Could a Carbon Tax Emerge from the Debt Ceiling Crisis?


Photo: thewritingzone, Flickr/CC BY-SA

So, the Senate has just passed a plan that allows the government to raise the debt ceiling -- just in time to prevent the United States from careening into an unprecedented default scenario. Hooray! But it meant Democrats and a more-spineless-than-ever Obama caving in to conservative demands that we gut important social programs that lend aid to the nation's poor and middle class in a time of economic difficulty. Booooo.

On top of all that, not a dime of increased revenues were acquired to help balance the deficit as part of the deal -- and economists warn that cutting spending in the midst of a recession could have disastrous consequences. So unless you're a wealthy "job creator", this "deal" is an exceedingly crappy one indeed. But some are cautiously arguing there could be a green silver lining: The obvious need for new federal revenues may begin to make a carbon tax a more viable policy option.Here's ClimateWire:

"A carbon tax could be an appealing alternative to even more ambitious cuts to entitlements and defense spending as well as a national value-added tax, repealing the home mortgage tax deduction, or higher income taxes," [economist Joe] Aldy said in an email. "A well-designed carbon tax could raise some revenues to finance deficit reduction and enable a reduction in payroll tax rates, for example."
And here's Joe Romm, pondering a scenario in which Obama wins reelection and actually tries playing hardball for a change during the inevitable negotiations to extend the Bush tax cuts for the wealthy:
[Obama] will actually have maximal leverage right after the 2012 election when the Bush tax cuts are poised to expire if no positive action is taken. Also, he won't be up for re-election so, in theory, he can play hardball. Yes, I know, it's a theory ...

Obama could trade both the Bush tax cuts and the corporate tax rate reduction for a carbon tax. No, I'm not saying he will. I'm only saying that he could -- and indeed, it strikes me as his only opportunity in his entire second term to enact any policy that would actually reduce absolute levels of U.S. greenhouse gas emissions.

The bargain would then be that the rich, very rich, and ultimo-uber-rich get to keep their tax cuts, and corporations get a tax break and get to keep their loopholes open. Instead, we'd apply a carbon tax that would, in most scenarios, generate more revenue that all of the above combined while driving industry to reduce greenhouse gas emissions.

I have a few problems with that scenario -- mostly, that it would allow the income inequality gap continue to widen at a time where it's already at a Gilded Age-level gulf. But it's an interesting possibility to ponder -- despite it still being, by all counts, really, really unlikely to happen at all.

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