You Ought to Have a Look: Carbon Tax, Government Science, Laurel and Hardy Weather Observations

You Ought to Have a Look is a feature from the Center for the Study of Science posted by Patrick J. Michaels and Paul C. (“Chip”) Knappenberger.  While this section will feature all of the areas of interest that we are emphasizing, the prominence of the climate issue is driving a tremendous amount of web traffic.  Here we post a few of the best in recent days, along with our color commentary.

The New York Times ran an op-ed  last week extolling the virtues of a carbon tax by trying to poo-poo the idea that a tax on carbon emissions (which are produced by burning fossil fuels like coal, oil, and natural gas during the production of 80% of our nation’s energy supply) would produce a negative impact on our economy. The Times’ editors attempt to do this by running through a couple of examples where they claim the imposition of a carbon tax has produced economic benefits (or at least, was somewhat neutral).

Economist Dr. Robert Murphy takes the Times to task on this in his post “The NYT Gets It Wrong on Carbon Tax.”

Murphy is a senior economist at the Institute for Energy Research, research assistant professor at Texas Tech, and also the lead author of our Working Paper (soon to be Cato Policy Analysis) examining the cost for a carbon tax.

In his response to the Times, Murphy points out the Times’ editors’ favorite example of a carbon tax done well—British Columbia—actually serves as a counter-example when looked at a bit more carefully. Not only did British Columbia’s economy suffer after the establishment of a carbon tax, but also, the revenue-neutrality of the BC tax is not a real-world possibility in the U.S.

Tax Rates, Tax Reform and Tax Revenues: Part One

Top Tax Rates and Revenues as % of GDP

Among Democrats seeking their party’s nomination, all candidates have proposed raising the highest tax rates to a least 43.6% (Clinton) or 45% (O’Malley).  Sanders famously admired Ike’s top tax rates of 91-92% from 1951 to 1963, but later suggested he’d settle for keeping top brackets of 43, 48 and 52% (including capital gains) while raising all the lower rates by 2.2%. Clinton and O’Malley assert or assume that raising only tax rates on the highest incomes would raise vast sums, enough to finance their many proposed new spending plans for various grants and benefits.

Leading Republican candidates, by contrast, would at least roll-back the highest tax rate to 35% (Rubio), 28% (Bush, Kasich & Christie) or 25% (Trump).  Senators Cruz and Paul would go further by replacing both payroll and corporate taxes with a 15-16% value-added tax (on payrolls and profits) while keeping a 10-15% flat tax on income.  Huckabee hopes to replace income and payroll taxes with a ~30% federal tax on all retail sales.  Carson and Santorum suggest a flat tax of 14.9% or 20% respectively.

Let’s put aside the VAT and lower corporate tax rates for now, to focus on individual income tax rates.

As the graph shows, the U.S. has had considerable experience with top tax rates as high as 91-92%, as low as 28%, and everything in between.  

The individual income tax averaged 7.7% of GDP since 1946. 

Should All Flyers Go First Class?

Anyone who flies, or, at least, anyone who isn’t rich who flies, probably wishes he or she had more leg room. Going “cattle class” isn’t fun. But for most people it still is better than not going. Which for most travelers is the real alternative.

For decades the Civil Aeronautics Board regulated airfares. Airlines competed on service rather than price. Business travelers, whose companies paid the bill, enjoyed uncrowded luxury in the air.

It wasn’t as grand for anyone on a budget. You were more likely to drive, especially if you had a family.

Deregulation of the airlines transformed flying. Discount airlines emerged, legacy carriers were forced to compete on price, airports filled with leisure travelers, and flying was possible for even those of modest means. Everyone was happy—except the old business flyers.

It isn’t fun being crammed into a metal tube zooming through the air, but most flyers still seem more interested in price than comfort. Now the group FlyersRights wants the government to mandate minimum seat width and pitch. The group’s president, Paul Hudson, argued that safety and health are at stake, with emergency evacuation made more difficult and deep vein thrombosis made more common.

Stop Reassuring Saudi Arabia, a Worse Threat to the Middle East than Iran

Secretary of State John Kerry recently traveled to Riyadh to reassure the Kingdom of Saudi Arabia and other Gulf states that the U.S. stood with them. “Nothing has changed” as a result of the nuclear pact with Iran, he insisted.

Washington’s long relationship with Riyadh was built on oil. There never was any nonsense about sharing values with the KSA, which operates as a slightly more civilized variant of the Islamic State. The royals run a totalitarian system which prohibits political dissent, free speech, religious liberty, and social autonomy.

At a time of heavy U.S. dependence on foreign oil a little compromise in America’s principles might have seemed necessary. Today it’s hard to make a case that petroleum warrants Washington’s “special relationship” with Saudi Arabia. The global energy market is expanding; the U.S. will soon become a petroleum exporter. The royal regime cannot survive without oil money and has continued to pump even as prices have collapsed.

In recent years Washington also treated Riyadh as an integral component of a containment system against Iran. Of course, much of the “Tehran problem” was made in America: overthrowing Iranian democracy ultimately led to creation of an Islamist state.

The Simple Solution to America’s Deteriorating Fiscal Outlook

The Congressional Budget Office has just released its new 10-year fiscal forecast and the numbers are getting worse.

Most people are focusing on the fact that the deficit is rising rather than falling and that annual government borrowing will again climb above $1 trillion by 2022.

This isn’t good news, of course, but it’s a mistake to focus on the symptom of red ink rather than the underlying disease of excessive spending.

So here’s the really bad news in the report.

  • The burden of government spending has jumped from 20.3 percent of GDP in 2014 to 21.2 percent this year.
  • By the end of the 10-year forecast, the federal government will consume 23.1 percent of the economy’s output.

North Koreans Should Have Attended Davos

Admittedly, North Korean diplomats would have cut a curious figure in Davos, attending the just-ended World Economic Forum. Representatives of one of the few regimes which still professes to be communist might have had to close their eyes amidst the capitalist excess highlighting the conference.

Still, the North Koreans would have seen much new. And there was the potential of what the Wall Street Journal termed “awkward encounters,” which might have allowed some informal diplomatic discussions on the side.

Alas, while the DPRK was invited to attend the forum, WEF rescinded the offer after the North’s latest nuclear test.

North Korea may be the most isolated state on the planet. Much of that is by choice. Nevertheless, Washington and its allies have made isolation their tool of choice in dealing with the North.

Of course, frustration with Pyongyang is understandable. Yet the policy has utterly failed. The DPRK has enshrined a unique form of monarchical communism, created an extraordinarily brutal system of domestic repression, maintained a large conventional military poised within reach of Seoul, and developed a growing nuclear arsenal.

Kim Jong-un, who succeeded his father in December 2011, has not liberalized politically. Moreover, he has continued the North’s missile and nuclear research.

Yet the DPRK is loosening economic controls. While much more needs to be done, Pyongyang’s commitment to reform appears real.

Kim has promised higher living standards alongside nuclear weapons. The more the regime could be tempted to sample heretofore forbidden economic fruits, the better. Just taste the apple from the tree of capitalism, Jong-un.

Which is where the WEF could have come in. Late last year the WEF invited the North for the first time since 1998, “in view of positive signs coming out of the country.” After Pyongyang’s January 6 nuclear test, however, the invitation was revoked since “under these circumstances there would be no opportunity for international dialogue.”

Actually, after the latest nuclear test was precisely the time when international dialogue was most required. War would be a foolish response and sanctions have been applied without result. China is angry with its frenemy but unwilling to risk the regime’s collapse. So if not negotiation, then what?

Metro Flunks Snowstorm 101

For the past several years, the Washington Metropolitan Area Transit Authority (Metro) has vied with San Jose’s Valley Transportation Authority for the non-coveted title of “Worst-Managed Transit System in America.” It is still only January, but with its performance, or rather non-performance, during snowstorm Jonas, Metro appears to have already clinched the title for 2016.

 This is what it takes to shut down Metro subways. Flickr photo taken Sunday morning after the storm by Ted Eyten.

To start with, rather than try to provide transportation for people who needed to travel over the weekend, Metro pre-emptively shut down, ending all bus service at 5 pm Friday (well before the worst of the snow fell) and ending rail service for the weekend at 11 pm. By comparison, New York’s Metropolitan Transit Authority (MTA)–serving an area that received much more snow than the district–kept its subways running throughout the weekend and kept its above-ground trains and buses going for as long as it could into the storm.

Metro could have followed MTA’s example by keeping the underground portion of its subways running–Ballston to Eastern Market, Medical Center to Union Station, and Fort Totten to Anacostia–all weekend, but chose not to do so. These lines cover much of the length and breadth of the district and could have provided vital transportation for many people. 

Metro’s excuses for shutting down were rather thin. It claimed that passenger safety was more important than the convenience of having service. But how safe is it to be out in a blizzard compared with riding on a subway? Metro also said it needed to put its employees to work to put it back in service on Monday. But the people who operate trains are not maintenance workers and union rules probably prohibited Metro from putting them to work shoveling snow.

Besides, Metro didn’t do a very good job of putting the system back into operation. Most of MTA’s above-ground trains were running by Sunday afternoon. MTA also put most of its bus lines back into service on Monday. Metro was content to open the subway portions of its lines on Monday, leaving its above-ground lines still closed, and to run just 22 out of its 325 bus lines.

Metro might argue that federal offices were closed Monday anyway, so the demand for its services was lower. But if Metro had been more on the ball, federal offices might not have had to close.

In short, MTA passes but Metro flunks Snowstorm 101. But Metro puts itself well ahead of the pack in the race to being the worst-managed transit agency of 2016.