Obama’s ‘Bold’ Action on Climate Change

I was invited to comment yesterday over at the New York Times on President Obama’s memorandum to the EPA to reconsider its earlier denial of a waiver requested by the state of California; a waiver that would allow that state to impose its own fuel efficiency standards for passenger vehicles and light trucks so as to reduce that state’s greenhouse gas emissions. The simple point I wanted to make at the Times is that allowing this waiver to go through would largely allow that state to dictate fuel efficiency standards for the nation as a whole. I argued that this is probably a bad thing — state action that imposes significant policy changes on the nation as a whole ought to be enjoined and those decisions ought to be left to Congress.

For those of you interested — and who have a strong stomach — read the comments on the board that follows. You might think that there is nothing particularly radical or even ideological in the argument I made. Apparently, you would be wrong.

This morning, I had a chance to reprise that discussion as a guest on the Diane Rehm Show. With me in the studio was David Shepardson, the Washington bureau chief of the Detroit News and Phyllis Cuttino, the director of the Pew Environment Group’s U.S. Global Warming Campaign. You can listen to the show online if you like, but in case you don’t have the time, here are the highlights:

Both Mr. Shepardson and Ms. Cuttino were nearly breathless about the bold, historic step allegedly taken by President Obama this week. Yet is seems to me that telling the EPA to rethink a decision made some months ago — with no stipulation that it actually reverse course — is something short of a political earthquake.  “Bold action” would be legislative proposal to increase federal fuel efficiency standards, impose a federal carbon tax, institute an ambitious cap & trade program, etc. I’m not saying I support that sort of “bold” action, but please — let’s keep things in perspective.

Ms. Cuttino argued at every turn that energy efficiency equals emissions reductions. But it does not. Energy intensity in the United States declined by 34% from 1980 through 2000, but energy consumption increased by 26% over that same period. More ambitious gains in energy efficiency promise no better. For instance, energy intensity in China declined by 70% over that same period while energy consumption increased by 80%.

The only way to reduce greenhouse gas emissions is to increase the marginal price of fossil fuels OR to strictly ration their availability. Everything else is a dodge. Reducing the marginal cost of energy or energy-related services — which is exactly what energy efficiency standards do — will not, in aggregate, reduce energy consumption.

Alas, Ms. Cuttino refused to acknowledge historic reality. When asked by guest-host Susan Page why the environmental community opposes a carbon tax in lieu of energy efficiency standards, she said that such a tax would be regressive. Well, that’s true. But so is a fuel efficiency standard, which imposes a tax on vehicles at the point of purchase. Unfortunately, I did not have the opportunity to jump in with that observation.

Still, Ms. Cuttino does not speak for the environmental community on this. No less than Al Gore is an enthusiastic supporter of (steep) carbon taxes (to be offset with corresponding tax cuts elsewhere).

Ms. Cuttino kept making the point that higher fuel efficiency standards are a free lunch. They will save motorists money, save U.S. automakers from bankruptcy, and rescue jobs in the auto sector. “Who doesn’t want better fuel efficiency?” she asked. Well, apparently, most people who buy cars don’t — not if they have to pay higher sticker prices for that fuel efficiency or give up other amenities. If it were otherwise, then there would be no need for a federal requirement, now would there?

Of course, polls tell a different story. Sure, if you asked me whether I wanted my car to get more miles per gallon, I would say “yes.” But fuel efficiency is not a free good that drops from the sky. There are trade-offs; higher sticker prices (as even California acknowledges in its petition for a waiver), smaller cabins, lighter weight (a safety concern for some) and reduced performance in some areas. Should decisions about how many and what kind of trade-offs to accept in return for fuel efficiency be made individually by consumers or collectively by politicians? I never found time to make that point, but that’s the nub of the issue.

On several occasions, Ms. Cuttino tried to dismiss my criticisms by saying, well, industry always says that the technology doesn’t exist to meet federal standards or that it would prove to costly, but — what do you know? — people like me were wrong then and I’m wrong now. Of course, I never made either of those arguments. I simply noted that there are no free lunches and that fuel efficiency comes at a cost. Heresy!

Ms. Cuttino’s repeated attempts to conflate “Jerry Taylor” with “industry” were particularly annoying. She is the one in favor of bailing out the auto industry. I am the one who is trying to protect the federal till from their political piracy. It’s a curious world when someone who wishes that bankruptcy would be allowed to take its course over at GM is somehow painted as an industry apologist.

National security externalities were also briefly touched on. Ms. Cuttino argued — as do many — that our consumption of oil strengthens anti-American actors abroad by lining their pockets with petrodollars. I pointed out that there is zero statistical correlation between oil profits and terrorism or oil profits and hostility from state oil producing regimes. Sure, it’s better for Iran to have less money than more, but the conceit that reducing oil consumption reduces problems abroad is completely without foundation.

There was, of course, the usual tripe about how how a strong plurality of Americans want this or want that and that a majority of Americans believe this or believe that. I countered with a hardy ”So what?” A plurality of Americans also believe that evolution is an atheistic fiction, so the fact that a majority of Americans think X does not mean that X is true or that X ought to be the law of the land. Unfortunately, a listener in the second hour complained that this sort of response was so snarky that it didn’t warrant anyone’s time. But why?

At the end of the show, I made the point that a couple of the callers seem to be under the impression that I favor a carbon tax. Not so — I said, look, if we have to reduce greenhouse gas emission then a carbon tax makes a lot more sense than an automotive fuel efficiency standard … but I am not there yet. Ms. Cuttino replied, in a rather annoyed voice, that it is impossible to argue with someone who doesn’t believe in climate science or global warming. But when did I say that? I don’t believe that ”climate science” is a figment of the imagination or that the world isn’t warming. I simply believe that the costs of doing something about that warming by reducing greenhouse gas emissions are greater than the benefits — an entirely different matter.

Some (Relatively) Good News on Trade

A couple of noteworthy events this week that signal Hope™ for not-too-egregious trade policy from the new administration.

First, Obama met with Mexico President Filipe Calderon and reportedly made no mention of renegotiating NAFTA (although he did say that he wants to revisit labor and environment provisions in that agreement, which is bad enough). Second, President Obama and President Lula da Silva of Brazil spoke by telephone yesterday (more here) and pledged to work together on biofuels (cryptic enough to leave this sceptic unmoved) and on the Doha round of world trade talks.

I am still not convinced of President Obama’s free trade credentials, and it’s a sad day when our expectations are lowered to the extent that we are affirmatively pleased that no protectionist action is being taken. I certainly don’t suggest we laud politicians for not catering to their worst instincts. But in this case, no news is good news.

Slate on Cato Conference

Michael Newman, Slate’s politics editor, writes up the counterterrorism conference we held here two weeks ago. It’s an OK article, and we appreciate the publicity. The trouble is that Newman tries to stuff a conference summary into a theme about Libertarians and Obama. Hence the title, “Cozying Up to the New Guy: Libertarians are oddly hopeful about the Obama administration.” That may be a good hook, it may even be generally true, but it creates a misleading impression here. So at the risk of looking a gift horse in the mouth, I have several complaints.

First, Cato’s defense and foreign policy scholars have repeatedly attacked the Obama team for its adherence to the flawed, bipartisan counterterrorism and defense strategy that it inherited. See here and here for starters. I’m not sure who is cozying up.

Second, the article imagines a strategic rationale behind the conference – Cato thinks it can most influence Obama on issues related to terrorism and is therefore directing its energies there. Not really. There is no singular “Cato view” on these matters or any other. Several scholars here had an interest in counterterrorism policy, and organized a project, which included a public conference, on it. The conference would have happened regardless of who was President. Sure, we’d like the policy-makers in the executive branch to adopt a more sensible perspective about terrorism than their predecessors. But we’d also like Congress, the public, and the media to adopt that view.

Third, Newman gets the theme of the conference right – terror is as big a problem as the terrorism that sparks it – but Slate readers may get the impression that this was just a bunch of libertarians saying so. In fact, the speakers came from across the ideological spectrum. To the extent that they agree, and not all do, it shows that these policies are common-sense, even if they remain unconventional.

Finally, the article says that: “Think tank experts aren’t stupid.” I would have started that sentence with “most.”

Obama’s So-Called Stimulus Scheme: Good for Government, Bad for the Economy

After eight years of higher spending and more intervention, some of us were hoping for change. Unfortunately, President Obama apparently wants to be George Bush on steroids. I explained in a previous video (http://www.cato-at-liberty.org/2008/12/15/are-we-all-keynesians-now/) why Keynesian economics was misguided. The much-anticipated sequel is now available for your viewing pleasure.

This new video looks at the details of Obama’s $825 billion plan to make America more like France. At the risk of spoiling the conclusion, there is no reason to think that big government will work any better for Obama than it did for Bush.

Obama’s Constitution

At the beginning of his inaugural address, President Obama observed that

“America has carried on, not simply because of the skill or vision of those in high office, but because we the people have remained faithful to the ideals of our forebears and true to our founding documents.” [my italics]

Although Obama had taught constitutional law for 12 years, the rest of his address raises a question whether he has ever read the Constitution. For he spells out his vision by committing his administration to a wide range of activities for which there is little or no authority in the Constitution.

“We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together. We will restore science to its rightful place and wield technology’s wonders to raise health care’s quality and lower its cost. We will harness the sun and the winds and the soil to fuel our cars and run our factories. And we will transform our schools and colleges and universities to meet the demands of a new age.”

Moreover, he asserts, our government should be judged by “whether it works – whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified,” not by such “stale political arguments” as whether the policies that might generate these outcomes are constitutional and generate benefits higher than the costs.

Nor are the commitments of his administration to be limited to those of greatest concern to Americans.

“To the people of poor nations, we pledge to work alongside you to make your farms flourish and let clean waters flow, to nourish starved bodies and feed hungry minds. And to those nations like ours that enjoy relative plenty, we say we can no longer afford indifference to the suffering outside our borders; nor can we consume the world’s resources without regard to effect.”

“What is required of us now is a new era of responsibility – a recognition, on the part of every American, that we have duties to ourselves, our nation, and the world.”

President Obama is intelligent and charming –- but not wise. The Constitution only authorizes the president to be the chief executive of the federal government and the commander-in-chief of the armed forces, ample challenges to the most skilled person, but the president is not the sole leader of the federal government, the American nation, or the free world. Based on his inaugural address, President Obama has no apparent sense of the limits of what he can and should do –- and that will reduce his effectiveness in addressing those issues within his clear authority.