Friday, April 10, 2009

Pinch Me, Thomas Friedman Is Making Sense

Even a broken clock is right twice a day. Or, when it comes to Thomas Friedman, even Captain Obvious writes a moderately insightful column every few weeks. In his latest column, Friedman makes a fairly persuasive case for preferring a carbon tax to cap-and-trade. The pluses:
  • a carbon tax is transparent, and easy to understand
  • cap-and-trade could be gamed by Wall Street, making a simple carbon tax preferable
  • offsetting a carbon tax with a commensurate payroll tax cut is an easy way to make it revenue neutral, so opponents can't criticize it a regressive burden on working families; whereas the opacity of cap-and-trade is open to this line of political attack (this is the point of cap-and-trade: hide where the tax is coming from)
Of course, the Obama administration is planning on generating some $600 billion in revenue from selling carbon permits, so they probably wouldn't be too keen on a revenue neutral plan.
More from Friedman:
Since the opponents of cap-and-trade are going to pillory it as a tax anyway, why not go for the real thing — a simple, transparent, economy-wide carbon tax?

Representative John B. Larson, chairman of the House Democratic Caucus, has circulated a draft bill that would impose “a per-unit tax on the carbon-dioxide content of fossil fuels, beginning at a rate of $15 per metric ton of CO2 and increasing by $10 each year.” The bill sets a goal, rather than a cap, on emissions at 80 percent below 2005 levels by 2050, and if the goal for the first five years is not met, the tax automatically increases by an additional $5 per metric ton. The bill implements a fee on carbon-intensive imports, as well, to press China to follow suit. Larson would use most of the income to reduce people’s payroll taxes: We tax your carbon sins and un-tax your payroll wins.

People get that — and simplicity matters. Americans will be willing to pay a tax for their children to be less threatened, breathe cleaner air and live in a more sustainable world with a stronger America. They are much less likely to support a firm in London trading offsets from an electric bill in Boston with a derivatives firm in New York in order to help fund an aluminum smelter in Beijing, which is what cap-and-trade is all about. People won’t support what they can’t explain.
Don't worry: I'm sure the Tom Friedman we all know and despise will be back next week. He'll probably be telling us yet again why we must pay banks whatever they want if we're going to fix the economy.

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