Like mushrooms after a rain, new pro-carbon tax youth groups are sprouting before our very eyes. Unlike wild mushrooms, however, this growth is anything but organic.
The latest iteration, High Schoolers for Carbon Dividends, joins Students for Carbon Dividends and Young Conservatives for Carbon Dividends. Each draws its framework from the so-called Baker-Shultz plan, which would tax oil, natural gas, and coal at a clip of $40 per ton of carbon emission and dole out the proceeds in the form of cash payments that it calls carbon dividends.
While I’m sure the young activists affiliated with High Schoolers for Carbon Dividends (HS4CD) and Students for Carbon Dividends feel part of grassroots groundswell, I wonder if they’re aware of the Baker-Shultz plan’s genesis. Do they know, for instance, that the founding members of the coalition’s grown-up iteration, the Climate Leadership Council, include a who’s-who of history’s largest corporate emitters?
Do they know that a star lobbyist for one of those founding members, ExxonMobil, was caught on tape this year describing his company’s perfidy in the entire endeavor? “There is not an appetite for a carbon tax. It’s a nonstarter,” the founding member’s lobbyist was recorded saying. He added, “And the cynical side of me says, ‘Yeah, we kind of know that.’ But it gives us a talking point.”
While the Young Carbon Pioneers of High Schoolers for Carbon Dividends and Students for Carbon Dividends can perhaps be forgiven for their naïve exuberance (particularly since the Climate Leadership Council gave ExxonMobil the Yezhoz treatment, scrubbing it from its website), the Young Conservatives for Carbon Dividends warrant more scrutiny.
The Young Conservatives make a great show of their conservative bona fides, proudly proclaiming that their tax scheme was “developed by President Reagan’s right-hand men,” James Baker and George Shultz. Whether this plan was genuinely developed by the nonagenarian Baker and the now-deceased Shultz or merely endorsed by them is not a question I’m qualified to answer.
What I am qualified to address, though, is that the political thread represented by Baker, Shultz, and indeed Reagan himself no longer typifies American conservatism.
While some conservative cornerstone groups like the Heritage Foundation continue to spread the Reagan economic gospel, the political rise of Donald Trump showed la bouillabaisse politique that today’s conservatism isn’t of the market-maximizing sort. Today’s conservatism is more nationalistic and more antagonistic towards free trade and big business.
The Baker-Shultz plan does chime with elements of the Reagan agenda, but those elements aren’t the ones that would four decades later be considered conservative. The Baker-Shultz plan is what we today recognize as neoliberalism. While some use that term as a pejorative, I use it merely as a descriptor. Taxes on externalities are a neoliberal touchstone. Reagan and Prime Minister Margaret Thatcher are, of course, credited with leading the neoliberal revolution of the 1980s which ushered in significant market reform and globalization. Rightly or wrongly, today much of that agenda clashes with the Jacksonian impulses of Trump-aligned conservatism.
What the Young Conservatives’ framework aligns with perfectly, however, is the tax-and-spend climate policy model preferred by the Biden administration. Despite spiraling inflation and a disturbing energy price spike, the Biden administration wants to fund its programs by pushing energy costs higher with a tax on our leading resources, natural gas, oil, and coal. It’s an approach to policy that can only alienate the populace, particularly in the energy-producing states where not only energy affordability but also employment and general economic vitality are intimately linked with production. That these regions tend to lean hard against the Biden agenda creates a conundrum for the Young Conservatives.
Interestingly, the Baker-Shultz plan attempts to square this political dilemma by cycling revenue back out in the form of payments reminiscent of a universal basic income — a move that might appeal to people from both the left and the right.
This wouldn’t be surprising, since while almost everyone hates the idea of paying more for gasoline, electricity, and heat, they might be willing to come around on the idea if it includes the corresponding promise of free cash.
The problem here is that it abandons the economic case that gives a carbon tax legs in the first place. The essential aim of taxing an externality is to achieve better economic efficiency by internalizing the cost of our actions. If we’re going to correct that alleged inefficiency, the bulk of the literature shows that the sensible way to do it wouldn’t be through the lump-sum payments these groups call a carbon dividend, but rather through the reduction of costly taxes elsewhere, such as payroll taxes. This conclusion has been reached by pro-tax groups (like the Alliance for Market Solutions), by agnostic groups (like the Tax Foundation), and by tax-skeptical groups (like my own, the Institute for Energy Research).
Despite the claims of the Young Conservatives that they represent the economists’ case for a carbon tax and embody the economic rationale of the Reagan Revolution, when it comes down to it, they’re not making an economic argument. They think it’s more likely that a carbon tax can be enacted in the United States if they include a sweetener in the deal.
What they’re making is a political argument. And it’s a muddled one at that.
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