September 22, 2008
Cognitive Dissonance Among Progressives and Greens
Over at CAP, Matthew Yglesias has coined the term neo-Hooverite to describe politicians like incumbent Senators Saxby Chambliss and Norm Coleman, or GOP candidate John McCain, who are proponents of reducing the deficit and cutting spending in a time of economic downturn. I completely agree with Yglesias' argument that focusing on a balanced budget in this economic climate is almost completely wrong headed. He captures the argument here:
"But if consumers cut spending at the same time businesses are reducing investment and state and local government are cutting spending and then the federal government also reduces spending well, then, everyone is going to be spending less and less. Which means everyone is going to be earning less and less. And things are just going to get worse and worse."
Yglesias, like many economists, pundits and policy makers, is quickly becoming a proponent of Keynesian-style deficit spending to spur the economy and create jobs and wealth. After all, the United States recovered from the Great Depression by spending on programs like the Public Works Administration and the Civilian Conservation Corps, and eventually mobilizing to fight World War II.
In fact, Yglesias has asserted the need for infrastructure projects in order to create jobs and increase spending. He is fully in the Keynesian corner. Which is why I was surprised when, over the weekend, almost as an afterthought in one post, he asserts the need for a price on carbon:
"What we ought to be doing with energy is putting a price on carbon, which would serve as a de facto subsidy to low-carbon energy sources."
Any economist will tell you that taxing one sector of the economy (i.e. taxing things that emit carbon) and giving money to another (spending the tax money) is not stimulus--it creates no real wealth, only reallocates it.
Perhaps Yglesias thinks that there are plenty of good reasons to put a tax on carbon emissions, and on that point we will be in perpetual disagreement. But proposing a carbon price in this economic and political climate is particularly badly reasoned. And it leads to a level of cognitive dissonance on Yglesias' blog. First he writes about the need for deficit spending to encourage economic renewal, and then champions a carbon price. It is almost as if the left hand doesn't know what the right hand is doing.
It is almost as if there is part of Yglesias' brain that is reserved for general progressive thoughts and analysis, and then a part that is reserved for particularly green thoughts and arguments. And in many ways, that is the state of the progressive coalition forming in response to the financial crisis. Labor leaders, economists, politicians and thinkers are all rallying around a long term economic renewal plan which will include public investment and short term stimulus. But in some ways, the greens remain slightly fractured from this coalition, as if its arm broke and then never quite healed properly: for some reason, climate action proponents cannot break out of a market fundamentalist attitude that is singularly focused on a carbon price (and maybe with some dividends--which, again, does not spur growth).
And this puzzles me to no end. Greens have started building support within their ranks for cap-and-dividend and could let a landmark opportunity pass them by. With the growing consensus around a need for deficit spending to spur the economy, climate action proponents could join this coalition to their great benefit. After all, what better investments for the Government to be making than in a wide portfolio of energy-related public works and technology projects?