Wall Street Weak
In an editorial on federal climate change legislation, the Wall Street Journal editorial page maintains the...er...standards for thoughtful commentary and journalistic integrity to which we are now accustomed:
When cap and trade has been used in the past, such as to reduce acid rain, the allowances were usually distributed for free. A major difference this time is that the allowances will be auctioned off to covered businesses, which means imposing an upfront tax before the trade half of cap and trade even begins. It also means a gigantic revenue windfall for Congress. [Emphasis mine.]
This, of course, is almost completely backwards. The price impacts -- the "tax" that the editorialists decry -- are imposed by the cap itself, not by the auction. Distributing allowances for free still imposes a "tax." The problem is, free allocation is like imposing a tax on consumers -- and then handing all the tax receipts directly to big fossil fuel companies! It would be, quite literally, a gigantic revenue windfall for some of the largest and most politically connected companies in the nation, all at the expense of consumers.
(I can almost hear the thought processes of the writer: "How can I make a massively regressive corporate windfall sound like a good idea? I know -- I'll just say that auctions are a windfall for Congress. Everybody hates Congress. Yeah, that's the ticket...")
Apparently, though, this is more than a rhetorical tic. In WSJ-land, a massive transfer of income from middle- and low-income folks to the well-off counts as sound public policy.
High Gas Prices Are Not Good
There's an emerging meme that recent high gas prices are a good thing. And I want to nip it in the bud. So... Bad Newsweek! Bad Wall Street Journal! Bad Freakonomics blog!
Gas prices are not something to crow about. To be sure, there are some benefits to higher prices -- a rush to innovate, and a bit less climate pollution -- but they're a tarnished silver lining, at best, to an awfully dark storm cloud.
I can't help it, I'm going to get a little preachy. Even though the drastic price increases are re-arranging conventional wisdom about our energy dependence, we need to remember that the suddenness of the spike is financially devastating to many families (and to many businesses too). It's only for a minority that this is an opportunity to try out sleek new bike gear. For many more it's an "opportunity" to stop saving for retirement, to pinch on necessities, and to run up credit card debt.
People will eventually adapt, of course, by switching vehicles, and perhaps even switching jobs or moving residences. (In fact, folks are already trying to adapt by switching to transit, driving slower, and cutting out far-flung vacations.) But in the near term, most people have few choices that can make a large difference for household expenses. Decades of sprawling land-use -- abetted by short-sighted policy and, yes, consumer choice -- means that many North Americans need oil. In many places it is truly impractical to get to work, or even to the grocery store, without a car. Until families have time to adjust by reducing gas consumption, high prices will take a big toll.
