We Need To De-Carbonize Our Tax System

by Bill Becker

“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.”

That observation by Charles Darwin has interesting implications in these last weeks of the presidential election campaign.  It suggests that both candidates may be missing what’s most important to keeping America safe, strong and competitive in the years ahead.

Jobs, education, tax reform and energy security all are important, of course. But the key to America’s success will be our willingness to adapt to the new realities of the 21^st century.

One of those realities is that economic development as we have practiced it, and as it is now being replicated around the world, is rapidly pushing us toward several critical ecological boundaries and has already exceeded others.  These boundaries are important not only because they threaten some species and some regions of the world; they’re important because exceeding them is an existential threat to continued peace and prosperity. These are not the relatively isolated and repairable environmental problems of the past. They involve global systems that support life, including the oceans, soils and freshwater resources. They also include the atmosphere’s ability to absorb man-made pollution without destabilizing the climate.  The most available way to manage that risk is to reduce and eventually stop burning oil and coal to fuel economic development.

The failure of the two candidates to address these planetary boundaries, and especially the enormous risks of climate change, is one of the profoundly disturbing shortcomings of the 2012 campaign.  It has been an unconscionable omission considering how critical the next four years will be to the future of the country and the international community.

However, the next president will have another opportunity to confront these risks, perhaps early in his term.  Members of both political parties in Washington are talking about reforming the tax system by lowering rates, trimming deductions and, in Obama’s case, asking the wealthy to pay a bit more. Tax reform also is an opportunity to begin de-carbonizing the U.S. tax code.

Sometime soon, the National Academy of Sciences (NAS) will issue a comprehensive carbon audit of the tax code – a report ordered by Congress to identify ways our tax system encourages the pollution most responsible for climate change.

Tax policies that encourage carbon emissions range from subsidies for oil companies – the latest proposal on the Hill would cut them by $113 billion over 10 years – to mortgage interest deductions for energy-wasting McMansions. There are many more. Ending or restructuring them will take a level of courage Congress has not exhibited in recent memory.

Political pragmatists will dismiss this idea as a non-starter, given how controversial messing with these sacred cows would be. But with the first destructive signs of global warming already upon us, we need bold action. In fact, we need to be even bolder. President Eisenhower said that when he was confronted by a problem he could not solve, he made it bigger. “If I make it big enough,” he said, “I can begin to see the outlines of a solution.”  In line with that principle, de-carbonizing the tax code would be only a first step. The larger task is to de-carbonize all of federal fiscal policy – in other words, all the ways the government influences the economy with how it obtains and disburses money.  Our current fiscal policy was built to support the old carbon economy. It encourages things that hurt us and undervalues things that make us stronger.

What the federal government funds in its massive farm and transportation programs are examples of fiscal policy.  So are the types of research the federal government conducts and funds, how much we charge oil companies to drill on public lands, and the criteria for winning federal grants, to name just a few examples.

There is a stark contrast between the two candidates on the need for our economy to adapt to contemporary realities, but neither has addressed it head-on. Throughout his first term and in the campaign, President Obama has talked about building a “new energy economy” and developing the energy technologies of the future. These are the terms he uses to describe a deliberate and necessary transition to a society that has adapted to the fact the end of the atmosphere’s ability to quietly absorb our wastes.

However, by mentioning climate change only in passing during the campaign, Obama has avoided talking about the urgency of the transition.

As a businessman, Mitt Romney knows that a company has to adapt to changing market conditions to avoid “the dustbin of business oblivion”. Yet he proposes that  we become a carbon superpower that, apparently without regard for consequences, produces more oil, coal and gas and keeps using the atmosphere as a waste dump.  He is selling the comfortable illusion that there is no to mess with business as usual – no need for a “clean energy economy.”

The Presidential Climate Action Project has proposed that the next president lead the adaptation of federal fiscal policy to the realities of the contemporary world. That means phasing out virtually all of the policies and practices that encourage the use of coal, oil, and natural gas.

This should not be done with a succession of one-off reforms. Fiscal reform could be accomplished in a process similar to that used years ago to close unneeded military bases. The president would revive the bipartisan National Commission on Fiscal Responsibility and Reform, perhaps with different members and the help of the NAS, to audit fiscal policy in its entirety and to present him with an all-or-nothing package of subsidies and policies that could be reformed without undermining national security or economic stability.  If the president approved the package, Congress would have 45 days to reject it.

A central question in this election is whether we will be the architects of our future or its victims, to paraphrase Buckminster Fuller.  The United States and its economy are not exempt from the fundamental laws of evolution. We must adapt if we wish to remain the fittest and the strongest of nations.

Bill Becker is executive director of the Presidential Climate Action Project.