Pigou Club: Another Set of Economists Miss the Mark

I am an admirer of Greg Mankiw and his blog as you may see below. But I cannot for the life of me see what drives this irrational tendency to support this Pigou club. Let me explain.

The Pigou Club alleges to be believers in the Pigouvian Tax. This is a tax on things we do not want people to do. This means that using the economists terms there are negative externalities. Let me give a few examples.

1. Smoking Causes Lung Cancer. Thus was tax cigarettes at an astronomical rate to get people not to smoke. Today that me be $7.00-$10.00 per pack! But people have an alternative. They can give up smoking even if it is a trying experience. They are not deprived of anything by not smoking.

2. Carbs make you fat and fat leads to Type 2 Diabetes.: Thus we would tax carbs. The $0.05 tax per 12 oz can of soda is an example. We could tax all empty carbs, we could tax high fructose corn syrup, if that made sense, and people would not have a major life change. In fact they may get a little nervous from a lack of a sugar rush but that is all.

Now consider a Mankiw type charge.

3. Driving causes congestion. Apparently Mankiw dislikes traffic. Then again he is in Cambridge and I am in New York, most of the time, so he wants to tax people at say $1.00 per gallon in addition to what is there to get them to stop driving. There is a negative effect. People need to drive, they do so to go to work. There are real people who do not work at Harvard who have to drive say to Lynn, or Lowell, or some other place where they cannot get public transportation. There is thus a burden on these people because unlike the sugar or tobacco case they have money taken from them and given to the Government and they then lower their standard of living. This is true Professor Mankiw, I see this in West Virginia, Kentucky, and many other states. Perhaps not in Massachusetts.

4. Carbon Dioxide is Bad and Cap and Trade Reduces it: Well let's go along with the CO2 issue for a moment. Yet as a commercial horticulturalist I could do with warmer weather, I lost a good percent of my seedlings to an overly cold winter, but I digress. Facts are so annoying. Makiw supports the plan proposed by Congressman Ingliss. Simply Ingliss proposes the same Cap and Trade as does the Administration but he says that the Government should give the money back to the taxpayer. Has he gone out of his mind. Has the Government ever given anything back. Just look at Social Security, we pay and they take. Then they complain they cannot meet their obligations. At least the current Administration is not a dreamer. They just want to tax and take away for what they believe is in their best interests.

Consider a simple Cap and Trade calculation.

1. In electrical power today there are 2.4 BmTn of CO2 emitted from electrical power generation.

2. Ingliss proposes a $10 to $100 tax per mTn. This is a tax of $24 B to $240 B.

3. There are 300M people and 80M HH in the US

4. This is a tax of $300 to $3,000 per HH per year.

5. There are current 35M people over 65 collecting Social Security with about 1.5 people per HH. This means that there are 24 M HH of those over 65. They collect $12,000 per person per year.

Thus we will tax the old at a rate of 25% of their gross income! What a great idea Congressman and you too Professor. This will soon take care of the Medicare problem, they will all just freeze to death. I have not included auto taxes on top of this.

Thus the Pigou Club has a strange idea. If there is some bad unintended consequence, a negative externality to be correct in the jargon of the economist, then we tax the user no matter if the result is another unintended consequence to them, such as their death! Only economists can create such a logic!