The Republican Leadership Declines ‘Pigou Club’ Membership

Tom Bozzo

John “Don’t Say” Boehner makes (or should make) Greg Mankiw cry:

Mr. Boehner likewise criticized Mr. Obama’s cap-and-trade emissions permits proposal, saying, “Cap-and-trade is code for increasing taxes and killing American jobs, and that’s the last thing we need to do during these troubled economic times.”

As the NYT reports, the Obama budget actually would (mostly) rebate the proceeds of selling the credits via the ‘Making Work Pay’ credit, so Boehner is (mostly) lying about the tax increase part of the proposal. The administration should be concerned that the implicit tax will be passed on for fairness and political reasons, and a conceptually good way to deal with that is to make people approximately whole in a way that doesn’t take away the price signal to reduce carbon emissions.

As for the job-killing business, I’d like to see any other job that Boehner would save in the name of inefficiency; jobs whose existence depends on free carbon emissions are being subsidized by the rest of society. Of course it’s the net job creation or destruction that really matters. Insofar as there’s not much net tax increase, usual arguments regarding incentive distortion of taxes don’t really apply, and the net proceeds would go to low-carbon energy infrastructure and R&D that would be reasonably calculated to have substantial long-range returns, the job-killing claim looks histrionic. But if you don’t have ideas, then I suppose there’s not much to do but try to pound the table.

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