I wanted to do more Waxman-Markey blogging, but unfortunately I was overtaken by events. However, I think it's worth noting that what happened with the bill sort of goes to my point about Medicare cost control. One of the ways Obama was going to get the money to pay for health care was from auctioning carbon permits. That went away to get through the House. And the Senate is more conservative about legislation than the lower house.
Now, everyone on the left was united in favoring auctions over giveaways. Auctions also had a fair amount of support on the right, mostly from people who hate corporate welfare even if they also oppose cap-and-trade. And you can whine all you want about how the Republican party had a god-given moral duty to provide political cover to Democrats from coal states (though frankly the complaining about your party's 60-seat senate majority is really starting to sound quite idiotic), but the fact is that at the end of the day, you couldn't do this perfectly obvious thing that has surprisingly broad support among the policy elites of both parties. Instead, the bill was passed in a form that makes it more expensive, and almost totally ineffective.
The fact that you can imagine some perfect bureaucrat administering a beautifully-designed law does not mean that this is actually possible in the American political universe.
There's something else that has been bothering me. I have been urged to support Waxman-Markey on the grounds that we musn't make the perfect the enemy of the good, and maybe I do. But the mediocre can also be the enemy of the good. Even if you support national healtch care, you certainly wouldn't build Medicare in its current form. But there is path dependance in institutions: once they exist, they're precious hard to change. Enacting a crappy climate trading system in order to do something forestalls the possibility of enacting a better design five or ten years from now. Given that this bill is universally expected to accomplish virtually no significant emissions reduction in the foreseeable future, that should worry people. Other than me, I mean.
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I should be supporting Waxman-Markey although I am not 100 % convinced that climate change is in our future. I don't usually get insights from reading National Review, but in this case their critique of WM in its present form ( as reprinted by Mickey Kauss ) seems compelling and infuriating- full of the extra stuff which Democrats bestow on their favored constituencies. So I can only hope that a pack of enlightened Blue Dogs unite with the usual evil Republicans to defeat this bill in the Senate.
Perhaps Obama will finally realize that he needs to fight to get what he wants. To quote a 19th century Brit deacribing another 19th century Brit, he wants the palm without the dust. Does not work that way.
Bernie
bernie,
Given the enormous impact this bill will have on our economy and our society, how can you state that you should support it if you're not sure it's even needed?
Of all websites I visit, this is the one place I'd hoped to see some statistical discussion of this so-caled phenomena. Here, where I presume we have people who have actually run statistical analyses - and have gotten paid to do it - we'd find a semblance of common sense.
If you have never been paid to stand by a mathematical model, please do not comment. If, however, you have ever bet the rent (literally) on a forecast that you have made, consider the following and then answer a simple question:
The current climate, as we experience it, has only been like this for thousands of years. Prior to that we know that the planet has experienced both ice ages and tropical phases. Thus, we know that the planet changes on its own, with no help from us. That is a fact, but the causes are 100% unknown to us.
Global - not regional, but GLOBAL - *land* climate has only been monitored adequately for about 50 years. Prior to WWII there were basically zero reliable temperature readings for the vast majority of our land area. Outside of Europe, USA, Canada, Japan, and about 100 other major global municipalities there was *zero* data. Huge swaths of land were totally unmonitored.
If you factor in oceanic and upper atmospheric temperature readings, the observation window shrinks from about 50 years down to 10 or so - and that's if, even now, you believe we have those covered. Satellites do a pretty good job, so I'm comfortable that we're finally getting actionable data there.
How, then, can you possibly presume that the trends we have generated are reliable? Given that "climate" is measured in millenia, how can we bet the whole economy on at best 50 data points?
Ice core proxies? Seriously? Does anyone in their right mind believe that we can accurately say what the climate was - within a degree, because that's the kind of accuracy needed here - 1,000 or 10,000 years ago?
I'm talking *data* here, not visceral "feelings."
And *the data* shows an 11 year trend DOWNWARD, even with CO2 at "record highs." Given that this is climatology, this basically means nothing. But it means "the same nothing" as the 50 year trend. Neither are anywhere near meaningful enough to bet the whole economy on.
We are generating the 21st century version of phrenology here. What's next, reading tea leaves?
Industries which emit carbon in 2009 would in no way be receiving incremental "corporate welfare" if they were "given" allowances to emit the same amount of carbon in 2010. Their situation would be unchanged.
Industries which would be required to pay for allowances to emit in 2010 the same amount of carbon they emitted in 2009 would be subject to decremental "corporate welfare" relative to their current situation.
Industries subject to a carbon cap which declines at two percentage points per year until 2050 would be exposed to the obligation to invest ~$700 billion per year until 2050 to actually install and commission the facilities and equipment which would actually allow them to achieve the carbon emissions reductions.
Industries which would be able to rapidly reduce or eliminate their carbon emissions at relatively low cost would have the opportunity to "trade" their surplus allowances to industries for which the process would be more difficult or more expensive.
The above assertions might not be politically palatable to some, but they are factual. The assertion that "giving away" allowances, rather than selling them to raise new tax revenue, is "corporate welfare" is merely a statement of political opinion.
Just because you can emit the same amount of carbon, by drastically increasing the price for everyone else, you are still indirectly given a subsidy. Imagine if the government started rationing gasoline but told people with the name Smith they could get the same amount as they got before for the same price. Obviously people with the name Smith would limit their gasoline use and focus their business on abusing their permit to buy gasoline at below market price. I wouldn't be at all surprised if many of these companies close down operations entirely, and turn their business into selling their allocated carbon permits for the next 20 years.
I don't understand your first sentence above.
Companies for which the investment required to reduce their emissions exceeded their ability to recover the investment through higher prices and/or allowance sales would likely cease to exist; or, would move to countries such as India, which have no intent to cap carbon emissions.
The electric utilities are an example of companies which cannot avoid the investments required to reduce their emissions. In fact, many companies could shift their compliance obligations to the utilities by eliminating direct fossil fuel uses in their operations, thus increasing the utilities emissions as the result of increased power consumption.
I believe that the current focus on the "tax" implications of W-M is an intentional misdirection from the real costs of the investments required to actually reduce emissions to 17% of 2005 rates by 2050. The federal "tax take" does nothing to reduce emissions directly, though it does increase the cost of compliance. I find it difficult to imagine that increasing compliance costs would provide a societal economic benefit.
This doesn't address you original assertion that there is no subsidy being given to some companies.
There is a distinct subsidy, even though it isn't a direct monetary payment. If the US government passed a regulation that all new companies had to pay half a million dollars. This wouldn't be a "subsidy" but would drastically favor current market participants. Entrenched interest in effect receive a half million dollar subsidy.
That very problem is what separates economic recommendations to politicians from pure positive economics. An economist can easily say, "Do X to get result Y" based on sound economics, but once its in the politicians hands it can be morphed into a monstrosity unlike anything its creators intended. This means that criticism of economic policy has to take into account whether the actual policy resembled in any way the one recommended before one attempts to pronounce the model false. However, it also means that anyone making economic policy recommendations should consider the potential failures before making a recommendation. A policy that is very sensitive to slight changes that politicians will be tempted to make is an inherently bad policy even if it has the best results in the model. Basically, policy recommendations are more an "art of economics" than a scientific discipline even though their started out with scientific data.
So you're saying legislation should be judged based upon its intent rather than the outcome? In that case, the patriot act was a great boon for America!
But advisers should not recommend anything that politicians might turn into an obscenity? Is there such a thing?
Sounds good to me.
Derek
Here is the Patriot Act judged on its outcomes: 1) we haven't been attacked again after nearly eight years 2) not one single case of abuse has ever been brought forward despite the ACLU crawling all over it for eight years.
On the other hand, here is the Patriot Act based on its intent: 1) we haven't been attacked again after nearly eight years 2) not one single case of abuse has ever been brought forward despite the ACLU crawling all over it for eight years.
Oops. You have more to fear from Google, Facebook and Bank of America. Assertion--no matter how fervent and histrionic--does not make fact.
I pretty much said the opposite. You have to consider what the likely outcomes would be before you recommend something. I think you got tripped up where I talked about evaluating economic theories.
I assumed the de facto Obama plan to control health care costs was to get a high enough percentage of Americans on government health insurance programs to give the government effective monopsony power. Right now, if the government were to slash Medicare reimbursements deeply enough, doctors would just refuse to accept Medicare patients (as some already have). But if Dems succeed in passing a public health insurance option for non-poor, under-65s -- and they price it to undercut private insurers -- then most Americans under 65 will gravitate to the public option. Once that happens, the government can mandate that any doctor who wants to get reimbursed for seeing under-65 patients who are part of the public option needs to accept Medicare patients as well.
Some small percentage of physicians might bail on both programs, preferring to run concierge practices for rich patients, but since there are only so many rich patients, most docs would have to toe the line.
Is that not the real plan?
Fine analysis, but I'm not sure I would want to conflate the probable outcome of the present maneuverings with anything so sophisticated as a plan.
Well, you were the guy who didn't think Billy Mays was a herald for the Second Coming, so your credibility is at an all-time low right now.
Fortunately, I have a recovery plan, loosely defined as "suing upward". I'm thinking about targeting the Jackson estate, as that will guarantee my cause at least three consecutive days of top-billed CNN coverage.
Well, several versions of the plan that circulated would have REQUIRED all physicians to accept the public plan, whether they wanted to or not.
Right now, if the government were to slash Medicare reimbursements deeply enough, doctors would just refuse to accept Medicare patients (as some already have).
Many practices have been closed to new Medicare patients due to the low reimbursements. My father had the problem that if he took an x-ray in the office, he was paid less than the cost of film and reagent. If he sent the patient to an outside x-ray center, they got paid more than he did to take it, a radiologist got paid to read it, he could charge for his reading of the x-ray (since he read foot x-rays better than a radiologist), and the patient had to come back for a second office visit. He did the x-rays in house anyway.
Doctors have been fed a line of BS by Medicare and Congress many times over the years: "Become a participating physician and get paid faster and get fee increases earlier/higher than those that don't." Lasted a year, IIRC.
Clearly the solution is to pass laws forcing doctors to work for less than cost.
The noble profession will just have get a little bit nobler.
How about this for a partial solution:
For physicians who agree to work for a modest salary (e.g., $100k per year, with the government picking up the cost of the physicians' liability insurance) for, say, five years after getting board certified in their specialty, the government covers the cost of their undergrad and medical school tuitions, with the proviso that if they renege on their five years of salaried service, they will owe the government the tuition cost plus interest and penalties, and the IRS will collect this out of their wages.
That should give us a pool of qualified physicians in most specialties who won't need to get paid $5k per procedure. Medicare can then funnel all of its patients to this pool of physicians.
That's a great idea! How about we all work for the government for 5 years at less than market wages in return for reimbursements on our education expenses!
Then we can really see what inflated education expenses look like. All those poor suckers that can't get government jobs will have to pay a lot more for their education, but the problem could be quickly solved if we just "nationalize" employment.
The government already does/did this for primary care docs that agree to work in "underserved" areas. They pickup med school expenses and pay a salary. From what I understand, you end up working in rural areas in government clinics or on various Native American reservations for a few years. Not real popular with someone who wants to be anything other than an internist, pediatrician or FP
Sarcasm plus a lame attempt at reductio ad absurdum won't put Medicare spending on a sustainable path. And to the extent that physicians' wages are determined by the market, they are determined by a market distorted by, among other things, anti-competitive practices such as requiring qualified foreign physicians to repeat their residencies if they want to practice in the U.S.
My idea would be to do this for all specialties, particularly the ones that have the highest per-procedure fees, and not require the physicians to all work on Indian reservations and such. Since they would be treating Medicare patients, and there are Medicare patients everywhere in the country, these physicians could end up being placed where they currently live.
However, it also means that anyone making economic policy recommendations should consider the potential failures before making a recommendation.
From the PoV of Congress, the law has already been a smash hit. Campaign money is assured until 2050. Exactly what many economists had said would happen with cap & trade.
>we musn't make the perfect the enemy of the good,
I think we should apply the precautionary principle.
Give us a list of names, and we can tar and feather them now.
Goodness gracious. Is this the level of thought in the rarefied atmosphere of Washington? (dumb question).
Presumably the goal of this legislation is to decrease carbon emissions.
This type of legislation is intrusive, expensive and has the potential to limit economic growth. That means people working and feeding themselves and their families, by the way. If the only results are negative, what justification can it possibly have?
Derek
"Presumably the goal of this legislation is to decrease carbon emissions."
Bad presumption, and assumes that legislation has a definable "goal."
Legislation has no "goal," each senator/congressman has his/her own agenda when voting for it. Each agenda is a combination of:
(1) Some subset of my constituents want this and have given me money (campaign contributions, not bribes per se) to vote for it.
(2) My party leadership wants this and it is in my interest to go along.
(etc.).
Regarding (1), there are many reasons why each constituent wants legislation. Ideologues have ideology and others are rent-seeking. Often (practically always?) the rent-seekers enlist the ideologues as "useful idiots" to further their ends.
Regarding (2), see (1), but now working for party leadership's constituents in short term and own current and potential constituents in future (i.e., accruing political capital that can be used later).
I imagine that somewhere, sometime, a senator/congressman has voted based on whether a bill was "good" or not based on that person's altruism. Maybe.
(yes, I've had to go to the hill to push for legislation before)
So tar and feathers is probably the best reaction.
Derek
Meh, it dies in the Senate anyway.
Given that this bill is universally expected to accomplish virtually no significant emissions reduction in the foreseeable future, that should worry people.
The bill's main goal is to Look Like We're Doing Something.
BTW, June's global temperature anomaly, as measured by satellite, fell to .001 degrees. That's after 30 years of warming. Yes, it's one month, but the slope of the line is not friendly to GCM predictions. We're probably looking at about 1 - 1.5 degrees of warming after 100 years.
Tall Dave,
"We're probably looking at about 1 - 1.5 degrees of warming after 100 years."
Since the average surface temperature measurement station is subject to errors greater than 2C, how would we know?
The satellite measurements are somewhat better and more reliable (and not subject to "corrections" from James Hansen, an environmental activist who says coal trains are the equivalent of Auschwitz and gets arrested at coal plants for trying to interfere with their operations.)
Yes, the surface measurements are a huge mess. Only 20% of them even match the standards. The proxies are even worse, of course.
That's one of three very big problems with GCMs -- they model against bad data, they assume CO2 forcing (i.e., if the model can't find warming from something else, it assumes it was CO2), and they require a large positive water vapor feedback that recent studies suggest may not exist (and which probably can't exist given the stability of Earth's temperature within a certain range over the past few billions of years).
Oh, if this bill were even mediocre.
Is it okay for the "bad" to be the enemy of the good?
Megan writes:
I could've sworn that the whole reason this was all such an emergency was that if we didn't start making massive cuts now, like yesterday, that the world was going to end in fire.
So what I'm hearing from you is that the best hope is a plan that might be able to do something about emissions after it's too late (5 to 10 years from now) and what we have is an expensive plan that still leaves us to die in the flames...
Am I missing something? Is it actually not dire, in which case this is just an economy sink, or should I be preparing for the inevitable apocalypse because the world is incapable of immediately ending the modern economy which is the only thing that could conceivably save us from certain doom?
Can we make a giant pork bill with no redeeming features the enemy of the good? Or at least the enemy of common sense?
I am getting tired of Republican legislators filling bills with crap and then Republican pundits pointing to the crapitude of said bills and saying, "See, it's too screwed up! It shouldn't be passed!"
I'm not trying to accuse Ms. McCardle of bad faith here, Waxman-Markley is probably crud made even cruddier by people Ms. Mcardle isn't a fan of. Her arguments here just remind me of the more sleazy arguing over at National Review, et. al.
Dude, the Dems have 60 votes in the Senate and own the House. The only way Repubs could fill bills with crap is if the Dem leadership is incompetent. Oh, wait...
Megan
This assumes that there is a problem that needs to, and can be, "fixed." CO2 has become the boogeyman for a non-existent problem. Anthropogenic Global Warming, now renamed Global Climate Change since warming didn't actually happen and its cooling off again, is a sham and a hoax designed to feed the coffers of the research grant industry and to drag human economies into some sort of 14th century subsistence.
Waxman-Markey is doubly bad as it pretends to "fix" a non-problem and provides a gigantic public spigot of payoffs and corruption for politicians.
AGW become CC because the IPCC became the popular "authority" in regards to AGW. It wasn't due to the reality that AGW isn't very significant.
Both global warming and climate change have been used to describe the overlapping phenomena since the 1970s. I really dislike pointing to my own site, but I don't think the Broecker paper is available elsewhere.
He may be an alarmist-whackjob, but thingsbreak seems right about the shift from AGW to CC.
Ironically, the shift to CC probably is responsible for prominence the IPCC now has.
aaron [It's not letting me respond to your post directly]
He may be an alarmist-whackjob
I'm always amused to be called "alarmist". My positions and level of rhetoric on the subject seem positively retiring compared to the DOOOM!-mongering of those adamantly opposed to mitigation legislation on economic grounds.
probably is responsible for prominence the IPCC now has
That can actually be traced back to shrill environmentalists Reagan (agreeing to UNEP/WMO's offer to participate in an intergovernmental panel) and Bush Sr. (UNFCCC). To be fair to Reagan, he had no real desire to actually fix anything in terms of GHGs, but he was worried after the momentum of Montreal that a binding international treaty would go forward with or without us and wanted to ensure we had the ability to water down any "unreasonable" demands by those stinking European hippies, and was facing significant pressure domestically iva EPA and NAS who were releasing reports on the dangers of GHG-driven climate change.
One of the things we have to get accurate from the git-go is direction. We must move health care reform in the proper direction.
Once it gets moving in that direction we can refine it.
There are aspects of the bill that are give-aways for specific industries. I'd prefer not to have them in.
However, we have to keep our eye on the ball: This is a global problem, and we need international cooperation to get it to work. If we go into the Copenhagen meeting in December with NOTHING, it will be impossible to get China and India on-board.
Whereas if we can in with something serious (even if far from perfect), we have something to break the ice with. Even if we get an international deal that is weak, if it distributes the pain in something like a fair way, I think it will be possible to improve it, because my impression is that the evidence for harm to the planet is increasing almost week by week: acidification of the ocean, more information about threatened species, more clarity about the deleterious impacts on agriculture.
But we MUST get the principle accepted that this is not just something that developed countries have to do: We need to get China and India on-board. We can only do that by proving that the U.S. is willing to accept some pain as well.
"This is a global problem, and we need international cooperation to get it to work."
"Climate Change" is Mandarin for "ca-ching!"
Does it seem strange to you that we are passing a large expensive bill, and the justification is not that it solves the problem, but that "we have something to break the ice with." How about if we want to break the ice we pass a bill that says, as soon as xyz international commitments are made or agreed to the US commits to the following. That seems like a pretty good ice breaker.
I'm not sure how anyone thinks taking a ton of money from workers and consumers and spending it on something that -no one- suggests will actually solve the problem is a good thing to do because it's an ice breaker and a first step.
First steps shouldn't spend a ton of money and accomplish nothing. But this whole thing is really just an expensive, offensive fools errand anyway.
Mr. King, you may have hit on the only truly worthwhile reason for the W-M bill. Otherwise, it's all just more Congressional kabuki theater for political effect.
But in all honesty, I think that's a thin reed to hang your hat on. Say we pass the legislation and it gets signed into law. Do we really think the Chinese and Indians are going to say to themselves, "Gosh, the Americans really mean business", and start instituting meaningful emissions reductions (i.e., economic growth restrictions)? At best, they will implement policies that are as effective W-M, which is to say, not very effective at all. And the incrementalist notion promoted heavily by some--that once such a regime is in place worldwide it will be far easier to start ratcheting up the restrictions--is a fallacy. Once that ship has sailed, it's going to be VERY hard to change course for at least five years, maybe more, and that's only if the system suffers no big corruption / fraud / abuse scandal. The odds on that are pretty low.
In the end, some enviros will grumble, "Well, it's still the right thing to do." If W-M is the right thing to do, global warming must not be the dire crisis they swear it is.
The hypothesis that human activity has caused climate change is invalid from a scientific viewpoint because it fails when tested against long term and short term physical data. Cap and Trade will not cause any changes to the global climate.
If we want to stem our use of imported oil, then tax that. If we just want to raise taxes, have the integrity to say so; but don’t wrap either in the unfounded belief that human activity will change the world’s climate.
"we musn't make the perfect the enemy of the good"
This reminds me of the old saying about second best policies. In theory, second-best policies may be a good compromise that aren't far from the first-best solution. But in practice, second-best policies tend to be designed by third-best politicians and administered by fourth-best bureaucrats. There's a lot of room for drift once we shrug our shoulders and stop even trying to reach first-best.
Megan,
Congrats on your happy news, and I hope you're breathing is better since the last time I stopped by. Just a few questions about the sources for some of your claims:
Now, everyone on the left was united in favoring auctions over giveaways. Auctions also had a fair amount of support on the right, mostly from people who hate corporate welfare even if they also oppose cap-and-trade.
Do you have any legitimate sources for such a claim?
(though frankly the complaining about your party's 60-seat senate majority is really starting to sound quite idiotic)
Not sure what this is in reference to.
you couldn't do this perfectly obvious thing that has surprisingly broad support among the policy elites of both parties.
I'm also more than a little confused by this. "Elite" in terms of the legislation is relative. Joe Barton as former chair and ranking member of the Committee on Energy and Commerce probably qualifies as much as any Republican as "elite" on such a topic. And he's a died-in-the-wool Climate Truther (like a good number of the commentors here). You've got Paul Broun who sits on the Committee on Science and Technology calling climate change a hoax to much GOP applause during the floor debate. In the Senate, you've got Jim Inhofe who as former chair and current ranking member of the Environment and Public Works Committee is probably the most hysterical (in both senses of the word) denialist in either house of Congress. John McCain, who ostensibly supported C/T for much of his later career, gave many indications as the 2008 election dragged along that he wouldn't be pursuing such legislation as President and doesn't seem to support it now. Gingrich is another who paid lip service to cap and trade only to fight against it when it actually entered the realm of the politically possible. GOP talking heads from Krauthammer to George Will to David Brooks have all taken their turns at the mic displaying their ignorance of the science, the mechanisms of mitigation or both. I don't know what country you live in where the political elites on the right actually genuinely take climate change seriously, much less cap and trade, and even less so 100% auctions.
Instead, the bill was passed in a form that makes it more expensive, and almost totally ineffective.
As we've already seen, the bill hasn't even hit the Senate floor yet, and it's already having an impact on mitigation dynamics.
Keep in mind, health care reform doesn't necessarily need funding. In fact, health care reform should and could save money if done properly. It's health care expansion that requires money. No one ever seems to comment on the masterful job Obama has done in making the public think these two separate issues are the same thing.
The whole point of W-M was not to actually do anything about emissions (I will not even dignify the GCM model by suggesting that it has enough validity to be considered a significant factor), but rather to put into place the framework for an extension of state control over the economy, something that would never have been accepted on its own merits. Once passed (presuming that the Senate doesn't kill it), W-M provides bribes to various industries and preferred constinuent groups, who in the future will dutifully oppose any significant changes in the overall regime so as to maintiain their benefits, and empowers a vast new bureaucratic empire to impose the will of their political masters upon virtually every facet of the American economy. Why does anyone at all believe that once in place the political will to 'fine tune' this monstrosity would be sufficient to overcome the entrenched resistence of those who benefit from it?
As for the notion that if the US adopts this poison pill, the Chinese and the Indians will happily join us flies in the face of numerous statements made by any number of officials in both countries that this is simply not going to happen. As manufacturing (or for that matter, any energy intensive activity) is driven out of the US, the Chinese and Indians will happily welcome it as a means to increase their own standard of living...and rightly so. Suggesting otherwise is a fairly significant claim against interest, and I have yet to see a convincing argument to would lead any rational person to believe that it should be taken seriously.