As part of the “Millennial Priorities for the First 100 Days” series, a call to tackle the budget and climate change at the same time.
On last Tuesday night, a triumphant President Obama thanked supporters in Chicago. “We know in our hearts,” he said, “that for the United States of America, the best is yet to come.” But as the elation of the moment subsided, many supporters undoubtedly began to ask a simple question: how? What is President Obama going to do in the next four years to move “the task of perfecting our union” forward?
For supporters who were listening closely, the text of his speech contained some answers to that question. In the next two months, President Obama and Congress will face the automatic series of spending cuts and tax increases that has been dubbed the “fiscal cliff,” a sudden package of austerity that, according to a report from Congressional Budget Office, is likely to send us into a double dip recession, causing GDP growth to plummet to -0.5 percent and sending unemployment over 9 percent.
In perhaps the most important line of his speech – “We want our children to live in an America that isn’t burdened by debt, that isn’t weakened by inequality, that isn’t threatened by the destructive power of a warming planet” – President Obama gave us some clue as to how he intends to avert the fiscal cliff and articulated his administration’s greatest challenges and ambitions. With these words, Obama may be tacitly endorsing an idea that has been floating around in DC policy circles for some time: addressing the fiscal cliff by, among other things, implementing a carbon tax.
Carbon pricing schemes have been wildly popular among progressive policy experts for a long time. For instance, the Center for American Progress included such a scheme in a 2007 report entitled “Capturing the Energy Opportunity,” which was published as part of an economic plan for the next administration. The report concluded that “once businesses have to factor the cost of emitting CO2 (and other greenhouse gases) into their bottom lines, the power of the marketplace will start to push toward efficiency, low-carbon fuels, [and] renewable energy.” (“The Price is Right” also discusses the budgetary and economic effects of carbon pricing.) But a carbon price is finally beginning to enjoy support on both sides of the aisle. Even Grover Norquist is now amenable to a carbon tax in lieu of letting income tax cuts expire. In a brilliant summary of this idea, the Washington Post’s Ezra Klein writes:
Let’s say you believe there is a 20 percent chance that global warming is anything other than a hoax. In that case, you are indifferent to carbon, with only a slight concern that the stuff might be catastrophic. But you are not indifferent to work and income, which everyone wants more of. So given a choice between taxing work and income on one hand, or taxing carbon on the other, the preference is clear: Tax carbon, especially as part of a deal to lower overall tax rates.
Some conservative groups and economists have already made this argument. Martin Feldstein, who was the top economist in Ronald Reagan’s administration, proposed a carbon tax in the Wall Street Journal back in 1992. When the American Enterprise Institute, a conservative think tank, had to submit a deficit-reduction plan as part of the Peter G. Peterson Foundation’s 2011 Fiscal Summit Solutions Initiative, the four scholars in charge of the project included a $26-per-ton carbon tax in order “to address environmental concerns in a more market-friendly manner.” Gregory Mankiw, a Harvard economist who advises Mitt Romney’s campaign team, has written that there is “broad consensus” among wonks for a global carbon tax.
That’s what makes this idea so exciting. Klein described this idea as “just a dream,” but now that the president has identified debt and global warming as top priorities – and, tellingly, mentioned them together in the same sentence – this dream is that much closer to becoming a reality. There are still many, many obstacles to a plan like this being adopted. But with the reelection of the president, progressives who hope for action on climate change and the debt now have reason for some cautious optimism.
In addition to debt and climate change, President Obama also identified the equally damaging but far more insidious problem of being “weakened by income inequality.” As challenging as climate change and the national debt are, policy solutions are available: if you want a balanced budget, raise taxes and/or cut spending (but not in a recession!); if you want less climate change, emit less carbon by creating a disincentive. Addressing income inequality, however, requires having a serious conversation about the role of government in our society and, indeed, the nature of our society itself. In a fantastic op-ed for the New York Times, Chrystia Freeland explains what could happen in a society that does not address severe income inequality: “the 1 percent pulls away from everyone else and pursues an economic, political and social agenda that will increase that gap even further — ultimately destroying the open system that made America rich and allowed its 1 percent to thrive in the first place.”
President Obama has already made some progress, most notably by repairing the gaping hole in our social safety net that allowed more than 40 million Americans to go without health insurance. In his speech and on the campaign trail, he has signaled that he is willing to fight for better schools for children of all backgrounds and a tax code that asks the wealthy to pay their fair share. But those commitments have yet to be turned from rhetoric into reality.
Ultimately, Barack Obama will be remembered as a good president if he can solve our nation’s obvious problems: the wars in Iraq and Afghanistan, the lack of access to affordable healthcare, climate change, and the national debt. But he will be remembered as a great president if, like his forebears Franklin Roosevelt and (yes) Ronald Reagan, his ideas succeed in transforming and reforming the role government plays in our society.
Wilson Parker is a member of the Roosevelt Institute | Campus Network’s chapter at UNC Chapel Hill, where he is studying economics. He serves as the co-director of the chapter’s Economic Policy Center.
Barack Obama image via Shutterstock.com.