CALLER: Yes, I agree with the Senator on what he says about the climate change. I believe that the world is just changing like it usually does….
INHOFE: I think he’s right. I think what he’s saying is God’s still up there. We’re going through these cycles. “¦ I really believe that a lot of people are in denial who want to hang their hat on the fact, that they believe is a fact, that man-made gases, anthropogenic gases, are causing global warming. The science really isn’t there.
Thank God the Senator from Oklahoma is here to promise us that that the Almighty will override at a planetary level the laws of physics He created and simply stop human-emissions of heat-trapping gases from ravaging his Creation. Now if we can only get Inhofe to tell God to stop all cancers and traffic accidents, too.
More seriously, the only thing more stunning than the fact that a U.S. Senator — the ranking minority member on the Environment and Public Works committee, no less — would advance such a predeterministic view is that anyone in the media would treat him seriously (see for instance, “NYT‘s Green Inc. blog wins worst headline of the day“).
But this fundamentalist, anti-scientific tripe, far from disqualifying Inhofe, puts him in very good company with other leading conservative politicians:
Angela Merkel wound up winning a strange kind of election victory, the kind where your party gets less support than it got before. Still, the CDU’s support only went down a little while the Social Democrats’ support collapsed and the liberal (in a European sense) Free Democrats gained a lot. The Greens and the Left Party also picked up support. The result is going to be some controversial free market reforms for Germany (I think the evidence suggests that most Germans actually don’t want the kind of reforms that this election result will lead to) and a real moment of crisis for the SPD that needs to really rethink some things:
I note that following on the European Parliament election results and some other national results, there seems to be a continent-wide crisis of social democracy. In a great many countries, social democrats are really getting squeezed by rising far-left parties and the fact that Europe’s center-right parties tend to be inconveniently non-crazy.
It’s also noteworthy that this will lead to FDP leader Guido Westerwelle taking over as Foreign Minister of Germany. He’s openly gay and a big believer in tax cuts. I don’t think the world has ever had an out gay man in such a senior role in a major country. He’s also really not a foreign policy guy at all. But German tradition dictates that the leader of the number two party in the coalition become Foreign Minister irrespective of his background and experience.
In an unfortunate coincidence, the libertarianish Free Democratic Party color scheme, when applied to an umbrella advertising a campaign literature booth, looks exactly like a New York City hot dog stand:
Relatedly, it turns out that when you amble around the Alexanderplatz area on a bicycle all the other tourists ambling around on foot think you actually live in Berlin and want to stop and ask you for directions.
Yesterday, Paul Krugman explained something that I bet could use a little more explaining for most people:
Now, a key point in all this is that the emissions tax or, equivalently, the rent on emissions permits, does not represent a net loss to society. It’s just a transfer from one set of people to another — from the emitters, and ultimately those who buy their products, to whoever collects the taxes or gets the permits, and ultimately whoever benefits from the revenue or rents thus generated. The only net loss is the Harberger triangle created by the reduction in emissions — which has to be set against the benefits of reduced pollution.
What’s a Harberger Triangle? Well, here’s a good illustration:
What’s that showing us? Well, when a market is in equilibrium you have some supply of goods being sold at a certain price. The reason people are buying the stuff in question is that the stuff is worth more to them than the money it costs. That’s the “consumer surplus.” And the reason people are selling the stuff in question is that the stuff is worth less to them than the money they can earn from selling it. That’s the “producer surplus.” If the government puts a new tax on the stuff, then the price goes up and the quantity sold goes down.
That reduces the consumer surplus and the producer surplus. But that lost surplus doesn’t just vanish, it’s basically being taken by the government and turned into tax revenue and public expenditures. But it’s not all taken by the government; some fraction of it—the triangle represented by D and E in the chart—really does just vanish. That’s the “deadweight loss” the value, to producers and consumers alike, of transactions that would have happened at the un-taxed price but didn’t happen at the taxed price. This, rather than the “cost” in taxes paid, represents the real social cost of a new tax.
But of course how much deadweight loss there is depends on the actual shape of the supply and demand curves. That chart has nice-looking straight lines. But in the real world it just depends. Different taxes have different degrees of deadweight loss. What’s more, the loss can be apportioned differently between producers and consumers. And a certain kind of tax could have a small deadweight loss at one level and a huge one at another level depending, again, on the shape of the supply and demand curves.
When you talk about a cap-and-trade system rather than a tax, you get all these same issues with consumer and producer surplus and deadweight loss. But instead of automatic revenue, you get rents associated with acquisition of carbon permits. And a key issue in policy design becomes how allocate those rents. One popular with industry proposal is to give them to industry for free. This basically compensates industry for the lost producer surplus, and in principle could actually be better for producers than the status quo ante was.
Alternatively, you could sell the permits and rebate the money to citizens—compensating consumers for the lost consumer surplus. There’s pretty good reason to believe that this would actually leave most people with more money in their pockets than they have under the status quo.
You could also auction the permits, have the government keep the money, and use the funds to reduce some other tax. If that tax has a higher deadweight loss associated with it than does the carbon cap, the overall economic cost of the carbon cap will be negative. And there’s actually pretty good reason to believe that permit auctions would be more economically efficient than many of the taxes we currently rely on, so as an abstract matter of policy design it would be relatively easy to design a pro-growth carbon cap regime. The dual problems are that the distributive consequences of going this route might be bad, and politically a tax swap is hard to pull off.
That said, as I was saying yesterday this idea is really laying out there in the street waiting for a political movement that (a) doesn’t mind redistributing wealth upwards, (b) likes to complain about the adverse economic consequences of taxes, and (c) would like to do something about climate change. We have a movement in the USA that fits (a) and (b) quite nicely, but their opposition to (c) is unfortunately so robust that they’ve somehow managed to forget everything they normally say about tax policy issues in order to concoct a theory to support the conclusion that a carbon cap would necessarily be economically ruinous.
Went to the Pergamon Museum yesterday and as I stood before the very impressive Ishtar Gate I couldn’t help but think to myself “If Iraq ever does emerge as a stable democracy whose government is a well-respected member of the community of nations, they’re probably going to want their awesome antiquities back.”
Later poking around elsewhere in the museum I found a sign that was sort of whining about how the Soviets stole a bunch of artifacts after WWII and then made a big show of returning them to the East German government in the early fifties but actually kept some stuff. Well, you can see why the Germans might not be thrilled with that outcome, but considering that they themselves carted all these artifacts off from foreign lands in the first place I’m not sure how much standing they really have to complain. Not that Germans were the only ones doing that (certainly some ill-gotten gains in Paris and London museums) but no honor among thieves, etc.
That said, the ups-and-downs of European conquest over the years have probably made museum-going an all-around better experience. Spain used to rule the Low Countries and parts of Italy so the big art museum in Madrid has paintings by Dutch and Italian masters along with the Spanish ones. That makes it a more interesting place than it otherwise would be, and Italy and it’s not like anyone stands around in the Rijksmuseum saying to themselves “I wish there were some more Dutch paintings here.” Similarly, had Jacques-Louis David not been hounded out of France by the Terror, The Death of Marat wouldn’t be in Brussels where it came as a much more unexpected surprise than it would have been in a French museum.
Editor’s note: The Wonk Room is reporting from the Clinton Global Initiative conference this week. This is our sixth post.
On the final day of the Clinton Global Initiative, the Wonk Room caught up with Ira Magaziner, the senior advisor for policy development in the Clinton White House and now the chairman of the William J. Clinton Foundation’s Climate Initiative. We discussed the Clinton Climate Initiative‘s approach to the challenge of global warming, including its work to advance energy efficiency projects in the world’s cities from the Empire State Building to Lagos, Nigeria. Magaziner also directly addressed why critics argue that advocacy of clean energy is a socialistic economy killer, citing Adam Smith’s recognition of the need for governmental action to address market externalities. As we neared the conclusion of the interview, Magaziner tied all the threads of the conversation together into one impressive discourse on building a clean-energy economy.
CREATIVE DESTRUCTION — PAST VS. THE FUTURE
MAGAZINER: Schumpeter — yet another capitalist economist — talked about creative destruction. Periodically, as new technologies develop and new needs arise, business systems and economic systems need to be remade — creatively destroyed and remade. We don’t need a buggy whip industry any more. We’ve got automobiles. And the buggy whip guys may not like it, but they ought to switch to making automobiles if they’re going to have a future.
What always happens in those periods of transformation is that some people oppose and some people see the future. We went from mainframe computers to minicomputers to PCs. And as we went through those transformations, different companies succeeded. DEC and Wang and companies that were the minicomputer companies didn’t understand the potential of the PC. So you had the Dells and others who developed them. In some cases, companies do make the transformation and they go with the future instead of the past.
We have a similar situation with clean energy and energy efficiency. You have some companies now, like GE, and there’s a bunch of others, who are saying, “I want to go with the future, and I’m going to invest in wind, I’m going to invest in solar. I’m going to invest in these things that I know are going to eventually be the future.” And you’ve got others who say, “I’m going to defend the past and stick with what I’ve got,” and fight Congress to prevent the future from coming.
BRINGING THE FUTURE FASTER
MAGAZINER: I think, in this case, in the case of clean energy, we have a public interest in bringing the future faster, because of global warming. We know that if we don’t bring the future faster with clean energy and with energy efficiency, that it’s going to have a tremendous economic and social cost. Therefore, we have to accelerate the process of that future coming.
That’s why government has to especially play a role in this revolution. I mean, it played a stimulative role in the Internet revolution, but in this revolution it has to play a much more active role. Because the negative consequences of not doing so are going to cause governments and people and economies tremendous unhappiness.
There have been so many reports written. The thousands of scientists in the International Panel on Climate Change established that the world is warming, they’ve established what the impacts can be, and there’s only now a few dissident scientists left. The overwhelming 99.9 percent opinion is very clear on this.
Economists like Nicholas Stern who have done serious work on this have said we can lose 5 to 10 percent of GDP in the next ten years, fifteen years if we don’t act, because of all the major dislocations. And if we spend one percent of our GDP to bring the transformation faster, we’ll save ten percent or 15 percent of our GDP. So there are enough studies out there.
THE CLINTON CLIMATE INITIATIVE
MAGAZINER: What we’re trying to do with the Clinton Climate Initiative is to make it real.
It’s very important that global leaders, the political leaders agree to set targets to reduce greenhouse gas emissions. It’s very important they pass legislation to put a price on carbon — because it does have a price for society — to help speed the transformation.
What we’ve said, what we’re doing, is say, even after that’s done, what you’re going to still need projects that demonstrate in large scale how to do this, what the business models are what the government models should be, so that government money gets spent well, carbon credit money gets spent well, and ultimately businesses can move into this in an accelerated way to make this happen. And so that’s why we’ve focused on these projects.
We’ve worked on energy efficiency, clean energy, and the third area we’re working on is forests, preserving forests around the world. What we as a human race have been doing is at the same time we’re putting all this CO2 into the air — which is poisoning the atmosphere — we’re cutting down the forests — which are nature’s way of taking carbon dioxide out of the air. We’re making the problem worse on both ends.
So we have major projects that we’re doing in Indonesia, and Cambodia, Guyana — Africa and the tropical countries — to help preserve forests and create economic value in preserving forests.
So that’s what we’re up to and we’re trying to make our contribution. That’s going to require a lot of different groups working in a lot of different ways to make a contribution.
THE MULTIPLIER EFFECT
MAGAZINER: What we do is: we do these projects and can measure the direct impact, and say there’s this many millions of tons less of CO2 going into the air because of the projects we have done. And then we’re creating these models which we can spread to others, so that we can have a multiplier effect that multiplies the impact of what the direct projects we’re doing can accomplish.
That’s why when we show that we can do an integrated waste management project in Delhi — in a very complicated, large city that’s never had integrated waste management — what we did in Delhi is the first integrated waste management project in the whole of southern Asia. We showed that it can work, it’s actually returning a profit to the commercial developers, it’s saving the city money, and it’s working in terms of making Delhi a cleaner place.
And now there are ten other cities that are ready to do it. As soon as we finish the project in Lagos — Lagos, Nigeria is a place with 21 million people in that city, growing a million and a half people per year — and they had no waste system. We’re putting the first integrated waste system there. We’re now doing it in Dar Es Salaam and Tanzania. We have requests from a number of other African cities. So our goal is to create these models and then spread them, because that’s really where we’re going to get at the problem.
Earlier this year, the so-called “fair and balanced” network launched its Fox Nation website, an opinionated online forum. Fox VP Bill Shine said, “We’re calling it a mix between the Huffington Post and Drudge,” and asserted that the network’s reporting is “aggressive but not ideological.” Promotional materials for the site claim: “It’s time to say NO to biased media.” Apparently, leading Republican officials didn’t get the talking points.
In a video posted on YouTube, top GOP figures — like Rep. Michele Bachmann (R-MN), Gov. Rick Perry (R-TX), Rep. Mike Pence (R-IN) — urge viewers to click on Fox Nation. But the most interesting endorsement came from former Gov. Mitt Romney, who touted the site’s political impact:
Hey, FoxNation.com and my fans there, they’re the best. Congratulations to you guys for getting that up there. Keep it going. I hope that we get a lot of strength, and that helps us in 2010 and the years beyond.
As an aside: I’ve long thought it would be an interesting commentary on the stratification in this society to have political candidates asked during a debate if they’d ever shopped at a Wal-Mart. I have to think that very few could honestly answer yes–and the higher the office the fewer the yeses. To think that a democracy’s leadership class should have no connection (other than owning stock–or, in Hillary Clinton’s case, being once on its board) to the biggest corporation in the country, how strange!Bback when the biggest corporation was GM or Exxon, even the wealthiest people likely had *some* dealings with it, even only being chauffered in a cadillac.
I think this is a much less clever suggestion than the suggester thinks. I’m about as much of an out-of-touch northeastern elitist as you’re going to find and I’ve been to Wal-Mart several times. In good out-of-touch northeastern elite fashion, it’s always been when I’m on vacation the Outer Banks or in Maine, but still I’ve been. These stores constitute a huge proportion of the retail available in the large non-dense portions of the country and anyone who travels around at all is bound to wind up in one. I’d bet that the biggest “never been to a Wal-Mart” demographic in the country would consist of very poor inner city dwellers who lack the means to drive to one but would benefit from the low prices.
Probably a better Wal-Mart related social stratification question would be to ask people if any of their friends and family work at Wal-Mart or did so recently and in what capacity. Over a million people work at Wal-Mart, most of them in low-level positions, and since the firm has a high turnover rate former Wal-Mart employees are a large fraction of the population. But they’re not randomly distributed.
Last month, the Washington Post revealed that Virginia’s Republican gubernatorial candidate, Bob McDonnell, had written a master’s thesis at Regent University in 1989 “in which he described working women and feminists as ‘detrimental’ to the family,” said that “government policy should favor married couples over ‘cohabitators, homosexuals or fornicators,’” and criticized “as ‘illogical’ a 1972 Supreme Court decision legalizing the use of contraception by unmarried couples.” After reading the thesis, TPM’s Eric Kleefeld and Zachary Roth said it represented “a manifesto of the anti-gender-equality right-wing.”
The thesis has since become a central issue in McDonnell’s race against Democrat Creigh Deeds. On Fox News Sunday today, host Chris Wallace asked McDonnell if his thesis represented a “radical agenda.” McDonnell replied that it did not:
WALLACE: … it was revealed that in 1989 you wrote a master’s thesis in which you said — and let’s put up some of the things on the screen — this has obviously been a big issue here in Virginia — The new trend of working women and feminism that is ultimately detrimental to the family. You criticize tax credits for child care. And you even opposed a Supreme Court ruling legalizing birth control for married couples. Mr. McDonnell, isn’t that a pretty radical agenda?
MCDONNELL: No. I think those are a couple of quotes out of a 100-page document, Chris, and what the whole purpose of the — of the thesis was to say, Look, families are the bedrock of society. And I think there’s broad agreement on that, and that government programs should not undermine the family, because that will lead to more government spending for problems that occur when the family’s not intact.
When McDonnell said the thesis was “20 years ago and some of my views over time have changed,” Wallace played a clip from an ad being run by Deeds, which said that McDonnell has supported his thesis agenda as a legislator. “In fact, we checked the record. As a legislator, you voted against a resolution that would have called for ending wage discrimination based on gender,” said Wallace. “You voted against extending child care services. And you voted against extending or requiring health insurance plans to cover birth control. So it’s not just the thesis.”