Climate of Fear XXI.

Used to be, presidential candidates could just say “I stand for the principles of the Whig Party” and let it go at that.[1]  Now, a presidential election campaign requires candidates to lay out their plans for examination by voters.[2]

Hillary Clinton has begun to do so.  One key area is climate change.  Here she seeks to reach beyond the goals set by the Obama administration.  President Obama believed that emissions had to be reduced, so he ordered the EPA to use the Clean Air Act to issue regulations that would compel vehicles and power plants to cut emissions by 25-28 percent below the 2005 level by 2025, and by 80 percent by 2050.

According to many economists, a carbon tax would be highly effective in reducing emissions.  Indeed, the goals for 2050 and perhaps even those for 2025 can’t be reached without a carbon tax.  It would drive up the price of carbon fuels above the price of alternative fuels, creating a market demand for those alternative fuels.  This, in turn, would shift the terms for solar and wind energy while stimulating a demand for mass transportation.

However, it would hit hard on ordinary consumers by raising gas and electricity prices.  So, Ford F-150s, “Mommy vans,” and air conditioning would all become prohibitively expensive.[3]  Such voters would become angry, angry hippos and—in an act of false consciousness[4]—vote Republican.  Clinton has rigorously avoided proposing a carbon tax.

Conceding that the Democrats are unlikely to win control of both houses of Congress (perhaps not even one), she envisions acting on climate change without legislation.  Clinton believes that “meeting the climate challenge is too important to wait for climate deniers in Congress to pass comprehensive climate legislation.”[5]  She would use the Clean Air Act to issue regulations that would reduce emissions by airlines, oil refineries, gas wells, and cement plants.

What might such action accomplish?  She hopes to raise the number of solar panels from about 70,000 today to 500 million by 2020.  She wants to spend $60 billion on mass-transit and energy-efficient buildings.  Experts believe that the Obama Administration already has done just about everything that administrative regulations can achieve, even if the courts allow all of them to remain in effect.  Taken all together, her energy proposals will cut greenhouse gas emissions by 80 percent of the 2005 level by 2050.  That is, the same mark as that set by the Obama administration.  Furthermore, a Clinton administration would need to get at least $60 billion in appropriations through Congress.  This seems equally unlikely to be achieved.

Nevertheless, Clinton has won some support from the environmental community, which sees the danger of climate change as more pressing than any other danger.  “We know that [a carbon tax] is not politically realistic.  And we need to be realistic about what we can get,” said Scott Hennessey, vice president of the solar power company SolarCity.[6]

The real issue is the American unwillingness to be taxed, rather than “climate deniers.”

[1] See: https://www.youtube.com/watch?v=UAjwAuHHQJs

[2] Voters in long-established democracies realize that their own candidates are just writing a wish list, but they believe that the other candidate means to try for integral fulfillment of his/her agenda.

[3] Actually, they already are in environmental terms.  It’s just that on one wants to tell people the truth.

[4] See: https://en.wikipedia.org/wiki/False_consciousness

[5] Clinton’s campaign chairman John Podesta, quoted in Coral Davenport, “Clinton’s Climate Change Plan Avoids Mention of a Carbon Tax,” NYT, 3 July 2016.

[6] Which spent a measly $200,000 on the Podesta Group lobbying firm in 2015.  See: http://www.opensecrets.org/lobby/firmsum.php?id=D000022193&year=2014%20Campaign%20Contributions  This was not mentioned in the NYT article.  See n. 5 above.

It ain’t necessarily so 2.

The current presidential candidates are selling snake oil when it comes to the economy.[1]

“The economy is rigged”—Bernie Sanders, with Hillary Clinton yapping along behind.  The economy is “rigged” only in the sense that economic change has assigned a lot of value to skills and education, and virtually no value to just showing up.  In a period of economic transformation, a modern economy shifts resources from low-productivity sectors to higher-productivity sectors.  All those in the skilled and educated sectors profit, while those in the less-educated and less-skilled sectors lose.  That isn’t the same as saying—as Sanders and Clinton imply—that a cabal of Wall Street bankers are making all the decisions for the nation at large.

“We don’t make things anymore”—Donald Trump.  In fact, it depends on what the meaning of “we” is.  On the one hand, the total value of goods manufactured in the United States is at its highest level, almost 50 percent higher than in the late 1990s.[2]  On the other hand, employment in manufacturing has declined by 29 percent over the same period.  Under the pressure of foreign competition, productivity in manufacturing has increased through new technological innovations.  Indeed, in the many days ago, it was the competition from highly productive American manufacturing that forced adaptation on foreign countries.

“I do not believe in unfettered free trade”—Bernie Sanders.  The North American Free Trade Agreement (NAFTA) and the proposed Trans-Pacific Partnership (TPP) have been condemned for exporting jobs to developing countries.  In fact, most academic economists—highly astute people on the left—believe that the evidence shows that free trade has been good for the United States.  It has destroyed some jobs, but it has created many others.  Job loss at big, old-fashioned firms is easier for the media to document than is job-creation at many small firms.

“I want to make sure the wealthy pay their fair share, which they have not been doing”—Hillary Clinton.[3]  While exceptions exist, the Congressional Budget Office (CBO) reports that the fabled top “one percent” of earners pays at a rate of 33 percent, while the middle three-fifths of earners pay at an average rate of 13 percent.[4]

“The Laffer curve.  HA!”—me.  Republicans promise that big tax cuts will lead to robust economic growth.  The Mellon Plan of the 1920s and JFK’s tax cut of 1963 seem to bear out this claim.  However, the Reagan and Bush II tax cuts did not stimulate much economic growth.[5]  Still, tax cuts leading to growth has become a Republican mantra.  Actually, the amount of growth from tax cuts is very uncertain.  What is certain is the impact of further tax cuts on the deficit.  Tax cuts will produce bigger deficits.  According to one estimate, Donald Trump’s tax plan would reduce federal income by 29 percent.

What Bernie Sanders, Donald Trump, and Hillary Clinton are trying to say is that Americans have become uncomfortable with adapting to change and competition.  That is easy to understand.  From 1945 to the 1970s, the American economy led the world.  Americans got used to high incomes from less work.  Then, the rest of the world caught up.  Sometimes this came in the form of better quality goods; sometimes in the form of lower prices.  Now it’s up to us to learn how to compete again.

[1] Gregory Mankiw, “The Economy Is Rigged, And Other Campaign Myths,” NYT, 8 May 2016.

[2] That is, during the now longed-for “golden years” of the Clinton administration.

[3] Asked to define “fair” taxes on the upper 40 percent of earners, my beloved sister-in-law says, “well, more.”

[4] http://www.pewresearch.org/fact-tank/2016/04/13/high-income-americans-pay-most-income-taxes-but-enough-to-be-fair/

[5] To be fair, the Reagan administration also had to wring-out a lot of inflation by slamming the brakes on money creation.  This led to high interest rates, slow growth, and high unemployment.