One of the most common–and persuasive– arguments posed by so-called “conservatives” against government regulation is that government should not be “picking winners and losers,” that the market should make those determinations.
So what about the enormous subsidies government provides to fossil fuel interests–subsidies that those same “conservatives” defend?
Paul Krugman had a recent column in which he discussed both the subsidies and the discredited economic theories offered to justify them.The column was prompted by the arrogant response of Stephen Mnuchin to Greta Thunberg’s speech at Davos. Thunberg had called for an end to investments in fossil fuels; Mnuchin suggested that she go “study economics” before making what he implied were uninformed and childish recommendations.
(Krugman also noted that Mnuchin “doubled down” on his claim that Trump’s 2017 tax cut will pay for itself — despite the fact that, just a few days before, his own department had confirmed that the budget deficit in 2019 was 75 percent higher than it was in 2016.)
Krugman explained why “Mnuchin was talking nonsense and that Thunberg almost certainly has it right.” He began with basic economics:
One can only surmise that Mnuchin slept through his undergraduate economics classes. Otherwise he would know that every, and I mean every, major Econ 101 textbook argues for government regulation or taxation of activities that pollute the environment, because otherwise neither producers nor consumers have an incentive to take the damage inflicted by this pollution into account.
But what about those subsidies?
The International Monetary Fund makes regular estimates of worldwide subsidies to fossil fuels — subsidies that partly take the form of tax breaks and outright cash grants, but mainly involve not holding the industry accountable for the indirect costs it imposes. In 2017 it put these subsidies at $5.2 trillion; yes, that’s trillion with a “T.” For the U.S., the subsidies amounted to $649 billion, which is about $3 million for every worker employed in the extraction of coal, oil and gas. Without these subsidies, it’s hard to imagine that anyone would still be investing in fossil fuels.
Krugman points out that, while Thunberg may be young, her views come “much closer to the consensus of the economics profession than those of the guy clinging to the zombie idea that tax cuts pay for themselves.” And he then concludes:
But could the economics consensus be wrong? Yes, but probably because it isn’t hard enough on fossil fuels.
On one side, a number of experts argue that standard models underestimate the risks of climate change, both because they don’t account for its disruptive effects and because they don’t put enough weight on the possibility of total catastrophe.
On the other side, estimates of the cost of reducing emissions tend to understate the role of innovation. Even modest incentives for expanded use of renewable energy led to a spectacular fall in prices over the past decade.
I still often find people — both right-wingers and climate activists — asserting that sharply reducing emissions would require a big decline in G.D.P. Everything we know, however, says that this is wrong, that we can decarbonize while continuing to achieve robust growth.
Given all this, however, why are people like Mnuchin and his boss Trump so adamantly pro-fossil fuel and anti-environmentalist?
Part of the answer, I believe, is that conservatives don’t want to admit that government action is ever justified. Once you concede that the government can do good by protecting the environment, people might start thinking that it can guarantee affordable health care, too.
Given the scale of subsidies we give to fossil fuels, the industry as a whole should be regarded as a gigantic grift. It makes money by ripping off everyone else, to some extent through direct taxpayer subsidies, to a greater extent by shunting the true costs of its operations off onto innocent bystanders.
And let’s be clear: Many of those “costs” take the form of sickness and death, because that’s what local air pollution causes. Other costs take the form of “natural” disasters like the burning of Australia, which increasingly bear the signature of climate change.
In a sane world we’d be trying to shut this grift down. But the grifters — which overwhelmingly means corporations and investors, since little of that $3-million-per-worker subsidy trickles down to the workers themselves — have bought themselves a lot of political influence.
And so people like Mnuchin claim not to see anything wrong with industries whose profits depend almost entirely on hurting people. Maybe he should take a course in economics — and another one in ethics.
Krugman’s being silly. No one in this administration can even spell ethics.