Monday, January 31, 2011

Former Fed Vice-Chair Urges — Show The CO2 Price Now! (Two Years Ahead of Time)

(Also posted at The Carbon Tax Center.)

Everyone from the President on down professes to want more hi-tech jobs and cleaner energy. Here’s a prescription for getting them: enact a gradually-rising carbon tax but delay its implementation for two years to avoid dampening the fragile economic recovery.

That’s former Fed Vice-chair and Princeton Econ. professor Alan Blinder’s message in “The Carbon Tax Miracle Cure,” broadcast today from the pulpit of free-market orthodoxy, the editorial page of the Wall Street Journal:

[A] carbon tax… should be enacted now [but] set at zero for 2011 and 2012. After that, it would ramp up gradually… What’s critical is that we lock in higher future costs of carbon today.

Once America’s entrepreneurs and corporate executives see lucrative opportunities from carbon-saving devices and technologies, they will start investing right away—and in ways that make the most economic sense… I can hardly wait to witness the outpouring of ideas it would unleash. The next Steve Jobs, Bill Gates and Mark Zuckerberg are waiting in the wings to make themselves rich by helping the environment. Jobs follow investment, and we need jobs now.

Blinder recommends using carbon tax revenue to reduce the deficit, but underscores the advantages of a carbon tax over other deficit reduction strategies:

[E]very realistic observer knows that closing our humongous federal budget deficit will require a mix of higher taxes and lower spending as shares of GDP. Forget about value-added taxes and other new levies you may have heard about. A CO2 tax trumps them all… reducing our trade deficit, making our economy more efficient, ameliorating global warming, and showing the world that American capitalism has not lost its edge.

Now that “hiding the price” behind cap-and-trade has crashed politically, Prof. Blinder is urging Congress to try the opposite: show the price—two years ahead of time—and let the expectation of a rising price on CO2 pollution do its job creation and climate work. As for the politics, Blinder drags out the familiar Churchill quote: “You can always count on Americans to do the right thing—after they’ve tried everything else.” It’s a cliche, all right, but it might just apply.


P.S. Check out my other recent post:
Obama’s Clean Electricity Standard: “A Menu Without Prices”

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