The Defection of Some of Their Friends

An op-ed in The Wall Street Journal last week Economists’ Statement on Carbon Dividends, appeared under a headline reflecting the latest conventional wisdom on how to frame the issue of coping with atmospheric pollution (don’t call it a “carbon tax”).  The bipartisan endorsement called for a revenue-neutral tax on carbon emissions, its proceeds to be returned to citizens in equal quarterly rebates, ensuring a progressive structure, administered by the Social Security Administration as an entitlement.

The proposal was signed by twenty-seven laureates, including Robert Solow, Robert Lucas, Amartya Sen and Thomas Sargent; all four living chairs of the Federal Reserve Board (Paul Volcker, Alan Greenspan, Ben Bernanke, and Janet Yellen), and fifteen former chairmen of the Council of Economic Advisers, including Michael Boskin, Martin Feldstein, N. Gregory Mankiw, Glenn Hubbard, Jason Furman, Austan Goolsbee, Christina Romer, and Laura Tyson. Former Treasury Secretary Lawrence Summers signed on as well.

Too fresh from their recognition last month to join in (or too obvious) were William Nordhaus and Paul Romer, both supporters. The signatories thus joined forces with a blue-ribbon group of multinational corporations and public interest organizations formed last summer as a Climate Leadership Council.

The economists’ list naturally invited a search for the missing.

Conspicuous by their absence among laureates were Joseph Stiglitz and Paul Krugman.  Krugman earlier explained that he favored more salable policies. That the plan for carbon taxation was devised by George Shultz, Secretary of State under Ronald Reagan, and James Baker, who succeeded him under George H. W. Bush, may also account for some of their lack of enthusiasm.

A little less obviously missing were laureates James Heckman (absorbed in early childhood investment), and Vernon Smith (energy saving and CO2 sequestration, per the recommendation of the Copenhagen Consensus Center). Oliver Williamson, approaching 90, is less of a force than formerly. Christopher Pissarides and Jean Tirole stayed away from the issue, Tirole because he favors regulation by systems of cap-and-trade.

That leaves Robert Mundell, of Columbia University, recognized in 1999 for his work on exchange rates regimes and currency areas; and Edward Prescott, of Arizona State University and the Federal Reserve Bank of Minneapolis, who shared the economics prize in 2004 for work on business cycles.  Both are favorites of the WSJ, having often expressed the view that raising taxes discourages economic growth, but neither has been involved to any great extent in the climate controversy.  That leads in turn to WSJ columnist Holman W. Jenkins, Jr., who has taken on the job of skeptic-in-chief.

Jenkins, 59, is a dependably lively presence on the editorial pages, a frequent skirmisher against views on climate change he considers wooly-headed or worse.  Last week he was at it again, under the headline Big Names Bake a Climate Pie in the Sky.  He disparaged the view that carbon emissions pose an immediate threat to global well-being; expressed skepticism of the motives of politicians and corporate lobbyists alike; and hinted at the existence of a proposal for tax reform, including a carbon tax, “to replace taxes that depress work, saving,” such that new technologies would develop to do things in less carbon-intensive ways.  Presumably that is the subject of a future column.

At the moment, the editorial board of the WSJ is pretty much the only voice among the mainstream press, of skepticism about climate change in general; in  opposition to carbon tax proposals in particular.   In The Global Tax Revolt last month, the editorialists took note of the rejection of various attempts to impose a local carbon tax – in France, in Canada, in Washington State – and concluded,

[A]fter decades of global conferences, forests of reports, dire television documentaries, celebrity appeals, school-curriculum overhauls and media bludgeoning, voters don’t believe that climate change justifies policies that would raise their cost of living and hurt the economy.

On its weekly show on Fox New, editorial page editor Paul Gigot went further:  he acknowledged elliptically that that “some of our friends” think strong measures are required to address atmospheric pollution, “and even in theory, if you think about it from a free market point of view, a carbon tax would be the most efficient way of trying to actually slow down carbon emissions… but that seems to be something that the public really isn’t buying.” There is, he said, “a disconnect between elites and average voters that don’t trust the elites”

As usual, editorial page columnist Kimberly Strassel went further still.  “Yes, intellectually, from a very wonky point of view,” she said, a carbon tax “may be an efficient way of raising revenues.  But no one buys that you are actually get rid of other taxes if you institute a carbon tax, so they see it as an additional tax … There also not a belief that money raised from such a tax would actually be put into any kind of renewable energy or investment strategy for a smarter climate; they know it going to get redistributed and be a new pot for the Washington spenders to put into their own priorities…

What would a carbon tax actually cost ordinary consumers?  That’s a question for another day – for many other days, starting with the 2020 elections, and in the decade beyond.  In the meantime, the populist editorial page of the WSJ stands pretty much alone amongst elite opinion in America against carbon taxation as the major instrument of climate policy. Over the long haul, we’ll see what difference that makes. Reports of the demise of the establishment Republican Party may have been exaggerated.

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