Who Says No? A Climate Change Compromise

Many on the left are up in arms over Trump backing out of the Paris agreement. Ignoring the fact that the agreement says that countries are free to set their own targets and their own policies and is largely symbolic anyway, let’s work under the assumption that liberals actually believe that this policy is disastrous for the earth’s future. In fact, let’s start from the (perhaps ridiculous) assumption that everybody in this debate is being intellectually honest.

Then Republicans have a great opportunity. Offer Democrats a compromise. The United States will re-enter the Paris agreement. And they’ll go even further. Democrats will be given full control over all matters of the environment. Carbon taxes, cap and trade, clean energy subsidies, whatever they want. Completely blank check.

In return, Republicans get everything else. They can pass whatever tax code they want, any deregulation they want. Democrats will have no say in healthcare, no control over education, no input at all over any issue except climate.

So my question is: who says no? Republicans (and Trump) have to go back on one of their key issues and allow the Democrats free reign. But for sucking up their pride on one thing they get everything they’ve ever wanted for a whole range of others. And what about the Democrats? Sure they’d be sacrificing a lot. In their view, we’d be significantly worse off in the short run. But isn’t that worth saving the world? If the results of climate change are truly catastrophic, isn’t it worth some people in the richest country in the world not having health insurance? Isn’t it worth middle class Americans being required to take out student loans to attend college?

Now maybe there are some issues that are as important as climate. If you think Republican control of the military would lead to nuclear war, then of course that can’t be part of the deal. Fine, keep that one. I’ll even throw in gun control, another issue that seems to be of vital importance for the left.  You can come up with your own list of some other issues you would never want to compromise on to save the world. But that list should be very small.

So who says no? I can’t imagine any Republican ever denying the above compromise. But I also doubt a single Democrat would take it. If that prediction is right, we are left with three possible conclusions. The first, which I think we can rule out, is that Democrats believe giving Republicans complete control over anything would be worse than the end of the world. The second, which could be true, is that they believe they can convince Republicans of the correctness of their view without conceding too much. Considering their lack of success to this point, and the apparent urgency with which they believe something needs to be done, this also seems unlikely. So we are left with the third, and in my opinion most likely, option: Despite their rhetoric, Democrats are simply not that concerned about climate change.

Some Thoughts on Universal Basic Income

People who oppose redistribution from the rich to the poor generally give two types of arguments against it. Perhaps the more obvious argument comes from a natural rights perspective – the person who created the wealth has a right to do whatever they want with it. However, if you don’t believe in free will (as I don’t), then this reasoning doesn’t make much sense. If you weren’t truly responsible for the circumstances that led you to create the wealth in the first place, why should you get to keep all of it? Shouldn’t some of it go to all of the people that had any influence on getting you to that position?

The stronger argument derives from incentives. Taking from the productive to give to the unproductive makes being unproductive far more attractive and we end up with a society where perfectly capable people choose not to work because they expect others to support them. Any attempt to solve poverty needs to deal with this issue, which makes designing anti-poverty measures difficult.

Our current welfare system has some checks in place that attempt to circumvent incentive problems, but it doesn’t solve them completely. Many of our current welfare programs involve cutoff levels where benefits begin to be reduced and eventually disappear altogether. This type of program introduces an implicit marginal tax on low income earners. Not only do they have to pay a higher official tax rate as their income rises, but they also lose some of the benefits they received at a lower income.

A simple way around this problem is to never phase out those benefits – to give them to everyone. This idea forms the backbone of the Universal Basic Income (UBI). One of the most complete proposals for a UBI comes from Charles Murray (yes, the same Charles Murray who gets kicked off college campuses because of his dangerous right wing ideas). In his version (laid out in his book In Our Hands), each American over the age of 21 would receive $13,000 per year in benefits unconditionally. Of this money, $3,000 has to be spent on health insurance, but the rest comes with no strings attached.

Of course, such a plan would be incredibly expensive. However, as Murray points out, our current system is already expensive. According to his calculations, if we eliminated our entire welfare system (including Social Security and Medicare), we could more than pay for the UBI. Getting rid of these programs would be difficult politically, but Murray offers several reasons why doing so would be desirable for almost everyone. Most notably, he estimates that poverty would be all but eliminated under his program vs the approximately 15% that remains under our own system.

Murray’s justification for some level of redistribution is similar to my own:

Inequality of wealth grounded in unequal abilities is different. For most of us, the luck of the draw cuts several ways: one person is not handsome, but is smart; another is not as smart, but is industrious; and still another is not as industrious, but is charming. This kind of inequality of human capital is enriching, making life more interesting for everyone. But some portion of the population gets the short end of the stick on several dimensions. As the number of dimensions grows, so does the punishment for being unlucky. When a society tries to redistribute the goods of life to compensate the most unlucky, its heart is in the right place, however badly the thing has worked out in practice
Charles Murray (2016) – In Our Hands

If we accept that some redistribution is desirable, a UBI seems like a more efficient way to carry it out than our current welfare setup. One common argument against the UBI is that it doesn’t make sense to waste resources on the rich. Bryan Caplan has given some arguments along these lines and argues that phasing benefits out gradually would avoid the implicit marginal tax rate problems without needing to give benefits to everyone. And it makes sense. If our goal is to eliminate poverty why not focus our efforts there?

But I don’t think that argument really works when you consider that a UBI is inextricably linked to the tax system. A UBI doesn’t look so universal after you consider that the rich are going to be paying for almost all of it. Everyone might get a check for $13,000, but top income earners pay far more than that in taxes. Their net benefit from government programs would still be strongly negative even after receiving the UBI. Depending on your perspective towards redistribution, this feature could actually be a negative, but given that redistribution is going to happen anyway, the UBI seems like a more efficient way of actually doing it.

It’s obviously not without fault, but I do think a UBI would be an improvement over our current system and I definitely recommend reading Murray’s book (it’s not that long) to anyone who wants to help the poor but believes we can do better than we do now.

 

Links 8-21-16

“In the land of the free, where home ownership is a national dream, borrowing to buy a house is a government business for which taxpayers are on the hook.”

“If you think that there has never been a better time to be alive — that humanity has never been safer, healthier, more prosperous or less unequal — then you’re in the minority. But that is what the evidence incontrovertibly shows.”

Noah Smith criticizes heterodox macro

And then addresses some of the responses

The Solution to High Rents: Build More Houses. Who would have thought?

Which Party is For Small Government Again?

Democrats want to expand the role of government. Republicans want to shrink it. At least, that’s what their rhetoric says. The story becomes a bit harder to believe when looking at government spending statistics. Consider two presidents as an example. President A increased spending by $357 billion over the first seven years of his presidency. Over the same period, President B increased spending by around half as much, $160 billion. Who is President A? The legendary champion of small government, Ronald Reagan. President B? None other than the evil Kenyan dictator, Barack Obama himself.

Let’s look at a graph of total spending per capita over time (data from the BEA). I don’t see any clear party breaks. The one big slowdown in spending in the 1990s coincides with Clinton (a Democrat).

gov_expenditure

Breaking the data down by president makes the point even clearer. The table below shows how much spending per capita increased over each presidents tenure.

president_spending

Note that Obama’s numbers are skewed by stimulus spending. Measuring from 2009 Q2 drops the increase to $153.

Overall, Republicans have held office for 36 years since 1953 and increased government spending per capita by $5310 during that time ($148 per year on average). Democrats were in power for 27 years and increased spending per capita by $3167 ($117 per capita). Not a single president in either party has actually reduced the size of government by this measure. A natural question is whether control of the senate or house is more important than the president. I didn’t calculate the numbers, but I doubt it would help the Republicans, who had control of the senate during the expansion in spending under both Reagan and Bush.

Bill McBride at Calculated Risk keeps a tally of public and private sector jobs added by president. By those numbers, Obama is the only president since Carter to decrease the total number of public sector jobs. Again, there is no clear relationship between party affiliation and number of jobs added.

On taxes, the picture looks strikingly different. Performing the same exercise shows that Republicans reduced taxes by $23 per capita per year, while Democrats increased taxes by $278 per capita per year. So maybe you could argue that the Republicans have kept half of their small government promise. But both parties clearly like to spend. At least the Democrats seem to care about paying for it.