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Articles by Jim Barrett

Jim Barrett is an economist and executive director of Redefining Progress.

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Peter Barnes’ carbon policy proposal would not spur the economic changes we need

Jim Barrett Politics

I should preface by saying that I am a fan of Peter Barnes. He’s an emeritus board member of Redefining Progress. He’s a smart and thoughtful guy. But I’m not a fan of his cap and dividend idea, mostly from an economic perspective.

First, the idea that a price on carbon would be transformative, and that we should do that first and then come in with other complementary policies later, is dangerously wrong. Transportation and building heating/electricity are the two largest contributors to carbon emissions, accounting for well over half the total. The price elasticity on transportation fuels is very low, as we’ve seen. With gas prices up $2 per gallon in the last three years, we’re now finally seeing small reductions in driving, somewhere in the neighborhood of 4%. $2 per gallon of gas is roughly the equivalent of $200 per ton of carbon, a price impact that the failed Lieberman Warner bill wouldn’t have brought until beyond 2040, if then.

Home energy use is not only terribly price inelastic (people light and heat their homes out of habit and necessity, not on the basis of price), so that we’d need very high ... Read more

Jim Barrett Politics

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  • The green tax credits are good ideas, but not good stimulus ideas

    So, maybe you've heard: the economy looks like it might be headed for the tank. You may have also noticed that there's an election this year. That means it must be time for a stimulus package on Capitol Hill. No one up there wants to head into reelection with rising unemployment, a rash of foreclosures, and falling incomes on their hands, without at least looking like they're doing something about it. So there's a rush on the Hill to get a "stimulus package" out the door to help boost the economy ASAP.

    Cynicism aside, I think this is a good thing. People are suffering, and if the government can do something about it, why shouldn't they? It sometimes seems like heresy these days, but I tend to think it's what we pay them to do.

    The problem is that some of the stimulus proposals floating around, including ones by our green friends (see Josh Dorner's post for example), are not very good stimulus policies. It's not that any of these ideas are bad. Most of them are downright good. Excellent, even. The problem is that almost none of them can be remotely classified as stimulus.

    Here's the problem, or at least one of them: Since World War II, the average recession has lasted just 11 months. Add the fact that it takes a fair bit of time (anywhere from 3 to 6 months) before we even recognize that we're in a recession. Add still more time to decide what to do about it, and more time on top of that for whatever we decide to do to actually have an effect, and you see the problem. Even for the quickest policy approach, we could be solidly 7 months into an 11 month recession before we can have any impact.

    There is a very short window for policy to stimulate the economy. If we don't act fast enough, the policy won't take effect soon enough to help anyone. If we're late enough, the policy ends up hitting the economy when it's on the upswing, and instead of smoothing out the business cycle, we end up contributing to it.

    Jim Barrett Politics