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Monday Smackdown:
Carbon Tax Revenue
Reversal Department
J. Bradford DeLong
U.C. Berkeley, WCEG, and NBER
2017-02-12
key
:
https://www.icloud.com/pages/0ejD0wGAGHjsmwlOj7mE-uzJg
html:
http://www.bradford-delong.com/2017/02/monday-smackdown-
carbon-tax-revenue-reversal-department.html
pdf:
pages:
Notebook:
words
1
I. Huh??
Back in 2009, Greg Mankiw was opposed to any [carbon-
tax/cap-and-trade] proposal that did not use "most" of the
[revenue raised by the tax/money earned by auctioning the
permits] to cut marginal tax rates.
Today Greg Mankiw is in favor of a carbon tax proposal
that does not use any of the revenue raised to cut marginal
tax rates.
There is no explanation of this shift.
The obvious explanation that would apply to most
Republicans is this: Back in 2009 word had came down
from the high councils of the Republican Party—Mitch
McConnell and John Boehner—that the object was to make
Barack Obama look like a loser, that until he had been
rendered a one-term president even his best policies needed
to be opposed root-and-branch, and that only after a
Republican was president should people advocate for
sensible policies.
I don't want to believe that applies here. But I do ask for an
explanation. Why was failing to use the revenue from any
carbon fee to reduce marginal tax rates a deal breaker in
2009, and part of the proposed plan now?
2
Greg Mankiw (and Ted Halstead and Martin Feldstein)
(2017): A Conservative Case for Climate Action:
CRAZY as it may sound, this is the perfect time to
enact a sensible policy to address the dangerous
threat of climate change.
Before you call us nuts, hear
us out.... President Obama... did not sign any
meaningful domestic legislation to address the
problem, largely because he and Congress did not see
eye to eye.... Our plan is built on four pillars. First,
the federal government would impose a gradually
increasing tax on carbon dioxide emissions. It might
begin at $40 per ton and increase steadily. This tax
would send a powerful signal to businesses and
consumers to reduce their carbon footprints. Second,
the proceeds would be returned to the American
people on an equal basis via quarterly dividend
checks...
Greg Mankiw (2009): A Missed Opportunity on Climate
Change:
A cap-and-trade system is like a carbon tax.
The price
of carbon allowances will eventually be passed on to
consumers in the form of higher prices for carbon-
intensive products. But if most of those allowances
are handed out rather than auctioned, the government
won’t have the resources to cut other taxes and offset
that price increase. The result is an increase in the
effective tax rates facing most Americans, leading to
lower real take-home wages, reduced work incentives
and depressed economic activity.... To those who
view climate change as an impending catastrophe and
the distorting effects of the tax system as a mere
annoyance, an imperfect bill is better than none at
all.... President Obama knows what a good climate
3
bill would look like. But despite his immense
popularity and personal charisma, he appears unable
to persuade Congress to go along.... I hope the
president refuses to sign a bill that fails to auction
most of the allowances...
* * * *
II. Background
(2017)
: Monday Smackdown: Carbon Tax Revenue
Reversal Department
Martin Feldstein, Ted Halstead, and Greg Mankiw
(2017): A Conservative Case for Climate Action
2009
: Climate Change: Department of "Huh?": Greg
Mankiw hopes Obama vetoes a cap-and-trade bill
…
Greg Mankiw
(2009): A Missed Opportunity on Climate
Change
Mark Thoma
(2009): Waxman-Markey is Not a Massive
Corporate Give-Away
Rob Stavins
(2009): The Wonderful Politics of Cap-and-
Trade: A Closer Look at Waxman-Markey
(2009)
: Greg Mankiw and Company Do Good on Cap-and-
Trade—in 2004:
http://delong.typepad.com/sdj/2009/09/
4
greg-mankiw-and-company-do-good-on-cap-and-trade-
from-2004.html
The Wonderful Politics of Cap-and-Trade: A Closer Look at
Waxman-Markey:
http://www.huffi ngtonpost.com/robert-
stavins/the-wonderful-politics-of_b_208581.html
Waxman-Markey is Not a Massive Corporate Give-Away:
http://economistsview.typepad.com/economistsview/
2009/08/stavins-waxmanmarkley-is-not-a-massive-
corporate-giveaway.html
A Missed Opportunity on Climate Change:
http://
www.nytimes.com/2009/08/09/business/economy/
09view.html
Climate Change: Department of "Huh?":
http://
www.bradford-delong.com/2009/08/climate-change-
department-of-huh.html
Monday Smackdown: Carbon Tax Revenue Reversal
Department:
http://www.bradford-delong.com/2017/02/
monday-smackdown-carbon-tax-revenue-reversal-
department.html
A Conservative Case for Climate Action:
https://
www.nytimes.com/2017/02/08/opinion/a-conservative-
case-for-climate-action.html
5
_[Monday Smackdown: Carbon Tax Revenue Reversal
Department][]_: Back in 2009, Greg Mankiw was opposed
to any [carbon-tax/cap-and-trade] proposal that did not use
"most" of the [revenue raised by the tax/money earned by
auctioning the permits] to cut marginal tax rates.
Today Greg Mankiw is in favor of a carbon tax proposal
that does not use any of the revenue raised to cut marginal
tax rates.
There is no explanation of this shift.
The obvious explanation that would apply to most
Republicans is this: Back in 2009 word had came down
from the high councils of the Republican Party—Mitch
McConnell and John Boehner—that the object was to make
Barack Obama look like a loser, that until he had been
rendered a one-term president even his best policies needed
to be opposed root-and-branch, and that only after a
Republican was president should people advocate for
sensible policies.
I don't want to believe that applies here. But I do ask for an
explanation. Why was failing to use the revenue from any
carbon fee to reduce marginal tax rates a deal breaker in
2009, and part of the proposed plan now?
6
Greg Mankiw (and Ted Halstead and Martin Feldstein)
(2017): [A Conservative Case for Climate Action][]:
"CRAZY as it may sound, this is the perfect time to enact a
sensible policy to address the dangerous threat of climate
change...
>...Before you call us nuts, hear us out.... President
Obama... did not sign any meaningful domestic legislation
to address the problem, largely because he and Congress
did not see eye to eye.... Our plan is built on four pillars.
First, the federal government would impose a gradually
increasing tax on carbon dioxide emissions. It might begin
at $40 per ton and increase steadily. This tax would send a
powerful signal to businesses and consumers to reduce their
carbon footprints. Second, the proceeds would be returned
to the American people on an equal basis via quarterly
dividend checks...
Greg Mankiw (2009): [A Missed Opportunity on Climate
Change][]: "A cap-and-trade system is like a carbon tax...
>...The price of carbon allowances will eventually be
passed on to consumers in the form of higher prices for
carbon-intensive products. But if most of those allowances
are handed out rather than auctioned, the government won’t
have the resources to cut other taxes and offset that price
increase. The result is an increase in the effective tax rates
facing most Americans, leading to lower real take-home
7
wages, reduced work incentives and depressed economic
activity.... To those who view climate change as an
impending catastrophe and the distorting effects of the tax
system as a mere annoyance, an imperfect bill is better than
none at all.... President Obama knows what a good climate
bill would look like. But despite his immense popularity
and personal charisma, he appears unable to persuade
Congress to go along.... I hope the president refuses to sign
a bill that fails to auction most of the allowances...
——
* **(2017)**: _[Monday Smackdown: Carbon Tax
Revenue Reversal Department][]_
* **Martin Feldstein, Ted Halstead, and Greg Mankiw**
(2017): _[A Conservative Case for Climate Action][]_
* **2009**: _[Climate Change: Department of "Huh?"][]_:
Greg Mankiw hopes Obama vetoes a cap-and-trade bill...
* **Greg Mankiw** (2009): _[A Missed Opportunity on
Climate Change][]_
* **Mark Thoma** (2009): _[Waxman-Markey is Not a
Massive Corporate Give-Away][]_
* **Rob Stavins** (2009): _[The Wonderful Politics of
Cap-and-Trade: A Closer Look at Waxman-Markey][]_
* **(2009)**: _[Greg Mankiw and Company Do Good on
Cap-and-Trade—in 2004)][]_
8
[Greg Mankiw and Company Do Good on Cap-and-Trade
—in 2004]: http://delong.typepad.com/sdj/2009/09/greg-
mankiw-and-company-do-good-on-cap-and-trade-
from-2004.html
[The Wonderful Politics of Cap-and-Trade: A Closer Look
at Waxman-Markey]: http://www.huffi ngtonpost.com/
robert-stavins/the-wonderful-politics-of_b_208581.html
[Waxman-Markey is Not a Massive Corporate Give-Away]:
http://economistsview.typepad.com/economistsview/
2009/08/stavins-waxmanmarkley-is-not-a-massive-
corporate-giveaway.html
[A Missed Opportunity on Climate Change]: http://
www.nytimes.com/2009/08/09/business/economy/
09view.html?pagewanted=print
[Climate Change: Department of "Huh?"]: http://
www.bradford-delong.com/2009/08/climate-change-
department-of-huh.html
[Monday Smackdown: Carbon Tax Revenue Reversal
Department]: http://www.bradford-delong.com/2017/02/
monday-smackdown-carbon-tax-revenue-reversal-
department.html
[A Conservative Case for Climate Action]: https://
www.nytimes.com/2017/02/08/opinion/a-conservative-
case-for-climate-action.html
9
