Sunday, October 16, 2011
The tangled history of energy policy is admirably described in the new book by legal scholar Michael Graetz, The End of Energy. Graetz is a professor of tax law at Columbia University and a major thinker about the design of our current tax system. He was at the Yale Law School for almost twenty-five years before that. He also was deputy assistant secretary of the Treasury for tax policy in 1990–1991. His earlier works include proposals to simplify the tax system and an influential book on the inheritance tax. ...
Energy policy is a good case study for politics in modern America, and Graetz’s book is a sobering reminder of the shortcomings of our political system. He shows that the ability of the federal government to respond to long-term challenges is very limited when a good policy will impose short-term costs. The need for taxes on energy externalities such as carbon emissions is central to our ability to reduce the harmful side effects of economic growth. It is striking how the political dialogue in the US has ignored a policy that has so many desirable features. Perhaps, in the near future, faced with the deadline of a dire economic situation, negotiators will formulate such a policy. It would generate substantial revenues while bringing so many long-run economic and environmental benefits. Simply put, externality taxes are the best fiscal instrument to employ at this time, in this country, and given the fiscal constraints faced by the US.