White House Chronicle

News Analysis With a Sense of Humor

GOP Establishment Savants Speak Softly, Back a Carbon Tax

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Call it a tax without tears. It is a proposal to address carbon pollution by replacing a raft of tax subsidies and regulatory requirements with a carbon tax.

What is surprising is who is pushing it: dyed-in-the-wool, rock-ribbed Republicans.

They are the top of the GOP: Every one of them has had an outstanding career in finance, industry or academia. They are men and women who contribute to Republican candidates regularly — and some of them quite generously.

These Republican grandees and party financiers have formed the Alliance for Market Solutions (AMS), which aims to educate conservative policymakers on the benefits of market-oriented solutions to climate change.

“A carbon tax, if the myriad of subsidies and regulations that policymakers now use to affect markets are stripped away, would lead to economic growth and achieve significant carbon pollution reductions,” says Alex Flint, executive director of AMS.

Well-known in Republican circles, he previously served as staff director of the Senate Committee on Energy and Natural Resources and as senior vice president of government affairs at the Nuclear Energy Institute.

The organization’s 10-member advisory board includes John Rowe, former chairman and CEO of Exelon Corp., the largest diversified utility in the United States, and Marvin Odum, former chairman and president of Shell Oil Co. and board member of the American Petroleum Institute.

What we need now, Rowe said, is “a new approach to energy tax and regulation that advances our strategic policy objectives and recognizes that the period of scarcity that began in the 1970s is over. We no longer need to subsidize energy production.”

Instead, we need policies that address “the next great energy challenge: carbon pollution,” he said.

Rowe and AMS allies believe that pairing a “revenue-neutral” carbon tax with a regulatory rollback would be good climate policy.

Flint explained: “A carbon tax would ideally be imposed upstream where carbon enters the economy. Costs would then be passed down the consumption chain through prices, which would impact decision-making and drive the use of cleaner fuels and new technologies across the economy.”

Studies by AMS estimate that a carbon tax would generate more than $1 trillion in additional revenue over the next decade, which lawmakers could use to reduce other, more distortionary taxes, or do things like make the 2017 tax reform permanent or even further reduce income taxes.

Rather than mounting a loud public-pressure campaign, Flint told me the members of the alliance — which also includes William Strong, chairman and managing director of Longford Capital Management, and Chris DeMuth, distinguished fellow at the Hudson Institute — began by meeting quietly with influential Republicans in small groups, going over the gains that would come from tax reform and emphasizing that the carbon tax does not have to be a one-size-fits-all solution, although it is a simple solution to a pressing problem.

Emphasis has been on Republicans who wield power behind the scenes and the tax writers in the House and the Senate. The reformers are getting a hearing, I am told.

The alliance has tried hard to get the facts and detailed analyses nailed down ahead of public discussion. They have done this in a new book, “Carbon Tax Policy: A Conservative Dialogue on Pro-Growth Opportunities,” edited by Alex Brill of the American Enterprise Institute.

The book is, you might say, the creed of the AMS. It is an eye-opening read by conservatives who want to limit government market-meddling and bring about sound policy through enlightened taxation.

You Can Keep Cutting Taxes, If You Want to Pay the Price

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By Llewellyn King

Those Republican presidential candidates who had been governors, vied with each other in their latest debate to claim who had cut taxes the most.

When I hear tax-cutting expounded as an unassailable conservative virtue, my mind goes back to a lunch in Houston in the 1970s, when two of conservatism’s rising stars and I were speakers at a meeting of the American Petroleum Institute.

The stars were Trent Lott, then a member of the House from Mississippi, and George Will, the hottest columnist burning up the op-ed pages across the country.

The three of us were urged to lunch together while the organizers got organized. I had recently launched The Energy Daily, a publication in Washington, D.C.

The conversation turned to taxes. We all agreed that we while we hated paying taxes, the United States was an under-taxed country. Let me repeat: Trent Lott, George Will and I agreed that the United States was under-taxed country.

So, I ask, how did we get to where we are today, when Republican presidential hopefuls are firmly committed to tax-cutting; when every state or local Republican governing body would rather see chaos reign — as has happened with our cities — than whisper that we should raise money to fix the problem?

The standard-bearer for taxophobia is neither an elected official nor a presidential hopeful. He is Grover Norquist, founder and president of Americans for Tax Reform, a political organization as powerful as the National Rifle Association, and as distorting of the national agenda.

Norquist has introduced a rigidity that makes discussion of tax policy almost impossible on the right. Tax has become not a matter of need and policy, but a litmus test of conservative purity.

The genesis of taxes as an evil goes back to a group of young conservatives — which included Norquist — with a consuming conviction that government is too big, and that the only way to cut it down to size (what size?) was, in their phrase, to “starve the beast.”

The problem is that Americans keep asking more of their government, and consequently it grows. We want more diseases to be researched by the National Institutes of Health, and more energy solutions to be developed by the Department of Energy. We want the food chain to be secured and nuclear waste disposed of. We want better roads, bridges, airports and air traffic control. When something untoward happens, like bee colony collapse or the disappearance of a strain of bananas, we want the Department of Agriculture to find a fix.

All those without a mention of providing social services, extending entitlements, and beefing up the military — all favored by the public.

The trouble gets worse when tax-cutting becomes an ethic, because even good taxes are an anathema to politicians, who are wont to start their political lives by signing Norquist’s “no new taxes” pledge.

Take the mess the highway trust fund is in. It is funded in fits and starts by a conflicted Congress, trapped between what it knows to be need and the desire to limit spending. Infrastructure needs to be funded in multi-year programs. Before the recent budget deal, it was funded for just three months. Can anyone build a bridge in three months?

The danger of blind tax hatred can be seen with the gas tax. It is generally agreed that using less gasoline would be a net good: fewer oil imports, fewer greenhouse gases, and more livable cities. Today’s price is low, even by historical standards.

An opportunity that may never come again exists to fix much of the nation’s crumbling infrastructure by increasing the federal gas tax from its present 18.4 cents per gallon, where it has languished since 1993. There is enormous elasticity in the amount of gas an individual or a family uses. You can buy a smaller car or a hybrid, or travel less. The price of gas is not like the price of shelter.

Many of the ills that contribute to the sense that the nation has lost its way would go away with better roads and general infrastructure improvement. You do not feel good waiting to cross a bridge or idling for hours on Interstate 95.

Sitting in a traffic jam for two hours in the morning and two hours at night may not qualify as a tax, but it is taxing. — For InsideSources.com


Political Lies and Small Business

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Brace for a storm of platitudes, recycled myths, and just old-fashioned
political lies.

It will all start with President Obama when he addresses a joint session
of Congress on Thursday about the jobs deficit. Whatever he says will be
followed by scorn and abuse from the Republicans. All the hoary old claims
about the absence of leadership, wasteful spending, punitive regulation
and the need to cut taxes will be regurgitated.

The president will have a TelePrompTer full of enchantment tales. He also
will talk of cutting some taxes; maybe because he thinks this will endear
him to the undecided voters, or mollify some Republicans, or because he
consistently tries to make his way in a viciously partisan political world
by endeavoring to sound like the voice of detached reason. It will make no
friends and infuriate the Democratic core. It will be another betrayal to
them.

All of the tax ideas, presidential and Republican, will be wrapped in cant
about small business. Oh, do politicians love small business. Apple pie is
good, mom is noble but small business, and small business alone, can cause
the entire Congress of the United States to genuflect.

They love the travel agent with six employees with the same passion that
they adore General Electric. The machine tool repair and maintenance
contractor with 40 employees – he is the very embodiment of American
exceptionalism. The woman with a wholesale jewelry business that she
operates with her husband and grown daughter — they are the stuff of
American legend.

Nonsense.

If Congress knew anything about the small business world, it would
stop forcing the wrong medicine on the patient. Incorrect therapies won’t
help, no matter how vigorous the applications.

To the political establishment, small business is suffering because of
taxation and regulation. Fiddle with these twin bugaboos, the political
narrative goes, and small business will bloom like the bluebells in
spring.

Have any of these people ever talked to small business operators? Small
business has many problems, but taxation is seldom one of them. Do they
really think the garment manufacturers on New York’s 7th Avenue are on the
phone, schmoozing about the rate of corporate taxation? More likely they
are talking about why the banks won’t lend, even against collateral, to
heretofore good customers; why imports from all over Asia are laying waste
to their customer base; and why the traffic in the cross-town streets is
horrendous.

Like all small businessmen, they don’t agonize over the frustration of
having to meet OSHA and EPA standards — these are irritants. Instead,
they agonize over whether there will be enough money to meet payroll.
Taxes, if any, come once a year, but the payroll keeps the small
entrepreneur anxious all year. It is the ogre that visits every two weeks.

To many, government is the problem; but not in the way legislators think.
The problem is the growing shortage of federal and state funds. This
affects many small businesses like builders, excavators, asphalt-layers
and the service industries that owe their survival to small contracts:
social service providers, translators, software writers, and consultants
in just about everything.

If you cut budgets, you cut small business.

Then there is the “chaining” of America. Local diners, hardware stores,
pharmacies and other retailing are crushed, annihilated when the chains
move in. The chains are not inherently evil, but they are manifestly
merciless. Walmart is but one of the chains putting small business to the
sword.

If those who administer government want to know something about small
business, they should spend a weekend at a strip-mall bakery or any other
firm with less than 50 employees. The experience would radically adjust
the rhetoric. It’s too late for Thursday, but don’t believe what you hear.

–For the Hearst-New York Times Syndicate

Political Lies and Small Business

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Brace for a storm of platitudes, recycled myths, and just old-fashioned political lies.

It will all start with President Obama when he addresses a joint session of Congress on Thursday about the jobs deficit. Whatever he says will be followed by scorn and abuse from the Republicans. All the hoary old claims about the absence of leadership, wasteful spending, punitive regulation and the need to cut taxes will be regurgitated.

The president will have a TelePrompTer full of enchantment tales. He also will talk of cutting some taxes; maybe because he thinks this will endear him to the undecided voters, or mollify some Republicans, or because he consistently tries to make his way in a viciously partisan political world by endeavoring to sound like the voice of detached reason. It will make nofriends and infuriate the Democratic core. It will be another betrayal to them.

All of the tax ideas, presidential and Republican, will be wrapped in cant about small business. Oh, do politicians love small business. Apple pie is good, mom is noble but small business, and small business alone, can cause the entire Congress of the United States to genuflect.

They love the travel agent with six employees with the same passion that they adore General Electric. The machine tool repair and maintenance contractor with 40 employees – he is the very embodiment of American exceptionalism. The woman with a wholesale jewelry business that she operates with her husband and grown daughter — they are the stuff of American legend.

Nonsense.

If Congress knew anything about the small business world, it would stop forcing the wrong medicine on the patient. Incorrect therapies won’t help, no matter how vigorous the applications.

To the political establishment, small business is suffering because of taxation and regulation. Fiddle with these twin bugaboos, the political narrative goes, and small business will bloom like the bluebells in spring.

Have any of these people ever talked to small business operators? Small business has many problems, but taxation is seldom one of them. Do they really think the garment manufacturers on New York’s 7th Avenue are on the phone, schmoozing about the rate of corporate taxation? More likely they are talking about why the banks won’t lend, even against collateral, toheretofore good customers; why imports from all over Asia are laying waste to their customer base; and why the traffic in the cross-town streets is horrendous.

Like all small businessmen, they don’t agonize over the frustration of having to meet OSHA and EPA standards — these are irritants. Instead, they agonize over whether there will be enough money to meet payroll. Taxes, if any, come once a year, but the payroll keeps the smallentrepreneur anxious all year. It is the ogre that visits every two weeks.

To many, government is the problem; but not in the way legislators think. The problem is the growing shortage of federal and state funds. This affects many small businesses like builders, excavators, asphalt-layers and the service industries that owe their survival to small contracts:social service providers, translators, software writers, and consultants in just about everything.

If you cut budgets, you cut small business.

Then there is the “chaining” of America. Local diners, hardware stores, pharmacies and other retailing are crushed, annihilated when the chains move in. The chains are not inherently evil, but they are manifestly merciless. Walmart is but one of the chains putting small business to thesword.

If those who administer government want to know something about small business, they should spend a weekend at a strip-mall bakery or any other firm with less than 50 employees. The experience would radically adjust the rhetoric. It’s too late for Thursday, but don’t believe what you hear.

–For the Hearst-New York Times Syndicate

On Tax Cuts, GOP Should Think like Business

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Mythology in Washington holds that when it comes to economics, Republicans know best. The root of this myth is another myth, which goes like this: When it comes to business, especially small business, Republicans know best.

All of this doesn’t matter until you get to taxes, when the Republicans, buttressed by their mythological understanding of these things, believe they know best.

And what the Republicans believe they know best is that when you cut taxes, everything gets better: Government shrinks, business booms and tax revenues go up.

It’s not that there aren’t shards of truth here; it’s just that everything has to be in the right conjunction to get one or all of these benefits.

Business doesn’t go along with these myths but, like everyone else, it hates paying taxes, so by and large it endorses the Republican position.

The thing is, business believes in a more durable truth: price.

Price means revenue, and business, therefore, believes and practices aggressive pricing. When business needs to exceed the gap between cost and revenue, it increases the price. If the market refuses to pay the price, business exits that market or fails.

Sometimes, however, and increasingly in these hard times, business pulls a con. It lowers or maintains the price, but adds other charges to gain income. The airlines are doing this. The banks make as much or more on fees than they do on consumer loans. Catalog companies do it with “shipping and handling” fees.

Publishers have experimented more with price than most businesses, and their conclusion is to stay on the high side. If the market rejects your high-priced publication, so be it.

I’ve spent a lifetime studying pricing in publishing. All I’ve learned is this: Defend your price.

In London, Rupert Murdoch engaged his Times in a costly price war with Conrad Black’s Daily Telegraph. In the middle of fierce cost-cutting, Murdoch’s camp, with more resources, was triumphant.

Cheap papers were selling.

But when it was all over, the relative positions of the publications had not changed by much and millions of British pounds had been lost. The hope had been that the victor, Murdoch’s papers, would gain so many more readers that they could make up the circulation revenue losses with higher advertising rates. It didn’t work.

Taxes are different, the GOP has averred. Not really. If they’re too high, they will stifle business, choke enterprise and cause businesses to go offshore. Clearly, marginal rates that exceed some magic number (well south of 50 percent) would stifle business.

At one point after World War II, they reached 90 percent in Britain with disastrous results and a few comical ones. The titled, moneyed families fled to Kenya and Rhodesia and the show-business types took up residence in Switzerland. Actor David Niven and playwright Noel Coward were among these.

Now that the tax cuts enacted in the early days of the George W. Bush administration are about to expire, it may behoove us to examine these with a question: What would business do? Things looked pretty bright when these cuts were enacted with the prospect of years of surpluses. But that was before 9-11, two big wars and a recession.

Therefore, if you looked at the tax issue from a boardroom point of view, the unanimous decision would be to go for the revenue and review the result later. Boardroom-loving Republicans ought to know this.

In business, they laugh at people who believe that lower prices automatically will produce compensating revenue. The joke goes something like losing a little on everything and making up with volume.

Many years ago, I had lunch with George Will and Trent Lott. All three of us were speakers at the American Petroleum Institute’s annual meeting in Houston. At the time, Lott and Will agreed that we were an under-taxed country, given the demands on government.

Back then, Republicans thought like business people.