive production to developing nations. It does this by reimbursing carbon taxes incurred in making goods for export while imposing a tax on imports from countries that did not price carbon, although it glosses over the vast expansion of the IRS that would be required to make such a system watertight.
The package is topped off by giving away the entire proceeds of the carbon tax to anyone with a Social Security number. The political bet is that the lure of free money for all — a reprise of a ploy first used by environmentalists in the 1930s, when the Green Shirts marched through the streets of London demanding payment of the national dividend to all — will be enough to induce wary Republicans who opposed cap-and-trade and want the Clean Power Plan nixed to embrace carbon taxation.
All government interventions to decarbonize impose an economic penalty. The best that can be said for a carbon tax is that it is the least bad way. A government-created market distortion that discourages the use of efficient hydrocarbon energy shrinks the economy’s productivity frontier — its potential output at the current state of best practice — and subverts consumer choice, so that for the same income families are forced to consume less than they would otherwise. This in turn shrinks the Gross Domestic Product, hurting consumers and increasing the deficit — effects ignored by carbon-tax advocates.
In that regard, the Conservative Case for Carbon Dividends produced by the Climate Leadership Council is disingenuous and dishonest. An American receiving as much in carbon dividends as he pays in carbon taxes would end up worse off because the economy would be smaller and his consumer preferences suppressed. So a carbon tax would not contribute to economic growth but detract from it.