Why We Need a Carbon Tax IV. The Economic Risks of Climate Change


I have now posted more than 200 entries on my blog.  I have discussed a wide variety of fiscal and economic issues in the last year and one-half.  But there are really, in my opinion, just a fairly small number of basic themes in my posts, such as:

  • Eliminating deficit spending so that we can shrink our national debt over time to a substantially lower level than the current 73% of GDP.
  • Boosting our economy in order to put more people back to work as well as bringing in more tax revenue.
  • Maintaining an activist foreign policy including a sufficiently strong military force to protect our free and democratic way of life.
  • Maintaining high citizen morale by addressing other critical domestic issues such as economic mobility and increasing income inequality.
  • Addressing natural threats to our way of life such as global warming.

Capture Today’s New York Times has an excellent article on global warming “The Coming Climate Crash” from a surprising source, former Secretary of the Treasury, Henry Paulson.  He was in office when the credit bubble burst in 2008 and is therefore an expert on crisis management.  His argument is that global warming presents a strong economic threat as well as an environmental threat.  It therefore should be addressed by an effective economic policy, such as a carbon tax.  He points out that:

  • Global warming is a far more intractable problem than a credit bubble, not at all amenable to a relatively quick fix by government action.
  • A threat from nature like global warming is not an ideological issue because it affects all of us in the same way, conservatives and liberals alike.
  • A future with more severe storms, deeper droughts, longer fire seasons and rising sea levels creates huge economic risks which we ignore at our great peril.
  • A carbon tax doesn’t outlaw the use of fossil fuels but rather creates a huge economic incentive for developing carbon sequestration when fossil fuels are burned.

Government regulation of fossil fuels by the Environmental Protection Agency represents a timid and arbitrary half measure that won’t have nearly the impact of a sound economic incentive like a carbon tax.  Let’s get serious and do things the right way!

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