Class Dismissed

The ‘populist’ case against cap-and-trade is absurd

Historian John Steele Gordon, writing on Barack Obama’s economic policies in the April issue of Commentary, says that the president’s plan to raise taxes on high earners and increase regulations on business will curtail job creation and slow economic growth.

This is nominally an article about cap and trade, the carbon-reduction strategy proposed by Obama that sets an absolute limit on emissions, and allows corporations or governments to trade emissions allowances under that overall cap. Gordon discusses how that theoretically environmentally friendly strategy would have severe economic consequences in places like Elkhart, Indiana—one of those places in the Midwest with a huge unemployment rate and an entrenched, failing industry. Elkhart manufactures RVs. The author points out, validly, that the drawbacks to these sorts of environmental laws would be felt more by working-class people in Indiana than by the “bi-coastal elites”:

The cap-and-trade tax will inescapably and adversely impact the economic recovery and future growth rates. If passed, it will act on the economy as a whole exactly the way a governor acts on a steam engine, increasingly resisting any increase in revolutions per minute. With the supply of licenses to emit carbon dioxide fixed, the price of the permits will inevitably rise as economic activity picks up. That means that any increase in overall demand will increase the price of energy, and thus, in a feedback loop, nearly everything else. That will damp down demand. The more the economy tries to speed up, the more the carbon tax will work to prevent it from doing so.

A carbon tax would have consequences, but Gordon’s point is also ridiculously over-simplified. In the first place, Gordon ignores the way policymaking actually works. As a result of industry lobbyists and legislators’ desire to attract certain voters, the carbon tax will be altered and amended as it comes up for reauthorization. No matter what the carbon tax looks like now, it will surely be modified to promote economic growth in certain sectors.

The other point is that, despite certain creepy parallels, this is not 1930; emitting carbon is no longer the main byproduct of economic growth. Ours is an increasingly technological economy, and the best American jobs—those the country ought to create and improve—don’t necessarily require big carbon emissions.

Gordon’s basic argument is that the underpinnings of Obama’s economic strategies don’t really help the little guy. But, then, Gordon’s gloss on “the little guy” is decidedly odd:

We have become overwhelmingly a country not of haves and have-nots but, one might say, of haves and have-yachts (including the land-yachts called RV’s). Over 3.5 million families today have net worths in excess of $1 million. Three-fifths of American families own financial securities in their own name. Millions more count on pension fund investments to make their old age comfortable. Only about 10 percent of non-farm families owned their own homes in 1936. Today more than 60 percent of American families do. This gives them the substantial financial assets that only the “rich” possessed in the 1930’s. The sort of desperate, grinding poverty seen in the FDR-era photographs of Walker Evans has simply disappeared. Today, even people of modest means enjoy a level of comfort, security, and even luxury undreamed of when Roosevelt was president. It is not the bicoastal elite that buys RV’s. RV’s are the vacation homes of the middle class. Plumbers talk about their 401-K’s and factory workers send their children to medical school.

Come on. “The sort of desperate, grinding poverty seen in FDR-era photographs” did not “simply disappear”; in fact, it disappeared—to the extent that it has actually disappeared—as a result of concerted public policy designed to address it. The mere fact that there has been an increase in the number of rich people does not mean there has been a corresponding decrease in the number of poor people. In fact, the top 1 percent of American households owns 33.4 percent of all the country’s wealth. The bottom 80 percent of American households own only 16 percent. Some 35.9 million people in the United States still live below the poverty line.

Studies released last year by both the Congressional Budget Office and Harvard researchers found that, though life expectancy in the U.S. continues to rise on average, it has actually declined for certain groups in certain places. As the CBO report concludes, there is a “growing disparity in life expectancy between individuals with high and low income and between those with more and less education. The difference in life expectancy across socioeconomic groups is significantly larger now than in 1980 or 1990.” It is true that the poor American no longer starve to death in any broad sense, but a quick drive through somewhere like West Oakland, or the Appalachian coal fields, might lead the author to reconsider the true prosperity of the American people.

But the ultimate point of Gordon’s article is that the working people who both manufacture and purchase RVs are the people who will be hurt most by climate-change legislation. Without getting too far into a discussion about Van Jones and his emerald proletariat, the fact that American workers currently benefit from and enjoy carbon-intensive goods and services does not mean those things are in their best interest. RVs are energy-hogging vehicles-cum-dwellings. It’s not inappropriate to suggest that, for the good of the country and the world, their days should be numbered. Products become obsolete. That’s okay; it ought to spur the U.S. to develop something responsible to manufacture.

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Daniel Luzer is web editor of the Washington Monthly.