Comments Peter Barnes has made

Bad use of higher carbon prices

I have great esteem for Jim Barrett and Michel Gelobter, former colleagues of mine at Redefining Progress.  And we agree on the most important thing: to solve the climate crisis, we must raise the price of carbon (through either a tax or a cap with auctions). Where we disagree is on what to do with the revenue.  

As I understand Jim's position, he would divide the revenue from higher carbon prices four ways: (1) investments in efficiency and renewables; (2) cash for low-income families; (3) spending on job retraining and retention; and (4) 65% or so for payroll tax cuts.

I would argue that using 65% of carbon revenue for payroll tax cuts is not a wise use of so much money.  First of all, if half of that goes to employers, that's just a huge windfall for WalMart, McDonald's, and other companies with lots of employees.  They're not going to pass that on in higher wages; it will go straight to their bottom lines.  Second, there's the non-trivial problem of how to finance Social Security.  And third, what about the millions of Americans who don't pay payroll taxes -- retired people, students, stay-at-home parents, the unemployed, workers in the informal economy?  They'll face higher carbon prices too, and under Jim's plan, they'd get nothing back.

What about investing in efficiency and renewables?  The whole point of raising the price of carbon is to drive private investment into efficiency and renewables.  Other policies -- efficiency standards, feed-in tariffs, etc. -- can also do this.  So I see little need to spend public dollars here.  We can get the `better and cheaper life' Michel envisions by leveraging private capital rather than by taxing the middle class.

Job training and transition assistance to impacted industries and workers are things that require public spending, but the amounts involved aren't huge, and there are other (progressive) revenue sources that can be tapped -- e.g. general revenue, a windfall profits tax on oil companies, and/or a shift of current subsidies to fossil fuels.    

As for low-income families, they'd receive cash under cap and dividend.

In sum, the case for spending higher carbon prices as Jim proposes is weaker than the case for giving the money back through equal monthly dividends.  

Peter Barnes http://www.capanddividend.org