Cut, Cap, And Trade

I had this dream last night of a sane political debate. The way it started was with a congressional opposition that wanted to use the debt ceiling as leverage for spending cuts and a president who wanted to cement his legacy with an important “grand bargain.” What happened is that the president was happy to agree to substantial spending cuts, but insisted that they be paired with revenue increases. Members of Congress said they were willing to swallow tax hikes as the price to be paid for spending cuts, but they couldn’t go along with the president’s obsession with taxing the rich. Then the president said that he, personally, would be willing to make the tax increase a broad-based — even regressive — one, but there’s no way he was going to be able to sell his base on regressive tax increases plus entitlement cuts.

Then in from the darkness came the Ghost Of The 2008 Republican Party, a substantial minority of which believed that the negative externalities caused by greenhouse gas emissions were a problem and should be priced. Why not throw a little carbon tax or cap-and-trade into the mix? Then we’d be not just averting a short-term economic calamity, we’d be making progress on two important long-term problems.

It’s not going to happen, of course. But while it’s a little perverse that we’ve spent the summer of 2011 focused on the long-term budget deficit rather than the short-term jobs deficit, it’s absolutely insane that we’ve been talking about the long-term budget deficit without talking about carbon pricing as part of the solution. It would, of course, also be nice if more than zero DC reporters had noted that both the Waxman-Markey bill that passed the House last congress and the John Kerry Senate climate proposal were deficit reducers.