The Agenda

The Importance of Precision in Assigning Blame

In a post titled “The Blame Game …,” Niklas Blanchard of Modeled Behavior, a terrific blog, argues that Republicans deserve the blame for the failure of climate legislation. Because I oppose the climate bill that seemed most likely to pass, I wouldn’t use the term “blame,” but that’s not what I find interesting at the moment. Rather, I’m interested in what Blanchard means when he writes the following:

Soon, we will likely see the worst case scenario come to pass in the name of “preventing climate change”, and that is to have a command-driven regulatory agency dish out quotas and make peripheral tweaks to existing regulations in order to look like they’re doing something productive. It is unlikely that climate legislation will pass the Senate in this Congress or the next…and that is a tragedy.

One wonders if this is a fair characterization of the state of play. It is certainly true, as Brad Plumer has observed, that the regulatory status quo will likely lead to a “coming coal shutdown,” which I’ll discuss in another post. And as David Leonhardt has reminded us, we could very well see more blunt regulatory efforts designed to reduce carbon emissions now that the effort to create an economy-wide carbon-pricing mechanism has run into a serious political barrier. Leonhardt’s is the kind of argument I think Niklas has in mind:

So long as dirty energy remains so cheap, people are going to use huge amounts of it.

But some policy makers haven’t been willing to acknowledge this. They continue to look for a solution without downsides. For them, a tempting option is a series of new rules requiring people to use cleaner energy. In a few cases, such rules really are a free lunch, in that they force people to take steps — like home insulation — that save money. But most rules increase costs. They force people away from the energy sources they are now using.

The classic example is the fuel economy rules from the 1970s that required car companies to make fewer gas guzzlers. The newly imposed scarcity of guzzlers, in turn, increased their price. But the relationship wasn’t obvious. Americans do not think of fuel economy rules as a tax on large vehicles.

This explains why the rule-based approach seems to be the best bet for winning Republican votes. Senator Richard Lugar, Republican of Indiana, has proposed new rules not just for vehicles but also for appliances, building codes and power plants.

That is, the opacity of this approach is the source of its appeal, not the efficiency. Niklas continues:

I place the blame squarely on Republicans; centrist and conservative alike. I tend to think that Democrats gave a lot on this issue…and I grant them that even though their preference for centralized solutions to environmental problems are oftentimes wrong on the merits.

To be sure, cap and trade was not my most preferred solution, which is a carbon tax…which was never even close to the table due to the Republicans’ successful campaign against the word “tax”. 

Let’s consider the mental model at work here: there is a group of people called Republicans, and they unilaterally decided to campaign against the word “tax.” But there is another mental model: in the United States there is a large number of two-earner households who worry about what seems to be a rising cost of living, and state, local, and federal taxes are a very visible component of the cost of living. 

Lisa Margonelli of the New America Foundation, a staunch supporter of carbon pricing and comprehensive climate legislation, explained the political problem exceptionally well, and I drew on her insights in a column a few weeks back:

 

The U.S. Department of Commerce published a fascinating report for the White House Task Force on the Middle Class. To provide a more vivid illustration of the choices facing middle-class families, the report’s authors present three two-parent, two-child families at three different income levels: $80,600 for the median family, $122,800 for the family at the 75th percentile and $50,800 for the family at the 25th percentile. For all three families the cost of owning and maintaining an automobile is staggeringly high. The 75th percentile family spends $15,400 a year on two large sedans or SUVs at a purchase price of $30,000 and drives them a total of 25,000 miles a year. If this sounds profligate, consider that mobility enables a family like this to earn as much as it does: Both parents commute and work long hours, both make trips to the grocery store to stock up on prepackaged meals. The family winds up devoting far more resources to mobility than to medical care, college savings or retirement savings.

The median family is hit even harder by car ownership. Though this family purchases less expensive vehicles, it has to drive just as much. The $12,400 it spends on mobility matches what it has to pay in taxes. And for the family at the 25th percentile, which still has to drive 25,000 miles a year, the cost of mobility dwarfs the amount of taxes owed: $7,900 for two small used sedans against $6,000 in taxes. Consider what happens when you ask these two families to pay a much higher gasoline tax. Or what happens when you offer a tax credit to buy a new fuel-efficient hybrid vehicle. Given how little these families are able to save in an average year, there is no asset cushion that would allow you to buy your way out of oil dependence. The Commerce report sheds light on the angst and anxiety caused by spikes in the price of gasoline, and why efforts by congressional Democrats to pass cap-and-trade have met such ferocious resistance.

To be sure, a utility-only cap would have only an indirect impact on the cost of mobility. But it certainly creates anxiety about the prospect of new energy taxes. Moreover, as Margonelli has observed, certain U.S. regions depend more heavily on coal than others — Ohio, the paradigmatic swing state, is a good example. Would Republicans have to campaign aggressively to get U.S. voters to care about the prospect of paying higher electricity prices? 

My basic point is that Republicans may well have been meeting a political demand rather than manufacturing one. To be sure, this is a complicated two-way street. One assumes that political elites help form opinion on these matters. Yet the notion that Republicans, who are obligated to take part in a (somewhat) competitive political process, have the kind of autonomy Niklas suggests — that is, Republicans campaign against the word “tax” and suddenly people don’t like taxes — doesn’t fit the facts. 

When Niklas writes that 

I tend to think that Democrats gave a lot on this issue

he’s positing that there is such a thing as a Democratic position on cap-and-trade (there are many Democratic positions) and that there is a discrete actor that makes concessions (there is a process, which involves a lot of give-and-take with various industries and other constituencies within the coalition). One perfectly coherent Democratic position is that passing cap-and-trade is not as important as a number of other legislative priorities, including the creation of a new health entitlement. Another is that congressional Democrats ought to at least try to win the votes of tax-sensitive non-college-educated white voters living in Ohio suburbs, a position that would incline one towards opposing a legislative push on carbon pricing in the near term.

Consider the counterfactual, a world in which Republican policymaking elites decided not to campaign against the word “tax” yet we nevertheless lived in a world in which the typical two-earner household with children subjectively felt that the fixed cost of leading a middle class life was high and rising, and that the tax burden was a significant component of this phenomenon. My guess is that enterprising Democrats would then decide to start raising this tax issue as a way to win votes. Or a third party would do the same, and meet with no small success. 

Bluntly, I think people who believe we need to raise taxes need to make the case to actual voters. Many Democratic candidates, including Barack Obama in 2008, have made the case for raising taxes on the relatively small minority of households that earn more than $250,000. The problem is that the tax increases he proposed were not adequate to meet the new spending commitments he also proposed. Mark Schmitt and Matt Yglesias have, to their credit, written totally cogent, forthright arguments for raising taxes. Schmitt and Yglesias tend to think that more and better well-funded public services are a fair trade for further constraining the net disposable income of U.S. households — or at least U.S. households making somewhat more than the median income, thus drawing large numbers of two-earner families with children into the net. I strongly disagree with Schmitt and Yglesias, but they’ve done us all a service by being open and honest about their goals. 

Regardless of what elected Republicans say or do, it is a safe bet that a large number of U.S. voters will disagree. This is true with respect to taxes broadly conceived as well as to energy taxes. More forthrightness — in the vein of Schmitt and Yglesias — is badly needed from advocates of higher energy taxes: yes, median family, you will have to consume and drive somewhat less or pay more for the privilege, but it is vitally important that you do so. Large numbers of prominent voices in the scientific and media and entertainment worlds have vigorously promoted this notion, and it really has grown more popular over time. It just hasn’t grown popular enough to allow left-of-center environmentalists to win a political victory at this point in time.

There is a tendency to believe that when “the other side” wins an argument — the referee being the public — there is some kind of manipulation going on, e.g., the American masses have been “duped” by liberals and the public sector unions, or they’ve been “duped” by denialist conservatives and the oil industry, etc. It’s not very edifying.   

Reihan Salam — Reihan Salam is executive editor of National Review and a National Review Institute policy fellow.

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