Global Warming Back In The News

Tuesday President Obama announces steps to address global warming. The Economist, a magazine which has heretofore been an advocate of drastic action, suggests that less convincing evidence of rising temperatures may make political acceptance of new initiatives a tough sell.

Cohn does his best to affirm that the urgent necessity of acting to retard warming has not abated, as does Brad Plumer of the Washington Post, as does this newspaper. But there’s no way around the fact that this reprieve for the planet is bad news for proponents of policies, suchMr  as carbon taxes and emissions treaties, meant to slow warming by moderating the release of greenhouse gases. The reality is that the already meagre prospects of these policies, in America at least, will be devastated if temperatures do fall outside the lower bound of the projections that environmentalists have used to create a panicked sense of emergency. Whether or not dramatic climate-policy interventions remain advisable, they will become harder, if not impossible, to sell to the public, which will feel, not unreasonably, that the scientific and media establishment has cried wolf.

The article includes a refreshing admission that the science of climate warming is hardly settled. A refreshing admission given that there never has been such a thing as settled science, climatological or otherwise.

But never fear, the true believers are banging the drums. Brad Plummer at Ezra Klein’s place explains.

Over the past few years, U.S. carbon-dioxide emissions have been falling rapidly, thanks to the recession, improved energy-efficiency, and a shift from coal to natural gas. But those trends have bottomed out recently, and coal started making a comeback in 2013.

That means the United States is no longer on track to reduce its carbon-dioxide emissions 17 percent below 2005 levels by 2020, as Obama pledged under the Copenhagen Accord. To hit that target, the White House report argued, new “policy steps” will be needed. (These cuts are seen as a necessary first step, but far from sufficient to tackle global warming— there are still longer-term cuts, China needs to get on board, etc.)

OK, everyone is entitled to their opinion, but can we at least agree that US presidents don’t go around the world committing the country to anything. Whatever utterances the President made at the Copenhagen conclave he never submitted anything resembling a  treaty or similar type of binding legislation to Congress for ratification. There may be a case for further policy initiatives but it’s not because we’re obliged to do so.

Greg Mankiw Talks About Inequality

The title of his paper is “Defending The One Percent” but I didn’t find it so much a defense as a rich discussion of the arguments for and against redistribution. It’s a bit long but not overly wonkish (hardly any math, thank God) and worth reading. Though it doesn’t go to the meat of his discussion, this paragraph should be taken to heart by all economists.

At the outset, it is worth noting that addressing the issue of rising inequality necessarily
involves not just economics but also a healthy dose of political philosophy. We economists
must recognize not only the limits of what we know about inequality’s causes, but also the limits
on the ability of our discipline to prescribe policy responses. Economists who discuss policy
responses to increasing inequality are often playing the role of amateur political philosopher (and,
admittedly, I will do so in this essay). Given the topic, that is perhaps inevitable. But it is
useful to keep in mind when we are writing as economists and when we are venturing beyond the
boundaries of our professional expertise.

There’s a also a nice bit of banter with Krugman about the paper in another post on his blog.

How Can You Not Do Some Austerity?

Austerity (often curiously defined as cutting government spending, particularly entitlements, but not raising taxes) has become one of the most reviled words in the English language, at least in certain quarters. It’s shorthand for cruel bastards who want to preserve the status quo of the richest by impoverishing the rest. Therefore, I use the word knowing the brand I’m putting on myself but don’t you wonder how a country in this sort of predicament can avoid taking the A route.

France has a comprehensive social security (sécurité sociale) system covering healthcare, injuries at work, family allowances, unemployment insurance, and old age (pensions), invalidity and death benefits.  France spends more on ‘welfare’ than almost any other EU country: over 30 per cent of GDP.

Total social security revenue is around E 200 billion per year and the social security budget is higher than the gross national product (GNP), i.e. social security costs more than the value of what the country produces. Not surprisingly, social security benefits are among the highest in the EU. Total contributions per employee (too around 15 funds) average around 60 per cent of gross pay, some 60 per cent of what is paid by employers (an impediment to hiring staff).  The self-employed must pay the full amount (an impediment to self-employment!)  However, with the exception of sickness benefits, social security benefits aren’t taxed; indeed they’re deducted from your taxable income.  Equally unsurprisingly, the public has been highly resistant to any change that might reduce benefits, while employers are pushing to have their contributions lowered.

I’m not sure how the authors arrived at the conclusion that,”… the social security budget is higher than the gross national product (GNP), i.e. social security costs more than the value of what the country produces.” Perhaps they were referring to future liabilities, I don’t know, so view that comment advisedly. Look at it this way. If the US had a similar social insurance system the country would spend about $5 trillion annually on entitlements. Think about that for a minute. Our total budget, or at least what we expect to spend since we don’t do budgets anymore, is around $3.7 trillion and some of us think that’s obscene. France, of course, has no intention of engaging in any sort of pruning, that as some suggest be counter productive and should wait until better times. Of course, no politician in his right mind cuts anything in better times. France will do the austerity walk, it has no choice, it’s subject to Herbert Stein’s law that “If something cannot go on forever, it will stop.” When it does it will be at the most inopportune time.

While we’re on the subject of austerity you might want to read F.F. Wiley’s post on the difficulty if not the fallacy of growing out of our debt problem.

That’s enough musing for one day.