05
Dec
12

Please stop doing this

Over in the New Yorker, which isn’t perhaps a hotbed of innovative economic thought but is presumably run by adults, we discover this opinion:

By all means let’s have a stiff carbon tax—a whole carbon-tax package, one that folds in levies on other pollutants and on the wasteful or dangerous use of natural resources in general. And, at the same time, let’s make the carbon tax the source of the [Social Security and Medicare] trust fund. Call it the Dignity for Seniors tax, because that’s what it would provide. Or the National Patrimony tax, because that’s what it would preserve. Or the Social and National Security tax, because it would underwrite both kinds.

It comes in the middle of an otherwise rather thoughtful piece on the virtues of shitcanning the payroll tax, which I’m reluctant to criticize because it comes across as the product of someone who took a math course once and understood it.  But, guys, this needs to stop.

Carbon taxes are Pigouvian when done right, which means they’re intended to price in externalities.  Unless you’re one of those Big Oil conspiracy theorists who thinks that the world’s energy companies have been conspiring to keep gas prices far below where the market demands they sit — in which case, wait WHAT?! — you should expect a properly Pigouvian carbon tax to reduce the amount of fuel bought, and to be inherently self-limiting in the revenue it brings in.

Is that really the sort of thing with which you want to underpin a social benefits scheme that’s rapidly rising in cost?  I didn’t think so.

But suppose you did.  You’ve now created a particularly strong incentive for the federal government to artificially lower energy efficiency, which last I checked was the opposite of what a carbon tax is intended to achieve.  That fantastic 60mpg Euro-diesel or 50mpg Prius you just bought now indicates that you hate old people.  If you really loved Grandma you’d drive a Ford Earthfucker, because every gallon of gas you guzzle underwrites the SSA’s commitments.

economummy

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