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I find all of the hand-wringing about the President’s use of Executive Power to regulate carbon dioxide emissions from fossil fuel plants a bit annoying (that’s not the right word). We know that Executive Agencies like the EPA, FDA, FCC, etc. have a great deal of power, and the real difficulty with that power is that there is very little direct accountability for what these agencies due. In other words, there is nothing like an “automoatic” judicial review process for what happens on the Administrative side. I wish that problem would have been dealt with way back when we wrote the Constitution, but that’s just wishful thinking at the moment.

That being the case, I think Republicans can very much point the finger at themselves for getting to this point. The deal with regulating carbon emissions is that it provides a very ample opportunity for Republicans to negotiate with the Democrats and the President. Even taking the estimates by the Chamber of Commerce, hardly an unbiased group, the new proposed EPA regulations are thought to cost the US $50 billion per year. This is not chump change, but it is not huge either. I know of few people who trust the EPA to administer these regulations effectively. And I also know that the conventional wisdom seems to be that any action on climate change is going to be economy-crushing costly.

I think combining all of that would tell us that there would be room for Congressional Republicans to craft a no-regrets carbon tax policy and force the President and Democrats to get on board – and if the Democrats and the President did not get themselves on board, such a proposal would force a public admission by the President and Democrats that they are not really interested in getting the “right” carbon policy but something else. Why do this? Well, we can debate until the cows come home whether even aggressive reductions in coal burning in the US will do anything for the global warming problem (it objectively seems to NOT be able to do this). But that doesn’t have to matter.

I, for one, understand the epidemiology on coal burning, and the economics of coal burning, to say that the real benefits of reducing coal burning (notice that this is not the same as carbon emissions, but that can be saved for a future wonky post) are the reductions in particulate matter and toxic coal ash that must be thrown away, and also of course some harmful and very polluting coal mining activities. I do not believe these costs are fully reflected in current coal prices, though by not as much as critics would suggest. That said., smart policies that reduce the problems from burning coal (i.e. that doesn’t mean we necessarily reduce coal burning, just the associated problems with that) will bring us quite substantial health and environmental benefits wholly aside from any impact on climate change. Given that issue, I think Republicans ought to take very seriously policies to mitigate the harms from coal. Of course, a cynic might argue that they simply cannot do it because of vested coal interests.

At the same time, Republicans have long made the (theatric, though I do not believe heartfelt) claim that taxes are bad. Fine. But they should state publicly that we need SOME taxes and that some taxes are less bad than others. They should be staking a very aggressive public stance right now asking Democrats and the President what taxes they would like to replace with the carbon tax. This forces tradeoffs and priorities to be made public. And note, that if we raise taxes from carbon in exchange for cutting the payroll tax, there does not have to be any net change in what the government does, but we will get some added health benefits from reduced carbon externalities and from the marginal improvements for employers and employees to get to work.

And given the populist nature of the arguments, my bet is that most people would argue that the carbon tax would be huge and costly, so it in fact would become a useful touchstone or starting point for the Republicans to recommend a much larger reduction of the payroll tax than a simple “revenue neutral” calculation would indicate. I am in fact in favor of a 100% reduction in payroll taxes.

But Republican intransigence and inability to work with Democrats and the President are forcing the President’s hand to regulate carbon directly. So now, we get the worst of both worlds. We will get a less well designed program for dealing with the carbon externality. and we will not get the associated reductions on other taxes and regulations that would be a useful tradeoff to make anyway, and we get precedence for the EPA to regulate with far less oversight than we’d see than if Congress stepped right in.

Way to go guys (and gals).

3 Responses to “Republicans are Rightly to Blame”

  1. Harry says:

    Let’s stipulate that a power company using coal should bear the cost of cleaning up after itself, as should miners of the coal. Ash, SO2, and whatever else, has to be dealt with, and it has. And I know WC is not debating (with himself as he does) the merits of the new 20,000 pages of regulations about to be decreed.

    And WC is correct in blaming Republicans for being part of the problem. Every time I asked my congressman, even when out of earshot of others, about anything having to do with regulating the waters of the U.S. and private property, you would think I was wearing one of those radiation hazard signs, and would quickly thank me for my concern. OK, these guys can’t have an informed answer for everything; that’s the job of their staff.

    Wintercow then wonders how come Republicans have not negotiated with Democrats (and Bernie Sanders) a deal to impose a modest carbon tax in exchange for a reduction in payroll taxes (I assume this means a reduction in marginal rates). Republicans should agree that all the invoices have to be paid for eventually by taxes.

    This sort of bargain has been done before. In Reagan’s first term, a Republican Senate and a Democrat House lowered marginal rates, to be phased in (that was part of the compromise, to please David Stockman and Tip O’Nell). Then in 1985 there was the big compromise in 1985, when top rates were raised to 30 percent, the closing of “loopholes” like accelerated depreciation, etc., to be more perfectly fair.
    How come the Republicans have failed to pull of a similar deal now? Well, the other side has no interest in compromise, and they need the extra money. A carbon tax can start out “modest” and will be felt in the form of higher electric bills after the power companies get their rate cases approved, which might be in 2017, and then Chuck Schumer can blame the power companies for profiteering.

    Moreover, rarely if ever (I can think of none) does one new tax appear in exchange for eliminating another, as in an income tax in exchange for a sales tax or vice versa. And the rate of the new tax always starts out at a modest level. There has to be an economic Law name for this phenomenon, like the Brezhnev Doctrine of what we have we keep.

  2. Tim says:

    I wonder how retirees would take WC’s proposal. Massive utility increases with no concurrent reduction in taxes. Of course, the Democrats would never demogogue this as the GOP being “against the elderly”.

  3. Andrew says:

    I just want to offer one correction about your comment that there is no automatic judicial review for agency action. Actually, Section 702 of the Administrative Procedure Act waives sovereign immunity and allows a person aggrieved by agency action to bring suit against the United States:

    “A person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof. An action in a court of the United States seeking relief other than money damages and stating a claim that an agency or an officer or employee thereof acted or failed to act in an official capacity or under color of legal authority shall not be dismissed nor relief therein be denied on the ground that it is against the United States or that the United States is an indispensable party. The United States may be named as a defendant in any such action, and a judgment or decree may be entered against the United States: Provided, That any mandatory or injunctive decree shall specify the Federal officer or officers (by name or by title), and their successors in office, personally responsible for compliance. Nothing herein
    (1) affects other limitations on judicial review or the power or duty of the court to dismiss any action or deny relief on any other appropriate legal or equitable ground; or
    (2) confers authority to grant relief if any other statute that grants consent to suit expressly or impliedly forbids the relief which is sought. “

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