‘America First’ swamps the Establishment
A thoughtful conservative carbon plan may not have the fuel
Earlier this month, a blue-ribbon panel of U.S. statesmen released “The Conservative Case for Carbon Dividends” as a way to address climate change, reduce U.S. regulations and provide additional funds for working-class people.
The first interesting thing about the proposal is to note the résumés of the authors, each of whom boasts serious conservative bona fides.
There’s Harvard economist Martin Feldstein, President Ronald Reagan’s chairman of the Council of Economic Advisors, and Harvard economist Gregory Mankiw, who held the same post under President George W. Bush. They’re joined by Hank Paulson, Treasury secretary under W, and Secretaries of State James A. Baker III (under Bush Sr.) and George Shultz (under Reagan). To round out the conservative business credentials, Thomas Stephenson, a partner at Sequoia Capital, and Rob Walton, the former chairman of Wal-Mart, also authored the proposal.
The proposal is bold while conservative — and has a little something for everyone.
First, something for you climate-change people.
If you’re concerned about the melting ice cap, rising sea levels and irreversible damage worldwide, the proposal would tax carbon-emitting industries at a starting rate of $40 per ton at the point of production — such as a refinery, a coal mine or a port. The obvious economic incentive here would be to reduce the production of carbon emissions. In addition, taxes on carbon would ratchet upward over time.
The conservative authors argue that Obama-era regulations — a mishmash of auto industry emissions targets, punitive regulations on coal production, financial incentives for “green energy” and the occasional symbolic pipeline-squashing — led to business uncertainty, higher costs and executive branch overreach. And then it’s inevitably followed by backlash and/or repeal, as is happening now. A carbon tax, by contrast, addresses the entire problem at once and puts a known, predictable price on carbon reductions for the entire economy.
Second, there’s something to get the consumers to buy in.
The authors propose distributing the carbon tax revenue back to American families in the form of a dividend — rather than use it to fund government programs. Money, obviously, appeals to wide swaths of the left and right. The proposal estimates a family of four would receive $2,000 in the first year. As the carbon tax rate increased over time, the dividends would increase as well.
The authors note the dividends would offset higher consumer costs due to the carbon tax. Just as importantly, I’d say a dividend makes for good political optics.
The Treasury Department estimates that the bottom 70 percent of households would be net beneficiaries, financially, from carbon dividends.
Finally, to attract the support of a traditional conservative base, the carbon dividend would almost completely replace or phase out the Environmental Protection Agency’s suite of regulations regarding carbon dioxide emissions. The business rationale for this plan rests on the idea that less regulation, replaced by predictable market signals, would spur investment in the private sector. The authors claim the freer market approach stands in contrast to traditional Democratic solutions of larger government and greater regulation.
OK, so let’s be real for a moment: “Carbon dividends” is a clever rebranding of “carbon tax,” which forms the core of this proposal. The tax would raise costs for energy producers such as coal and oil and gas extractors.
As part of this rebranding, the authors chose the fiscally conservative approach of redistributing the collected funds in the form of “dividends” to taxpayers, rather than using the revenue stream to fund existing government programs.
Do I think this idea will pass a unified Republican Congress and executive branch, given its thoughtful conservative origins? A key Trump Cabinet member could be a natural ally.
Rex Tillerson, secretary of state and formerly the CEO of Exxon Mobil, has backed the idea of a carbon tax, at least when compared to a mishmash of federal regulations on the oil and gas industry.
No doubt under a Republican President Jeb Bush, John Kasich or even Marco Rubio, these blueribbon statesmen would be guiding a conservative consensus toward a cleaner energy future. But that, right there, is probably the most interesting thought inspired by this conservative proposal.
Another way to view this carbon tax proposal would be as a reminder — and a metaphor for — the true power of Establishment Republicans right now.
Which is to say, the Republican Establishment is now like a coastal city of the future, swamped and under water. The Establishment has been covered by the rising tide and heated rhetoric of an “America First” populism that disdains markets, globalization and science.
I’d say this thoughtful conservative idea doesn’t have a snowball’s chance in Haiti of ever becoming law.
Michael Taylor is a columnist for the San Antonio Express-News, a former Goldman Sachs bond salesman and writes the finance blog BankersAnonymous.com.