Robin Hahnel author of Green Economics: Confronting the Ecological Crisis, says it deserves support
SHARMINI PERIES, EXEC. PRODUCER, TRNN: Welcome to The Real News Network. I’m Sharmini Peries, coming to you from Baltimore. This week, Lawrence Summers, former Treasury secretary under Bush era and economic adviser to President Obama until 2010, made a very rational case in an opinion piece for a carbon emission tax levy. It is published in The Washington Post and Forbes magazine. The rationality of it appears to be hailed in the liberal and more progressive climate change advocates camps alike. Summers suggests that one item under discussion is how much the gasoline tax should be. Summers also suggests that with the recent fall in crude oil prices, no one’s going to feel too much pain from the imposition of a gasoline tax. Now joining us to discuss the Summers proposition, from Portland, Oregon, is Robin Hahnel. Robin is professor emeritus in the Economics Department at American University and a research associate at Portland State University. He is author of Green Economics: Confronting the Ecological Crisis. Thank you so much for joining us, Robin. ROBIN HAHNEL, PROF. EMERITUS ECONOMICS, AMERICAN UNIVERSITY: Okay. Thank you. PERIES: So, Robin, tell us what is exactly in this Summers proposition. HAHNEL: Well, he’s come out in favor of putting a price on carbon here in the domestic economy in United States. He talks about particular numbers. He talks about a $0.25 tax increase in the federal gasoline tax. And he makes some arguments about why this is a good time to do something like this. And as much as it pains me to say that Larry Summers has got something right, I think that mostly what he has said makes very good sense and deserves support from both environmentalists and progressives. PERIES: Right. So let’s unpack this a bit. So it appears that the size of the tax is in question. Now, the government itself, after having done some studies, recommended a certain amount of a tax /poʊr/, for example. I think they had suggested $0.37. HAHNEL: Well, that comes from–the U.S. government went through a very painstaking process of deciding. And this was not just the EPA; it’s the administration did a coordinated study amongst many agencies of the federal government to come up with what they call the social cost of carbon emissions: what does it cost society to burn a cubic metric ton of carbon? And this was a very, very disputed process. People were arguing both directions. But the current number is $37 per metric ton. So in some sense we have an official U.S. government position on the issue of what does it cost society when we burn a cubic metric ton of carbon, whether that be gasoline, coal, or whatever. Now, it’s just convenient that it turns out that if that’s the damage that burning a cubic metric ton of carbon causes, $37, that roughly translates into about $0.37 per gallon of gasoline. So what he talked about was increasing the–so the number question really is what is the true cost. Most economists who study this, most environmental economists, argue that $37 is actually too low. On the other hand, in terms of political practical possibility, that’s the difficult part. Getting actual legislation and policy movement to the extent that we should make it is obviously always very difficult. In any case, $0.25, it would be a significant increase in the gasoline tax. One could argue that it ought to be $0.37 or it ought to be even higher than $0.37, but $0.25 per gallon is certainly not meaningless. PERIES: So one cannot underestimate the impact that this is going to actually have on households, because when you’re talking about a gasoline tax, you actually picture somebody pumping gas into their car and having to pay this tax. But really those perpetrators of carbon emission has really been the manufacturing industry. So isn’t this really a tax to consumers, really? HAHNEL: Part of the reason that Summers is raising this issue at this point, at this point time–and other environmental economists besides Summers were doing–the gas–he’s making a political point, which is: this is a great time from a political perspective to take advantage of the low prices of gasoline, because when I fill up my tank, I’m paying $2.60 a gallon, and I’m used to paying–you know, six months ago I was paying more than that. A year ago I was paying practically $4 a gallon. So he’s simply arguing that the shock to the consumers, to U.S. households, would be felt less in the present context than it would be in other contexts. And I think that’s a perfectly valid point to make. This is a good time to talk about raising the gasoline tax. One issue is–and the other point that he makes that I think–that I want to also agree with, whatever–the question of what you do with the revenue from the tax can be separated from the question of whether or not the tax is a good idea in the first place. And the tax is a good idea in the first place because we have arguably the most important price in our market economy very, very wrong. We have a price on carbon that’s zero. And it really is at least $37 per metric ton. That’s a huge wrong price to have in a market economy, and it produces a tremendous amount of inefficiency. So putting a tax on carbon can correct for that kind of inefficiency, not to speak, of course–I mean, it also is a huge step in the direction of reducing carbon emissions, which we have to do in many, many ways if we’re going to avoid cataclysmic climate change. Then the question is, well, what you do with the tax? PERIES: Exactly. What you do with the taxes, and how will that be distributed? I guess that’s what the question is in many people’s minds now. HAHNEL: Of course it is. And everybody is going to come in and say that they have a favorite project about how it’s to be used. Summers’ own recommendation in his article was, he said, well, he would take a lot of those taxes and use it to pay for massive improvements in the physical infrastructure in the United States. He probably is thinking about roads and bridges. I would put it into something more like redoing the electric grid so that we can actually change the energy system. But in any case, everybody has a–there’s a long laundry list, and different interests have sort of different interests in how they’d like to use the tax. One of the things he recommends–so, when he recommends infrastructure, well, a lot of us who’ve been saying that the federal government should have been doing massive increases in infrastructure to get us out of the recession and get people back to work, we’ve been saying that for quite a while. The other recommendation he makes is that we use the tax to increase the earned income tax credit, and also to reduce the employees’ share of the payroll tax. Well, those are two huge progressive changes in the tax structure that progressive economists like me have been recommending and suggesting for quite a while. But you certainly could, and many economists have worked on this. You’ve had James Boyce on, and he’s an expert in calculating how much of the tax raised would have to be rebated to households in order to essentially make them whole from the increase in the gasoline prices that they’re paying. So there’s no reason that the tax couldn’t be used in those ways too. But simply having the tax was the first step, and having it as high as possible, quite frankly, is the major thing that we should fight for. PERIES: Right. And what do you think of the suggestion that we’ve heard from some of the environmental movement about putting this back into innovation for clean energy? HAHNEL: That is a perfectly–that is also an excellent recommendation of what should be done with the tax. In some ways it’s a huge tax windfall. Just getting the price right for carbon in a market economy generates a huge tax–I mean, he gives you an estimate of, I think, an extra trillion dollars in tax revenues over a ten-year time period that $0.25 increase in the federal gasoline tax would give you. There’s lots of good things that we could do with that. And progressives have one set of ideas. Environmentalists also have their own ideas about what are the important thing–what are the important social priorities that we should be spending this tax windfall on. But, yes, I as an environmentalist certainly think that we need to level the playing field with fossil fuels not only by increasing the price of using fossil fuels, which is what the tax does, but start subsidizing renewables, start subsidizing energy conservation projects, all the kinds of things that Bob Pollin is talking about on your show. PERIES: So, Robin, thank you so much for joining us and exposing this good idea that Summers finally had. HAHNEL: It actually–this is a case where the logic is so compelling that even somebody of Larry Summers ilk can get it right. PERIES: And thank you for joining us on The Real News Network.
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