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November 09, 2012 9:44 AM Convergence of Forces

By Michael O'Hare

John Boehner has committed the house majority to accept new revenues under the “right conditions”. The California legislature has a 2/3 D majority in both houses, which means it can actually raise taxes, and the CA electorate that pulled the legs out from under its government a third of a century ago voted to increase taxes. The presidential candidate who wants to raise taxes on the rich won. The American public evidently views those who take without giving back as morally culpable: when Romney blithely and wrongly tarred half the population with that brush, voters despised him for it.

The “conditions” are now right: I add to the foregoing the occurrence of a climate-change-mediated catastrophe unprecedented in US history, along with a basso continuo ostinato of drought, steady sea-level rise, melting of the arctic sea ice, glacier retreat and all the rest. What did James Inhofe say about Sandy? This would be an excellent time to do as Bob Frank advises: tax bad things and not good things, and one of the worst things is the takers who use up the finite capacity of the atmosphere to process CO2 without paying a dime for it. Everything Romney wants to believe about retirees who paid their social security taxes all their lives (not to mention sales tax this very week) is wrong about them, but right about us: takers and free-riders. More if you light your house with coal electricity and drive a big car when you don’t have to, less if you bike to work and happen to live where your power comes from a dam or a nuke, but takers, all of us.

Every economist wakes up in the morning with a little prayer that more things should be sold at their real marginal cost, but the survival of an inhabitable planet is being sold way below cost and we’re using up too much of it. Economists are praying from the right missal here. Many have a little too much faith in getting this particular price right: properly responding to global warming, even with a atmosphere user fee working its incentive magic throughout human affairs, still requires government to provide things like bike paths and trams. But the moral case and the technical case for what I prefer to call a “carbon charge” – because that’s what it is, a user charge for services you consume and therefore deny to others – are perfectly aligned. We’ve wasted two decades hoping for a magic bullet climate policy that requires no heavy lifting by anyone and maybe will make a fortune for an existing interest group: denial? cap and trade? clean coal? biofuels subsidies and mandates? Understandable hope, but doomed like all magical thinking. If we don’t get the prices right, and we expect the whole economy to flout the law of demand…well, better think about selling that coastal property.

California has been out front with climate policies and would be an excellent place to pilot a carbon charge. Twenty dollars a ton, increasing at 5% per year for a couple of decades would be not bad. And nationally: unless he can’t read election results, Boehner should find it easy to get a lot of his caucus behind a revenue measure that doesn’t have to be called a tax (my framing is not a quibble or a verbal trick).

[Cross-posted at The Reality-based Community]

Michael O'Hare is a Professor of Public Policy at the University of California, Berkeley.