STEM the Science Deniers – Part VI

NOTE: The reasoning behind the decision to continue to emphasize the subject of Climate Change in this column is driven by my conclusion that neither the public nor politicians are concerned enough about the potentially tragic, and probable catastrophic, long-term consequences of global warming. Yet it is my belief, that eventually, a carbon tax will be implemented. Stay tuned.

PIGOU CLUB

I look at the name above and envision that sign on the front of a ramshackle all-you-can-eat barbecue joint where the letter T had fallen off the end of PIGOU. Although there is no physical presence to which the name can be attached, a club with this name really does exist, and the concept behind it has recently gained increased attention, discussion, and even agreement. In addition, the composition of the club’s membership provides enormous credibility to the concept.

The Members

The Economist, Greg Mankiw, who was covered in last month’s column, developed the original idea for the creation of the Pigou Club, and as a result, the majority of members are from that field. Particularly interesting is the fact that despite the inability of political parties to agree on anything, both Progressive and Conservative Economists are enthusiastic members, believing strongly in the economic theory upon which the Club is based.

In addition, the caliber and stature of the group are extraordinary. There are three Nobel Prize winners in Economics involved, Gary Becker, Joseph Stiglitz and Paul Krugman. A few other Economist members you might recognize are Alan Greenspan, Larry Summers, and Paul Volcker. Other notable non-Economist members are Thomas Friedman, Michael Bloomberg, Lindsey Graham, and Christopher Dodd.

Although Professor Mankiw’s credentials are unassailable both as an academician (head of the Economics Department at Harvard), and as a Republican (as President Bush’s Chief Economist), the majority of law makers in Congress who are also Republicans don’t quite agree with his belief in the economic theory that is the basis for the Club’s existence. But then, I have the admittedly cynical belief that most Congressional legislators, regardless of party affiliation are, to say it kindly, Economics challenged.

The Theory

You will recall that last month’s column emphasized the growing interest in the effectiveness of a carbon tax. The Pigou Club was formed back in 2006 to promote the advantages of a similar tax on gasoline (that never got through Congress) using the same economic theory as the basis for its potential benefits–– the same that pertain to a tax on carbon. In fact, many other taxes that have been imposed over decades derive from the same theory––the most notable being the cigarette tax.

If you have been puzzled by the word “Pigou,” it is the name of an economist who was quite famous in the early part of the 20 th Century. In fact, in July of 2007, this column was devoted to him, and the theory that made him famous. Assuming your memory is as bad as mine, I don’t expect many of today’s readers to remember that column, so here is a short quote from that edition:

“With an unlikely name, Arthur Cecil Pigou was a brilliant economist who taught at Cambridge University in England from 1908 to 1943. It was Pigou who essentially rationalized and defined the concept of the “sin tax.” By taxing what might be termed “sin” or sinful endeavors, benefits would migrate to the economy by making the sinful endeavor more expensive and less desirable.” This type of taxation is commonly referred to as a Pigouvian tax, and a tax on carbon fits that definition.

Acceptance is Growing

What is particularly interesting is that despite the fact that Republicans have never met a tax they liked; the Carbon Tax seems to be somewhat, but not completely, an exception. The major reason for its advocates is that the revenues generated from the tax would be used to offset other taxes that would be reduced accordingly. This makes it less controversial, leading to a more popular “revenue neutral” result.

The Pigou Club lists economists from both parties who are all advocates of the carbon tax, and as described in last month’s issue includes the king size hater of any form of tax, Grover Norquist. Shockingly, even oil producers such as Exxon Mobil, Royal Dutch, Shell, Statoil, and BP agree. They were co-authors of a joint statement issued by over 100 major corporations calling on lawmakers around the globe to impose “a clear, transparent, and unambiguous price on carbon emissions.”

Conservative publications such as the Wall Street Journal and the National Journal support the concept. Even the ultra conservative magazine, Forbes, ran an article very favorable to a Pigouvian tax on carbon. In fact, there is very broad bipartisan support outside of Congress. In addition, there are now 26 other major countries on every continent that have already initiated a carbon tax.

It Could Half the Budget

There is a branch of Congress that is relatively unknown to the public, and apparently also relatively unknown to many of the members of Congress (who should know better) that it serves. It is described in the Library of Congress as follows: “The Congressional Research Service (CRS) is well-known for analysis that is authoritative, confidential, objective and nonpartisan. Its highest priority is to ensure that Congress has 24/7 access to the nation’s best thinking.”

Last year the CRS issued a report that found that imposing an escalating fee [on carbon] that starts at $20 per metric ton could reduce the projected 10-year budget deficit by more than 50 percent, from $2.3 trillion to $1.1 trillion. That estimate relies on the Congressional Budget Office’s (CBO) “baseline” deficit projection.

So why are the Koch brothers spending so much money to extort a pledge from Congressional members to oppose a carbon tax? Is that in the country’s best interest or their own? Take a guess.

NOTE: I apologize for not yet divulging the two entities that should convince Science Deniers that Climate Change is real. However, next month’s entire column will be devoted to that subject.