21st Century Agenda for America

Pigou and Climate Change

When you dislike something, it makes sense to tax it right? Taxing bads or undesirable goods is as old as recorded history. The abstemious Roman, Cato, the Elder, imposed a ten fold tax on goods costing more than 1500 drachmas, Plutarch tell us, to discourage luxury spending. Over the centuries, people have taxed luxuries (sumptuary taxes), alcohol and tobacco (sin taxes) and, recently, pollution.

Modern economic theory calls those taxes Pigovian after the British economist Arthur Pigou who formalized their study. However, to survey taxation today is to find that more often than not government taxes not bad things but good ones! Government taxes income, communications, housing and even jobs through payroll taxes. Since jobs are something we ought to subsidize, the obvious question is why tax them? The answer is that there are rarely enough bad things to go around so government ends up taxing things that are good.

With the realization that CO2 in the atmosphere creates a greenhouse effect that threatens life on the planet, it is now clear that CO2 in the air can be a bad thing. In 1993, this led Al Gore to propose a BTU tax-an indirect tax on carbon--that ended up dying on the congressional budget room floor, replaced with a small increase in the gas tax. More recently, however, it has led to serious efforts to explore the merits of a carbon tax. Indeed in his Nobel Prize acceptance speech last year, Vice President Gore called for just such a tax to put a price on carbon

The benefits of a carbon tax are obvious. The major challenge that a carbon tax is, after all, a tax and therefore would raise the price of energy at the expense of business and consumers. But what if the revenue from the tax were used to offset taxes on a good thing-for example, jobs? The result would be a revenue neutral shift from taxing good things to bad things and a net gain in social welfare.

NDN's Rob Shapiro has been studying the carbon tax for some time. Last year, drawing on research by William Nordhaus at Yale, he found that a carbon tax would compare favorably with other policy options in limiting price volatility in the energy sector. Recently, Rob co-founded the U.S. Climate Task Force to explore climate issues together with former Clinton Administration official, Elaine Kamarck who will be speaking on this and other issues at NDN's March 12th Forum.

Can a carbon tax regime find global acceptance? Other approaches to cutting CO2 such as a cap and trade system have their advantages as well. But whatever the final mix of policy levers, it is clear that a carbon tax coupled with a payroll reduction is gaining traction. Stay tuned.

A global recession for democracies?

I strongly recommend Larry Diamond's article, The Democratic Rollback, in the new issue of Foreign Affairs. He discusses how we can best foster democracy and civil society in aspiring nations, a theme I've discussed here and here, and one of our most urgent global governing challenges. The piece begins:

Since 1974, more than 90 countries have made transitions to democracy, and by the turn of the century approximately 60 percent of the world's independent states were democratic. The democratization of Mexico and Indonesia in the late 1990s and the more recent "color revolutions" in Georgia and Ukraine formed the crest of a tidal wave of democratic transitions. Even in the Arab world, the trend is visible: in 2005, democratic forces in Lebanon rose up to peacefully drive out Syrian troops and Iraqis voted in multiparty parliamentary elections for the first time in nearly half a century.

But celebrations of democracy's triumph are premature. In a few short years, the democratic wave has been slowed by a powerful authoritarian undertow, and the world has slipped into a democratic recession. Democracy has recently been overthrown or gradually stifled in a number of key states, including Nigeria, Russia, Thailand, Venezuela, and, most recently, Bangladesh and the Philippines. In December 2007, electoral fraud in Kenya delivered another abrupt and violent setback. At the same time, most newcomers to the democratic club (and some long-standing members) have performed poorly. Even in many of the countries seen as success stories, such as Chile, Ghana, Poland, and South Africa, there are serious problems of governance and deep pockets of disaffection. In South Asia, where democracy once predominated, India is now surrounded by politically unstable, undemocratic states. And aspirations for democratic progress have been thwarted everywhere in the Arab world (except Morocco), whether by terrorism and political and religious violence (as in Iraq), externally manipulated societal divisions (as in Lebanon), or authoritarian regimes themselves (as in Egypt, Jordan, and some of the Persian Gulf monarchies, such as Bahrain).

Before democracy can spread further, it must take deeper root where it has already sprouted. It is a basic principle of any military or geopolitical campaign that at some point an advancing force must consolidate its gains before it conquers more territory. Emerging democracies must demonstrate that they can solve their governance problems and meet their citizens' expectations for freedom, justice, a better life, and a fairer society. If democracies do not more effectively contain crime and corruption, generate economic growth, relieve economic inequality, and secure freedom and the rule of law, people will eventually lose faith and turn to authoritarian alternatives. Struggling democracies must be consolidated so that all levels of society become enduringly committed to democracy as the best form of government and to their country's constitutional norms and constraints. Western policymakers can assist in this process by demanding more than superficial electoral democracy. By holding governments accountable and making foreign aid contingent on good governance, donors can help reverse the democratic recession.

As the economy slows, keeping the focus on the struggle of every day people

Lots of stories today about the terrible jobs report, and what this means for the marcoeconomy. David Leonhardt from the Times does a terrific job today putting all this news in perspective, and reminds us that far too many Americans had not shared in the wealth created in the Bush era:

If history is a reliable guide, the recession of 2008 is now unavoidable.

The dismal jobs report released Friday showed overall employment to be lower than it was three months ago. Every time such a slump has occurred since the early 1970s, a recession has followed - or already been under way.

And if the good times have really ended, they were never that good to begin with. Most American households are still not earning as much annually as they did in 1999, once inflation is taken into account. Since the Census Bureau began keeping records in the 1960s, a prolonged expansion has never ended without household income having set a new record...

Recent recessions have inevitably brought inflation-adjusted income declines for most families, which would be particularly painful given what has happened over the last decade. For a variety of reasons that economists only partly understand - including technological change and global trade - many workers have received only modest raises in recent years, despite healthy economic growth.

The median household earned $48,201 in 2006, down from $49,244 in 1999, according to the Census Bureau. It now looks as if a full decade may pass before most Americans receive a raise.

What this all means for economic policy is that whatever set of policies are put into place to put the economy back on track they must be capable of addressing the struggle experienced by every day people prior to the current slowdown/recession. Offering up such a strategy has been at the heart of our economic work at NDN these past several years, and based on our recent major survey of American public opinion, is what Americans are desperately looking for. Looking back at the exit polls in 2006, there is even a very strong case that it was unhappiness with the economy that was the primary cause of the extraordinary GOP defeat in the fall elections.

Some highlights of what we've been advocating for:

A New Economic Strategy for America that makes globalization work for all Americans - In a recent paper Rob Shapiro argues that America needs a comprehensive new economic strategy, one that tackles rising health care and energy costs, accelerates innovation and makes significant investment in human capital and infrastructure.

A More Modern Approach to Trade Liberalization - In a major paper about the future of US trade policy, Rob Shapiro and I argue for a a continued commitment to global liberalization but only if coupled with a substantial new domestic approach to help those struggling with globalization prosper.

A New Committment to 21st Century Skills - In two papers, a Laptop in Every Backpack and Tapping the Resources of America's Community Colleges, NDN makes the case for a new national strategy to ensure that all Americans have the capacity to work in the much more IT-intensive work environment of the 21st century.

A Better Understanding of What is Driving Growth - In a new paper, The Idea-Based Economy and Globalization: The Real Foundations of American Prosperity in the 21st Century, Rob Shapiro describes how the American economy is undergoing an historic transformation from one built on hard physical assets to one built on intellectual property and intangibles - "ideas." The implications for policy makers here and abroad are only just being understood, and need to be if better understood in crafting future American policies to accelerate future growth.

The Need to Invest in our Aging Infrastructure - In a major new paper, NDN Fellow Michael Moynihan makes the case a major new commitment to investing in domestic infrastructure will help drive future growth and improve America's quality of life.

A 21st Century Immigration System -We need a much more modern approach to bring both high and low skilled workers into America, in ways that meet the needs of our modern economy and does so in a way consistent with our values. NDN has been one of the leading institutions championing a thoughtful approach to immigration reform, and certainly for those looking to relieve downward pressure on wages and benefits for American workers bringing the 5% of the workforce that is undocumented under the protection of American law, giving them access to the minimum wage and the ability to unionize would be a good place to start.

NDN also recently announced a major new initiative, tentatively titled the Green Project, which will be looking at ways to help transition our nation to a post-carbon economy while maintaining growth.

The economic path forward will not be easy, inexpensive or full of quick fixes. Globalization is bringing about structural changes in our economy that are not well understood, and helping make the American Dream a much more distant reality for too many. Whatever set of policies the nation pursues in the years ahead, it is critical we take a long-term view, and advance a comprehensive agenda that tackles the underlying structural challenges of what was already a very tough go of it in the age of Bush.

To talk more about all this be sure to come to our Forum this Wednesday, March 12th, in Washington, DC. Rob Shapiro, the Chair of our Globalization Initiative, will be speaking about these and other matters at 1:15pm.

What Transformative Policies are up to the Challenge of Climate Change?

A growing political consensus is emerging that climate change is real, is only getting worse, and that something must be done to deal with it. But what? And at what scale? And at what kind of timetable?

Many, like former Vice President Al Gore, argue that we must make big changes very fast. We must put forward transformative policies asap. In fact, in his speech accepting his Nobel Pease prize, Gore called for a comprehensive shift to a carbon tax. Such a tax would shift the incentives of the economy towards clean energy and away from any energy that emits carbon, the critical gas that is a major contributor to global warming. But it also would send shock waves through the economy, creating a lot of new winners and a bunch of losers. Instituting a carbon tax, though arguably very beneficial in the long run, would be extremely difficult to get through in the short run.

Instituting a carbon tax in America sometime soon is something we can expect Elaine Kamarck to comment on in her appearance in next week’s event on “A Moment of Transformation.” Kamarck is at Harvard’s Kennedy School of Government after a career in politics and government. She served in the Clinton White house from 1993 to 1997, creating and managing what was known as the reinventing government initiative. She then served as Director of the Kennedy School’s Vision of Governance for the 21st Century. Then she took a leave of absence to work as a senior policy advisor in the 2000 campaign for Al Gore.

Kamarck now is about to co-chair the Climate Task Force, a new organization bringing businesses and environmentalists together around the most effective ways to address climate change. Among other things, they will undoubtedly consider a carbon tax, or cap and trades, or any of the many other ideas out there for how America can become a global leader in responding to the changing climate.

We look forward to hearing what insights she can give about how transformative a time we are in. And we hope you will join us for this free, day-long event, next Wed. (March 12) in Washington, DC. If interested, just RSVP. See you there.

Peter Leyden
Director of the New Politics Institute


Making Cleantech Happen

For those wanting to take a break from the campaign, here is a report on climate change and clean technology....

When it comes to addressing climate change how do we do more than play at the margins? That was the challenge posed by San Francisco Mayor Gavin Newsom at the latest Cleantech conference bringing together venture capitalists, hedge fund managers, clean tech entrepreneurs and others seeking market solutions to climate change. Noting that San Francisco has the largest fleet of plug in hybrids in the country-three, Newsom warned that despite all the promise of new clean technologies, rollout has barely begun A lot of low hanging fruit is out there, Newsom exhorted, but mayors, governors, corporations and people need to do reach out and pick it.

At the latest Cleantech, a conference that has gone from filling a room to an entire hotel in just three years, a host of visionaries and venture capitalists looking to cash in on what John Doerr says is a bigger opportunity than the Internet, exchanged the latest news on thin film solar technologies, biofuels, windmills and electric cars as oil economists predicted gas prices of over $4 per gallon this summer and higher prices ahead. With global oil production at close to full capacity and China and India just beginning their consumption trajectories, oil prices (as well as those of natural gas) seem almost certain to continue to climb. Falling prices of batteries, solar power and other renewables have made clean technologies the obvious solution to a looming energy and climate disaster. But first costs have to drop and acceptance has to increase.

Concentrating solar power through mirrors is one promising way to bring the cost of solar power down. So are thin films-the use of sun absorbing foil and other materials--in place of expensive silicon. To store intermittent wind, water and solar energy, better and cheaper storage, whether mechanical or chemical in the form of lithium ion batteries, will be critical. Finally, new business and pricing models will be important to the rollout of electric cars, home generation of electricity and other consumer methods of creating power.

While the technologies on display were impressive, they are not developing quickly enough to stop, for example, the melting of the summer Arctic ice cap. That's where policy will be critical. The easiest lift is efficiency. California consumes only one half the energy of the country as a whole at no loss to consumers. Speakers agreed on the need to "put a price on carbon" whether through a carbon tax or cap and trade system with several projecting that the United States would have a cap and trade system in place within 24 months. A "feed in" tariff such as that employed in Germany that pays consumers for producing power, predictable instead of on-and-off subsidies and decoupling of production from purchase markets were also mentioned as critical levers.

Blocking progress has been the stodgy nature power utilities-the largest customer for many products--that operate under a web of regulation. Absent in the industry so far has been the adrenaline of cost reduction through mass production-the driver of the consumer electronics, cell phone and Internet revolutions.

While no one has yet figured out a way to marry the speed of the Internet to clean technology, next month Vice President Gore's Alliance for Climate Protection will begin a multi million dollar ad campaign to raise awareness of the danger of climate change and hopefully accelerate action.

Indeed, other countries are arguably outpacing the United States. At the conference, Dr. Sultan Ahmed al Jaber of the UAE accepted an award for the UAE's $15 billion clean tech initiative, Masrad. If the US has one strength it is innovation and high tech companies are rushing to get into the game with Google, in particular, making a huge push to reduce its carbon footprint and offering $10 million to companies making a plug-in hybrid car. Google has installed one of the world's largest collections of solar panels the Googleplex.

I'll be back in California later in the month to meet with clean tech participants and NDN members to learn about your efforts and insights regarding this challenge. Or email me at mmoynihan@ndn.org.

Shai Agassi and the Transformation of Transportation

One of the speakers at our Moment of Transformation day-long conference on March 12th will be a high tech entrepreneur with no experience in politics. But, like everyone else at this event, he is in the transformation business. And political people will find it useful to listen closely to what he has to say.

Shai Agassi is trying to transform the $1.5 trillion-a-year auto industry and eventually make the $1.5 trillion-a-year gasoline industry obsolete. He is the CEO of a Silicon Valley start-up called Better Place that is trying to jumpstart the electric car business with an approach to building an infrastructure for swapping out batteries in a practical, quick way.

Agassi is no wide-eyed dreamer. He was one of a handful of top executives at SAP, the third-largest software company in the world, and he barely was edged out for the top CEO position in 2007. When he did not get that job, he left to become the founder and CEO of Better Place. Since then he has successfully lobbied the Israeli government to back his plan to quickly scale up electric cars in Israel. He has raised more than $200 million in venture capital, and found a auto-company partner in Renault Nissan. This plan is for real. For the detaield version of this amazing tale, check out a recent BusinessWeek story.

Agassi will be speaking late in the morning on March 12th about his big, bold idea and what it takes to think and act in a transformative manner. With all the talk about change and even transformative change coming to politics, we will be stepping back and talking about just how transformative the changes could be in America and the world as we come off this historic election. Agassi will be just one of about a dozen people talking about the transformations happening in their fields of expertise.

We hope that you will come and join many others in giving your insights into what kind of change we will see coming in the months and years ahead. Spread the word about this free, open event among your friends and colleagues. And then make sure you come and RSVP. Thanks .

Peter Leyden
Director of the New Politics Institute

Taking stock of the conservative movement

Evan Thomas takes a very in depth look at William Buckley and his legacy in a Newsweek cover story this week.

While Mr. Buckley brought a great deal of charm to our politics, the great conservative experiement he helped launch cannot be considered an historical success. I don't have time today to write about this big subject, but NDN has written a great deal about the monumental failure of modern conservatism, the bulk of which can be found in our Meeting the Conservative Challenge portion of our site. Pete and I took a much longer look at the end of the conservative ascendency in our recent essay, The 50 Year Strategy.

For more on this debate be sure to come to our major forum next Wednesday March 12th, in DC, A Moment of Transformation?

Another Transformation: The New Geopolitics of China and India Rising

Any talk about transformative change in the world today must at some point look at the rise of China. The rise of China, along with the rise of India and Asia in general, is fundamentally restructuring the geopolitics of the early 21st century. So in our Moment of Transformation gathering on March 12, we will be looking hard at the emergence of China and its impact on US foreign policy. And we are extremely fortunate to have Orville Schell to help guide us.

Orville Schell deeply understands China and has been studying it since the 1960s as a student, academic, journalist and author. He is the author of no less than 9 books on China, including Mandate of Heaven: The Legacy of Tiananmen Square and the Next Generation of China's Leaders. His books are a nice blend of deep thinking that can be found in academic writing (he has a Ph.D. in Chinese History from UC Berkeley) with a contemporary understanding of a working journalist (for example, he covered the war in Indochina in the 1960s).

It is no wonder that when the New York-based Asia Society was looking for a director to head its new Center on U.S.-China Relations, they wooed Orville. To get a sense of Schell see his masterful interview of Henry Kissinger at the inauguration of the Center in New York about a year ago.

When he joined the Asia Society, Schell had just completed a decade as Dean of the UC Berkeley Graduate School of Journalism, where he helped move the program into the new multimedia digital age. Schell was known for opening the school to a variety of non-traditional teachers, often working journalists and writers who would give open lectures and teach classes for a time. He did much to move the school towards preparing students to be fluent in the ways of video and the web.

Schell now gets to China quite a bit and has done much thinking about how America should deal with this emerging giant. Come to the Transformation event to see him and a great lineup of people with similar stature in different fields. Just be sure to RSVP.

Peter Leyden
Director of the New Politics Institute

A Different Kind of Event for a Transformational Moment

We’ve been talking a lot on the blog and our websites about our upcoming event called “A Moment of Transformation.” This is not a typical Washington DC event, but more like a new breed of conference that is appearing in the private sector. These conferences focus on presenting big ideas from many disciplines in a memorable way. They seek to bring together a remarkable collection of speakers and leave much room for discussion and networking.

The conference that set the standard in this realm is the TED conference, which originally stood for Technology, Entertainment and Design conference, but now is just known as TED. This week TED is being held in Monterrey California, on the Pacific coast, with a simulcast linked to Aspen, Colorado. You can get a good background of that conference here, or just watch video of past events off the TED site.

TED pretty much does not deal with politics or government. However, our Transformative Moment event does. (TED also costs $6,000 and our event is free.) We have pulled together a terrific group of speakers who will talk bout the transformations happening in their fields with an eye towards how they might impact politics and government. In the run-up to the conference in a couple weeks, we will highlight some of them, starting with Amory Lovins.

Amory Lovins has blazed a trail over the last couple decades in understanding how to build a sustainable economy with clean energy in very practical ways. He was one of the coauthors of the seminal book Natural Capitalism, which talked about how to use market mechanisms to reward energy efficient, sustainable behavior. He then coauthored the extremely practical Factor Four, which focused on very specific ways to improve energy efficiency by a factor of four. His latest book is Winning the Oil Endgame, which carries on in this tradition, looking at how to overcome our oil transportation hurtles.

Amory is cofounder and now Chairman and Chief Scientist of the Rocky Mountain Institute, a non-profit looking at a broad range of issues having to do with sustainability. RMI was way ahead of the curve on talking about sustainability, starting in 1982. They now have a staff of about 40 people based in Colorado.

Amory has been given many awards, including a coveted MacArthur Fellowship, known as a genius grant. I got to know him through his involvement in Global Business Network, a pioneering think tank on the future. He was one of their 120 remarkable people who helped many private sector companies to understand the big trends shaping the future. Amory is sure to do the same for us at the March 12th event. I hope you come and see.

In the meantime check out a two-minute video below of Amory at TED where he discusses how we can reduce oil dependency.

Peter Leyden
Director of the New Politics Institute

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