The Wonk Room

Cap And Rebate Scheme Based On Libertarian Mistrust Of Communities

Peter Barnes

At Gristmill, economist Peter Barnes hails the demise of the Lieberman-Warner cap-and-trade bill as an opportunity to propose his favored alternative:

A revenue-neutral cap would cover all carbon entering the economy, auction all permits, and return the proceeds to every American equally, ideally as monthly dividends.

I agree wholeheartedly that all greenhouse emissions permits should be auctioned, but Barnes is wrong when he advocates that all proceeds should then be cut as rebates (or “dividends”) to American taxpayers. As the Center for Budget and Policy Priorities has found, reserving just 14 percent of all proceeds for direct rebates can fully protect low-income Americans from potential costs. By contrast, Barnes’s cap-and-rebate proposal — which he’s variously sold as “cap-and-recycle,” “cap-and-dividend,” and “Sky Trust” — is founded on the libertarian belief that government shouldn’t be trusted with any money. As he’s written:

If you assume the atmosphere belongs to government, then cap-and-auction is your choice. If you assume the atmosphere is a gift to everyone, then cap-and-recycle follows.

Implicit is the assertion that our government is not representative of the American people — a corrosive, anti-American philosophy. In a slideshow supporting cap-and-rebate, the eminent climate scientist and “middle-of-the-road conservative” James Hansen admitted this anti-government philosophy more bluntly: “keep hands off money!”

Creating the green economy that breaks our addiction to fossil fuels and solves global warming requires investment at all levels of community — local, state, federal, and global. Barnes’s proposal is bad politics and bad policy. Read the Center for American Progress report, Investing in a Green Economy, for a better way.