“The Key Role of Conservatives in Taxing Carbon”

Julia Yellow

Economist N. Gregory Mankiw presents a compelling and succinct case for conservatives leading market based climate change through the carbon tax in a recent posting in the New York Times.

As Mankiw states in the article, “It encourages people to buy more fuel-efficient cars, form car pools with their neighbors, use more public transportation, live closer to work and turn down their thermostats. A regulatory system that tried to achieve all this would be heavy-handed and less effective.”

At this juncture, conservatives and libertarians should think of government responses to climate change as a binary choice – either opt for the inevitable heavy-handed and likely ineffective machinations of government agencies that are riddled with cronyist handouts and contradictions, or put a price on a substance that is in having an environmental impact to drive market-based incentives to change behavior and let private industry innovate around the new landscape. The role conservatives can play is to ensure that moves in this direction are consistent with limiting the role of government and making sure that carbon taxes are offset with tax reductions elsewhere. Otherwise, we will be left with a double penalty of more taxes and a higher burden of regulations.

A carbon tax would be at least neutral or perhaps much less economically malicious than taxes on income, investments, consumption, or taxes on production (corporate taxes). Conservatives could propose a compromise approach to climate change in which carbon taxes are offset by reductions in the aforementioned tax types that would likely pass into law.

It encourages people to buy more fuel-efficient cars, form car pools with their neighbors, use more public transportation, live closer to work and turn down their thermostats. A regulatory system that tried to achieve all this would be heavy-handed and less effective.

Indeed, a simple carbon tax is, as quoted in the article, “a solution that is consistent with free enterprise and limited government.” This rings particularly true when compared to the current arbitrary rule by diktat patchwork that is the EPA.


“The Farm Bill Mainly Helps Wealthy Farmers”


A postscript to my recent post on Farm Welfare  is a great graphic courtesy of the American Enterprise Institute. This is a nice addition given that my previous post focused on previous iterations of the farm bill as forms of de facto middle class welfare. Politicians like to crow that in the 2014 bill forms of direct payments were ended and in their place farmers could get disaster relief in the form of crop insurance. This shift presumably allows many politicians to make the claim that they implemented more free-market reforms. Alas, as the infographic shows, large farms are getting a lion’s share of the subsidies, farm families are still much more wealthy than their non-farm counterparts (likely as a result of non-wealthy farm families getting crowded out of the market due to welfare going to those that own the land), and insurance is simply a hidden form of more welfare.

The cynicism and contortions of Ted Cruz

Gun Legislation
UNITED STATES – APRIL 17: Sen. Ted Cruz, R-Texas, speaks during the news conference on alternative gun legislation on Wednesday, April 17, 2013. (Photo By Bill Clark/CQ Roll Call)

One of the more memorable exchanges of the recent Republican debate occurred between Rubio and Cruz over paths to legalization for the 11 million illegal immigrants currently thought to be residing in the U.S. The setup of the debate was this: Rubio and Cruz were sparring over intelligence and the use of telephone metadata in the fight against terrorism. Cruz pivoted the debate to one of border security and immigration where he believes he is on firmer ground and can attack Rubio. During the scuffle, Rubio pointed out that Cruz did in fact support a path to legislation. Ever the lawyer that is extremely careful with words and terms, Cruz at one point indicated that, “I have never supported legalization, and I do not intend to support legalization.” The emphasis on “intend” was mine, and I find there to be a carefully constructed amount of future wiggle room for a lawyer in that statement.

Where this gets interesting is that while Cruz is now cynically pouncing on the “Gang of 8” bill that seems to hang like an albatross around Rubio’s neck with the nativist wing of the party, it is clear that Cruz did in fact propose an amendment in 2013 that called for an increase to the H1B visa for skilled workers by 500%, a doubling of legal immigration (including for the low-skilled he now claims are taking everyone else’s jobs), and creating a path to legalization status (but not full citizenship) for the 11 million illegal immigrants already in the country.

“I have never supported legalization, and I do not intend to support legalization.” – Senator Ted Cruz, Las Vegas Republican Primary Debates

Senator Cruz’s full remarks on the amendment he filed is out for all of the world to see and judge. Note his vociferous support of high-skilled immigration in the first video I have linked, and his support for legalized status for the existing 11 million illegal immigrants in the second video. Some of the key language Cruz employs makes him sound more like a reasonable and compassionate defender of immigration as a centerpiece of the American experience – using terms such as “coming out of the shadows” and “I want immigration reform to pass.” Cruz’s lawyerly threading of the needle in the amendment is to not support citizenship but supporting legalization and work status. While this amendment stance may not be near generous enough for a pro-immigration, free-market oriented person like myself, it is hardly the militant stance Cruz now employs and it also proves his debate statements the other night to be blatantly false and cynical. Since Cruz is so fond of leveling the charge of amnesty at his opponents these days, perhaps we could all benefit if the debate champion could define precisely what amnesty actually means to him.

In response to the fact-checking that many news outlets are doing and no doubt the increasing spike of people watching these videos, the Cruz campaign has indicated that his amendment was actually a poison pill plot to kill off the entire immigration reform bill that the Gang of 8 brought forward in order to get what Cruz wanted all along – zero immigration reform. That leaves Cruz supporters with two equally problematic conundrums from tough-talking “anti-establishment” Ted Cruz: either he did in fact fully support a rapid increase in high-skilled immigration and a path to legalization for the 11 million resident illegal immigrants and he is therefore not the principled ideologue waging war consistently on the border that he passes himself off to be, or he is a schemer and plotter that plays games in Washington. On the latter challenge, to echo the Wall Street Editorial Board in a recent podcast, this is hardly the stuff of anti-establishment dreams.



“How Marco Rubio is quietly killing Obamacare”

Source: How Marco Rubio is quietly killing Obamacare

The linked article provides yet another example of a candidate in the race that has serious proposals and shows the leadership and initiative to bring about change through intelligently crafted legislation. The act of legislation exhibited deep knowledge of where the actual weaknesses of ObamaCare existed and presents a mortal blow to the Act that slipped past the desks of its most ardent supporters. Meantime, taxpayers are protected from cronyist bailouts written into the law – part of the Faustian bargain insurance companies made with the government as a prerequisite to receiving their support (and their lobbying dollars) for the law.

Hopefully the mounting evidence to the American people that the Republican race has a few viable candidates will finally stem the tide from fascination over the bluster that is confused with straight talk, the unintelligible shooting from the hip for actual sound policy, and the mistaken notion that we need an outsider to shake things up rather than someone that can actually lead.


Paul Ryan opposes Ex-Im bank with superb speech

Paul Ryan Opposes Ex-Im: http://feedproxy.google.com/~r/CafeHayek/~3/_6zdUZfQ1pE/paul-ryan-opposes-ex-im.html

Huzzah! Ryan’s statements are brilliant. I can’t believe this is being resurrected. By so called adherents to the free market no less.

Ryan’s speech in full below:

Mr. Speaker, I want to express my strong disapproval for this bill for the Export-Import Bank.

This is a pretty profound debate we are having. It’s about what kind of economy we’re going to have. Are we going to reward good work or good connections?

I think there are plenty other ways to expand opportunity in this country, and corporate welfare is not one of them. The biggest beneficiaries of this bank, two-thirds of their money go to 10 companies. Forty percent goes to one company.

And this bank does cost money—just ask the Congressional Budget Office when they use real scorekeeping. Remember Fannie Mae? Remember their accounting? Remember when they told us they weren’t going to cost any money—until they did? And it cost us billions.

The other excuse that I just don’t buy is, ‘other countries do this, so should we.’ We shouldn’t acquire other countries’ bad habits. We should be leading by example. We should be exporting democratic capitalism, not crony capitalism.

There is this criticism by those against the free enterprise system who compare it to competition, like a sport. Where the critics of free enterprise say there’s a winner and there’s a loser, just like a boxing match or a football game. Well, that’s true when it comes to crony capitalism. That is the case when it comes to corporate welfare. Because in that case, the winner is the person with connections. It’s the company with power. It’s the company with clout.

The loser is the person who is out there working hard, playing by the rules, not knowing anybody, not going to Washington, hoping and thinking that the merit of their idea and the quality of their work is what will win the day. That’s what is rewarded under a free enterprise system.

Free enterprise is more about collaboration. It’s more about transactions of mutual benefit where everybody benefits, and the rising tide lifts all boats. Equality for all. Equal opportunity. That’s free enterprise. That’s small d, democratic capitalism. This thing is crony capitalism, and I urge it be rejected.

Why I support the Trans Pacific Partnership (and free trade and globalization in general)

The brief talking points in the attached link serves as a pretty close approximation to how I feel about the benefits of this particular deal. While the text is not entirely known to the public and while the agreement may not be a perfect quid-pro-quo between signatories on lowering trade barriers, I will adopt an adage from a previous boss that I think applies of, “don’t let perfect be the enemy of good.”


The authors note three reasons for supporting the TPP, of which I quote below:

“Reason #1: The economic gains to the 12 countries today. Although no one has read and processed the entire text of this freshly inked agreement, over the years sufficient information about its broad structure has emerged to permit analysis that shows TPP would generate non-trivial economic gains. A prominent study recently estimated that by 2025 the TPP would increase annual worldwide real income by about $223 billion and annual worldwide exports by about $300 billion. These estimates are conservative insofar as they do not model any acceleration in countries’ underlying economic growth rates from TPP.

Reason #2: The economic gains to even more countries tomorrow. By design, the TPP process has allowed new countries to enter into the negotiating framework. The hope of many is that in the future, additional countries will accede to the TPP—which would generate even larger economic gains for all involved. The two most notably absent countries from the TPP table have been India and China. Each of these countries has, to date, undertaken very little liberalization with the TPP dozen. Thus could the future economic gains be quite substantial.

Reason #3: The economic and other opportunity costs of failing. Not ratifying TTP would incur substantial opportunity costs—both now and in the future—well beyond the foregone $223 billion per year. The Trans-Atlantic Trade and Investment Partnership, a similarly ambitious agreement between the Untied States and the European Union, would likely fail as the EU loses interest in an unreliable partner. The World Trade Organization, which hopes that a ratified TPP would boost its energy, would almost surely see the death of its 14-year-old, already-on-life-support Doha Development Round. And beyond matters of just economics, world leaders might resign themselves to thinking that global challenges with less-certain, longer-term, more-contentious benefits than TPP—say, climate change—are simply insurmountable.”

As a general guiding principle, I am in support of open trade given that the alternative of protectionism places government in the role of arbitrarily choosing winners and losers, which necessarily promotes a governmental power that I believe should be trimmed. Many small and large business owners would support the fact that true commerce and the ability for their business to flourish is enhanced when there is respect no national boundaries for their scope of commerce. Hence, erecting trade barriers to protect the few will necessarily involve the government enacting and enforcing powers that are detrimental to the majority for the benefit of a minority special interest group (think of a U.S. sugar producer that benefits from trade barriers erected against Brazilian sugar producers. He may benefit from the intrusiveness of the government, but the rest of us as consumers pay higher sugar prices as a result.)

Aside from the philosophical debate on the role and scope of government, I support free trade at large due to its actual benefits to the economy. To break it down simply, it benefits us largely as producers and businesses and almost entirely as consumers. I say “largely” to resist the urge to be a simplistic Panglossian supporter and to echo a point made by the authors of my linked article that not every single producer or employee will benefit from free trade. Much like the authors, I would indicate that a more appropriate palliative to this is to focus on employment assistance and training rather than shooting off the foot to save the toe that is protectionism.

The benefits of free trade are largely beneficial due to the economic concept of comparative advantage, which if you put in the perspective of a nation-state means that our respective nations’ possess different inherent advantages in producing goods. For example, it is intuitive that the U.S. holds a comparative advantage in the production of high-tech technology goods, corn, and higher education services compared to most other countries. Thus, the comparative advantage construct is a relative rather than an absolute one. Just because America may produce the best sugar in the world (an absolute advantage) it does not follow that America holds a comparative advantage in the production of sugar and it may mean that America should not produce sugar at all. This may result from the fact that another country can produce it far more cheaply due to labor advantages, or that America fails to attract enough investment in sugar due to all other opportunities. To use a simple analogy, just because Lebron James might be the best house painter in the world, it does not follow that Lebron should in fact waste his time painting his home when he could easily pay someone else to do so and spend his time where it is more valuable – on the basketball court. Thus, comparative advantages are closely related to opportunity costs – the cost of foregone opportunities due to diverting resources to some other use.

I recognize that this can get a bit esoteric, so perhaps a thought experiment will help elucidate the point I am attempting to make here. Using my hometown and current residence of Lubbock, Texas – imagine that Lubbock had to rely exclusively within a walled off city to buy all of our needs. This means only buying our means of transportation, technology, food, and furthermore only being able to produce and sell to our fellows in our community. The end result of all of this is that we would be awash in cotton but unable to produce or purchase a modern car, sushi, an iPad, or a whole host of other items that we have grown accustomed to enjoying as if they were second nature. These same concepts and benefits extend on a much broader scale when we talk about interstate and international trade.

For those interested in exploring this topic further, I highly recommend reading The Choice by economist Russ Roberts. He presents the choices between free trade and protectionism in a remarkably lucid and easy to understand way in the form of a page-turning novel. http://www.amazon.com/The-Choice-Fable-Protection-Edition/dp/0131433547

I echo a lot of Robert’s points from The Choice in an essay named “Free Men, Free Trade” that I contributed to a book called Reinventing the Right that further expands on my points from above. http://www.amazon.com/Reinventing-Right-Conservative-Voices-Millennium/dp/1439267359


The Twilight Zone World in Which it is Difficult to Elevate Paul Ryan as House Speaker


What kind of Twilight Zone political world are we living in which Paul Ryan, an accomplished, respected, wonkish, intelligent, and virtuous man is not deemed worthy to serve as Speaker of the House by a small but vocal and obstructive portion of the Republican wing of Congress? What erratic things must be going on where an ideologically sound man such as Ryan reluctantly steps into the ring and has to set out conditions for serving (conditions that I view as entirely within reason and to ensure he is not being set up to fail by a recalcitrant and needlessly obstructive backbench) for one of the most powerful and traditionally respected positions in the American government? The Speaker of the House is third in line to become President, and nobody really wants the job. That should tell us something about the current state of the dysfunction in the party that I think many of us actually expect to lead under the divided government that Americans seem fond of.

In case it is not clear, I believe Ryan would make a wonderful Speaker of the House. I thought he would have made a great Vice President, and it would have been a good thing to put him on a path to becoming a Presidential candidate. He is a fine statesmen with the type of high-minded character we should want in individual in higher office, whether of the right or left bent.

Alas, in an era of protected and gerrymandered uncompetitive districts coupled with a restive population as a result of years of economic malaise and administrative mismanagement (in both the executive and legislative branches), it seems that what a substantial portion of the population is reduced to clamoring for their representative to be “a fighter,” whatever the term actually means and even if it ends in nihilistic demagoguery and ignominious defeat that results in nothing getting truly accomplished. What used to be valued traits in possessing the ability to engage in thoughtful policy crafting coupled with the ability to compromise and find ways to move a conservative agenda forward, even if in increments, has given way to fighting for fighting sake, even if the end result of failure is assured.

The Freedom Caucus group of 40 or so representatives railing against John Boehner, Kevin McCarthy, and now Paul Ryan for not taking enough bold stances throughout the duration of the Obama administration is a fight about style and tactics and not a fight over policy substance. It must be clear that most on the right side of the political divide agree on most of the philosophical principles. All of these aforementioned men have proven careers promulgating and advancing conservative policy. I imagine their scorecards of actually getting beneficial laws passed eclipse by a wide margin their detractors in the Freedom Caucus, whose relative youth and espousal of a forceful and vocal form of obstruction render them largely ineffective parvenus given the Democratic control over the executive branch.

Against this backdrop is the immutable force of the U.S. Constitution and the intent of the framers of that venerable document as laid out extensively by John Madison, Alexander Hamilton, and John Jay in The Federalist Papers. Advancing legislation and decisions slowly, incrementally and based on consensus was precisely what the Founders had in mind when crafting the separation of powers across branches of government as well as the separation of power fostered in a federalist system of state and central government. Thus, the critique of the Freedom Caucus of the  incremental and compromising approach is ultimately a critique leveled and squarely aimed at James Madison and the other framers of our Constitution. Alexis de Tocqueville, in Democracy in America, would describe the potential of the majority to ride roughshod over the rights of minorities (defined in this case as those who did not currently hold the levers of government) as the “tyranny of the majority.” As a bulwark against this fear of coercive power being enacted by an entrenched and tyrannical majority, the Founders deliberately constructed a government system in which advancing legislation quickly by design is in fact difficult to do. The guiding implicit principle behind this is that the minority opinions of today can quickly become the majority opinions of tomorrow and hence the framers of the constitution deliberately constructed a system such that the potential whims of the current day would not be legislated until they were a proven and sustainable desire of the people. This may harm us in the short-run as individuals and as interest groups when it comes to getting things done efficiently, but it also protects the rule of law and from poor decisions being made hastily for the sake of expediency and for what is currently popular at the time. The Founders greatly favored slow change, overwhelming support for ideas, and compromise. As a result, the founders expected statesmen to engage in the proposing of ideas and to win over the population through the strength of an idea and the strength of an argument rather than a war using arcane legislative procedural processes that confound and anger the public at large.

The final point I would make is that if the Freedom Caucus can’t put forward a viable candidate on their own (which they can’t) then it is time to support a leader that they philosophically agree with on substance, and start spending their time making the case to the American public why they need to elect a Republican for President in order to truly enact the reform that they want to enact rather than wasting their energies on internecine fratricide. To adapt an old military adage I am rather fond of: either lead, follow or get out of the way.