Two questions on CBO methodology, whose analysis shows essentially no inflationary impact for 2022 and 2023:
1. Does the CBO analysis include the disinflationary effect of the increased tax collection by the IRS? This passage makes it unclear to me:
''The analysis included the effects on the deficit from higher revenues resulting from increased funding for the Internal Revenue Service. Under guidelines agreed to by the legislative and executive branches, those effects are not included in the total line from CBO’s cost estimate reporting the net effect on the deficit. Thus, the effects shown in the memorandum are additional. Those revenues constitute a shift in resources from the private sector to the government that would reduce demand and thus reduce inflationary pressure.'
2. If I'm reading the CBO correctly, when my ACA APTCs (or my solar power credits) increase, that will free up cash for me and I'll spend some of that cash thereby pushing up demand and increasing inflation. But from my point of view, my cost of living has decreased since my health insurance (electricity) costs are lower. Does CBO reflect that decrease of cost of living in its calculations?
"telling young leftists that it was all one big struggle would make it possible to knock health care out of pole position in the prioritization game and get climate to the front of the line"
In retrospect it really does take Kwisatz Haderach oracular sight to see that, despite a pandemic (!!!), climate change (plus Inflation) is a bigger issue than health care.
I wonder about the claim that this is politically worthless. Overall, the argument is cogent. However, climate change appears to be particularly important to young people who have soured on Biden & the democrats more than others. Moreover, midterm voting drops off increasingly with decreasing age, which is a big part of the democrats' midterm penalty. So having a climate accomplishment may be a real political boon with a key segment. I don't honestly know, it would take nuanced data & sensitive analyses to say, but it's plausible.
"Back in the Waxman-Markey days, people thought carbon pricing was the only way to take climate change seriously."
And they were right except that trading emission permits is a pretty bas-akwrds way of doing it.
I await a serious study that estimates how much CO2 will be eliminated this bill. It IS pretty good becasue research is the major component (and "investments" like the EV subsidy much smaller.) But the REALLY important thing is that it reduces the deficit. That will permit the Fed to have lower intereest rates and shift more resources to private investment.
The IRA really does seem to take climate change more seriously than the GND. It’s obvious that the authors put their green eyes shades on and figured out what would really lower carbon emissions and what would be acceptable to the country as a whole. GND struck me as being primarily about creating European style social programs and climate change was the tool to do it with. They didn’t push nuclear power and plants were their only carbon capture technology. I dont think the GND authors really understood the science behind climate change and new tech. It read like something drafted by aging hippies. Technology was always the way out even if that technology is being developed by oil companies. Plus it’s cool and it could create jobs.
As an aside, certain types of mining waste are ideal for storing carbon. Is the Mining waste in West Virginia the type that would be used, and if so would air capture and sequestration be a good jobs program for coal towns in W Virginia?
In general, too much of the political consultant and activist class survive on flooding the zone with baffling (borderline conspiratorial) narratives that confirm a sliver of people's biases that ultimately just don't square with basic facts (like fundraising numbers that show Sinema and Manchin rake in way less money that they otherwise might if they had different positions)...and then utilizing political "loyalty" within your movement to bullshit (in the technical sense) everyone to believing that some good thing that happened (despite your best efforts to ask for too much in threat of others walking away from the table) happened precisely because you played that type of hardball....
Gotta love the “Manchin won’t say no to coal because his family money is in coal”. Is that really more plausible than that he won’t say no to coal because it’s an important industry in his state and if we get rid of coal a bunch of his constituents are going to lose their jobs he wants to get re-elected?
I think something that is very deeply ingrained in the Democratic political psyche is that tangible marketing of the things the government is doing for you is very critical to political success in the future.
This is evident across the entire issue space... a hugely popular theory about the problems with the Obama stimulus is the Social Security tax cut was a bad idea because it was not broadly marketed. Student loan stuff is very popular under the perception that "doing something" for young people (something with a visible and financial impact) is key to retaining their support. The desire for something very visible was also key with how prominent the various relief checks were in the discussion of pandemic aid.
It isn't exactly "checks" but the Green New Deal is a similar theory that you can essentially buy off a huge array of interest groups and voters with various targeted programs (re-training/aid funds for affected fossil fuel workers, various programs targeted at underprivileged folks, and a huge expansion of the social safety net/possible jobs guarantee for everyone).
Ultimately though I think the last two years of polling/politics doesn't really support this theory of the case... people did not really care that much about the relief checks. And frankly the general populace was more skeptical of the Child Tax Credits, etc. than wonks were. The checks/letters were super visible with Trump or Biden's name on them but did not move the needle (as a side note I remember people saying putting Trump's name on the first relief check was somewhere between Machiavellian genius and dirty politics, but it really didn't do anything).
I think it really debunks the theory that directly targeted programs at particular constituencies will create any political impact with those constituencies...
Basically I think the thing is any policy action you do will create a political backlash. You should try to do the best you can while you are in power, but it is unrealistic to think that a great/popular policy will create NEW popularity that you can use for a snowballing "GREEN NEW DEAL" type agenda.
>>In this case, I think Democrats may actually benefit politically from passing the bill because it would give the party license to stop talking about climate change for a year or three. <<
This this this. I hadn't thought about this before, but this would be so welcome. Climate is both the most important political challenge we face and the one most needing depoliticizing. It needs investment and subsidies -- which the people will never rise against -- as well as NRC reform, easier transmission line permitting, lots of actions on the state and local level, and the like. But if we could keep it out of the national political arena? Awesome! Let the Secret Congress do its occasional thing and otherwise let's move on to the next great existential debate.
On the other hand . . . I read this: "Politically, now that they’ve done a Big Important Substantive Thing on climate" and I scream in anguish. It hasn't come close to passing yet! It's not law! I imagine my Jewish mother turning her head, spitting and going "Tfoo tfoo tfoo." Matt, you are just begging for the kinehora; please stop.
I really do not get the sense from the "Climate Left" that they believe there is a desire among the mass public for sweeping climate legislation. While they will often cite issue polls showing their legislation's supposed popularity, that seems more of a supporting justification for why climate legislation should be first on the agenda than the central reasoning. The central reasoning is that the government should have a "moral" commitment to addressing climate change, and in particularly has a moral commitment to younger and future Americans to ensure they will have a hospitable planet in the future (notice how central children are to their campaign). I happen to agree with this reasoning, but the progressives often treat this line of reasoning as self-evident and not based on a series of assumptions baked into their specific worldview, so they neglect the need to convince the mass public to share their worldview. Also, as someone who learned about the greenhouse effect at a young age, I have developed an intuitive understanding on the connections between carbon emissions and climate change, but it is actually quite complex and not very intuitive, and I think educated elites who have been steeped in this world for a long time just have lost a sense of how much all of this just does not register with the average person.
A general problem that plagues the left is that they all believe that the government has a "moral" responsibility to address various ills that plague society (climate change, poverty, racism, lack of healthcare coverage, gun violence, income inequality, etc.), so when it comes time to try and prioritize campaign and legislative issues, they fight over whose issue deserves the highest "moral" priority, which essentially becomes a religious debate divorced from political realities. This view of the government's "moral" obligations is treated as self-evident in progressive circles, as if you are an inherently shitty person if you don't subscribe to it, but I would like to see some writing outlining where precisely this view of "morality" comes from, especially in a left that is increasingly secular.
Having a moral commitment to a livable planet in the future is great so long as you advocate for policies that will actually do that at least cost: a tax on net CO2 and methane emissions.
If you confronted them about how unpopular many of their proposals are I think many will admit that this is true, but that's different from acting as if it's true. What MY is trying to help them realize is that many of their actions don't match reality. Yelling at Manchin over his beliefs that are politically popular is counter productive in that framing.
But I agree that they see this in a moral framework and you can't dissuade people about a good vs evil subject by using practicality arguments.
I think it’s also compounded by the fact that there is alignment in the “feels good” and “is financially beneficial / clout increasing” for them to indulge and there is quite a lot of money / funding at stake these days….
I think the thing that most Bernie folks never truly got about Sanders (though MY clearly gets) is that Bernie Sanders is clearly bullshitting when he says he "believes" that Medicare For All or the Green New Deal can pass...
It's clear that others, like AOC, get this (remember she basically said the quiet part out loud before Nevada?) but there are some folks who just completely miss the wink AND the nod that Sanders is doing...and ultimately...that's what ends up sinking so many of these movements in the long term. A lack of expectation management just burns people out very quickly....as you perpetually seem like you are losing BIG time if you compare gains to asks....
Two words: cancel culture. When you live in an ideological bubble and silence out any possibility for debate even within your own camp the most basic doubts, indeed not even doubts, just pointing out of factual errors, will inevitably be missed. People seem to forget that the strongest case for free speech was based on a very simple and, I should think, self-evident premise: no one is infallible.
What specifically did Summers say? According to WaPo,
“The two men spoke this week, and Manchin listened as Summers talked in detail about why Democrats’ proposed economic package — including its energy provisions — would not lead to higher prices.”
That’s not different from what the Wharton economists said.
So the leftist staffers vetoed a visit to “ a steel factory in the Midwest that was using union labor to manufacture steel with hydrogen rather than coal. ” ?? Well, kids, this is why we can’t have nice things. Seriously, this is fable-level stuff. So much so that I suspect that it is, in fact, just a fable, but a very effective one.
>> Do Democrats want to emphasize the (true) idea that the IRA should moderately reduce inflationary pressures in the economy, or do they want to emphasize the (also true) idea that it’s the most important climate legislation in history? <<
Surely the correct answer is (c), emphasize the bipartisan infrastructure bill.
Two questions on CBO methodology, whose analysis shows essentially no inflationary impact for 2022 and 2023:
1. Does the CBO analysis include the disinflationary effect of the increased tax collection by the IRS? This passage makes it unclear to me:
''The analysis included the effects on the deficit from higher revenues resulting from increased funding for the Internal Revenue Service. Under guidelines agreed to by the legislative and executive branches, those effects are not included in the total line from CBO’s cost estimate reporting the net effect on the deficit. Thus, the effects shown in the memorandum are additional. Those revenues constitute a shift in resources from the private sector to the government that would reduce demand and thus reduce inflationary pressure.'
2. If I'm reading the CBO correctly, when my ACA APTCs (or my solar power credits) increase, that will free up cash for me and I'll spend some of that cash thereby pushing up demand and increasing inflation. But from my point of view, my cost of living has decreased since my health insurance (electricity) costs are lower. Does CBO reflect that decrease of cost of living in its calculations?
"telling young leftists that it was all one big struggle would make it possible to knock health care out of pole position in the prioritization game and get climate to the front of the line"
In retrospect it really does take Kwisatz Haderach oracular sight to see that, despite a pandemic (!!!), climate change (plus Inflation) is a bigger issue than health care.
I wonder about the claim that this is politically worthless. Overall, the argument is cogent. However, climate change appears to be particularly important to young people who have soured on Biden & the democrats more than others. Moreover, midterm voting drops off increasingly with decreasing age, which is a big part of the democrats' midterm penalty. So having a climate accomplishment may be a real political boon with a key segment. I don't honestly know, it would take nuanced data & sensitive analyses to say, but it's plausible.
"Back in the Waxman-Markey days, people thought carbon pricing was the only way to take climate change seriously."
And they were right except that trading emission permits is a pretty bas-akwrds way of doing it.
I await a serious study that estimates how much CO2 will be eliminated this bill. It IS pretty good becasue research is the major component (and "investments" like the EV subsidy much smaller.) But the REALLY important thing is that it reduces the deficit. That will permit the Fed to have lower intereest rates and shift more resources to private investment.
The IRA really does seem to take climate change more seriously than the GND. It’s obvious that the authors put their green eyes shades on and figured out what would really lower carbon emissions and what would be acceptable to the country as a whole. GND struck me as being primarily about creating European style social programs and climate change was the tool to do it with. They didn’t push nuclear power and plants were their only carbon capture technology. I dont think the GND authors really understood the science behind climate change and new tech. It read like something drafted by aging hippies. Technology was always the way out even if that technology is being developed by oil companies. Plus it’s cool and it could create jobs.
As an aside, certain types of mining waste are ideal for storing carbon. Is the Mining waste in West Virginia the type that would be used, and if so would air capture and sequestration be a good jobs program for coal towns in W Virginia?
Speaking of bill names that don’t translate well across the Atlantic, I can’t imagine there will be many pro-IRA politicians running around the UK.
Well other than a plurality of the Northern Ireland assembly and those MPs with the sweet gig of never having to show up for work.
That’s true, SF did take a plurality didn’t they?
In general, too much of the political consultant and activist class survive on flooding the zone with baffling (borderline conspiratorial) narratives that confirm a sliver of people's biases that ultimately just don't square with basic facts (like fundraising numbers that show Sinema and Manchin rake in way less money that they otherwise might if they had different positions)...and then utilizing political "loyalty" within your movement to bullshit (in the technical sense) everyone to believing that some good thing that happened (despite your best efforts to ask for too much in threat of others walking away from the table) happened precisely because you played that type of hardball....
Gotta love the “Manchin won’t say no to coal because his family money is in coal”. Is that really more plausible than that he won’t say no to coal because it’s an important industry in his state and if we get rid of coal a bunch of his constituents are going to lose their jobs he wants to get re-elected?
I'm conservative/libertarian but also an economist. Thus I love the idea of a net zero carbon tax.
Better to tax carbon that labor.
Also I wish we saw more of a focus on regenerative farming to sequester all that carbon while building soil health, and healthy foods
FWIW, here is an interesting blog post by Univ. of California economists. It's extremely detailed. Maybe Matt could give us his "take" some day?
https://energyathaas.wordpress.com/2022/07/25/is-taxing-carbon-really-the-best-way-to-decarbonize-the-grid/
I think something that is very deeply ingrained in the Democratic political psyche is that tangible marketing of the things the government is doing for you is very critical to political success in the future.
This is evident across the entire issue space... a hugely popular theory about the problems with the Obama stimulus is the Social Security tax cut was a bad idea because it was not broadly marketed. Student loan stuff is very popular under the perception that "doing something" for young people (something with a visible and financial impact) is key to retaining their support. The desire for something very visible was also key with how prominent the various relief checks were in the discussion of pandemic aid.
It isn't exactly "checks" but the Green New Deal is a similar theory that you can essentially buy off a huge array of interest groups and voters with various targeted programs (re-training/aid funds for affected fossil fuel workers, various programs targeted at underprivileged folks, and a huge expansion of the social safety net/possible jobs guarantee for everyone).
Ultimately though I think the last two years of polling/politics doesn't really support this theory of the case... people did not really care that much about the relief checks. And frankly the general populace was more skeptical of the Child Tax Credits, etc. than wonks were. The checks/letters were super visible with Trump or Biden's name on them but did not move the needle (as a side note I remember people saying putting Trump's name on the first relief check was somewhere between Machiavellian genius and dirty politics, but it really didn't do anything).
I think it really debunks the theory that directly targeted programs at particular constituencies will create any political impact with those constituencies...
Basically I think the thing is any policy action you do will create a political backlash. You should try to do the best you can while you are in power, but it is unrealistic to think that a great/popular policy will create NEW popularity that you can use for a snowballing "GREEN NEW DEAL" type agenda.
>>In this case, I think Democrats may actually benefit politically from passing the bill because it would give the party license to stop talking about climate change for a year or three. <<
This this this. I hadn't thought about this before, but this would be so welcome. Climate is both the most important political challenge we face and the one most needing depoliticizing. It needs investment and subsidies -- which the people will never rise against -- as well as NRC reform, easier transmission line permitting, lots of actions on the state and local level, and the like. But if we could keep it out of the national political arena? Awesome! Let the Secret Congress do its occasional thing and otherwise let's move on to the next great existential debate.
On the other hand . . . I read this: "Politically, now that they’ve done a Big Important Substantive Thing on climate" and I scream in anguish. It hasn't come close to passing yet! It's not law! I imagine my Jewish mother turning her head, spitting and going "Tfoo tfoo tfoo." Matt, you are just begging for the kinehora; please stop.
I was just asking myself this… “wait, did this even pass yet??”
I really do not get the sense from the "Climate Left" that they believe there is a desire among the mass public for sweeping climate legislation. While they will often cite issue polls showing their legislation's supposed popularity, that seems more of a supporting justification for why climate legislation should be first on the agenda than the central reasoning. The central reasoning is that the government should have a "moral" commitment to addressing climate change, and in particularly has a moral commitment to younger and future Americans to ensure they will have a hospitable planet in the future (notice how central children are to their campaign). I happen to agree with this reasoning, but the progressives often treat this line of reasoning as self-evident and not based on a series of assumptions baked into their specific worldview, so they neglect the need to convince the mass public to share their worldview. Also, as someone who learned about the greenhouse effect at a young age, I have developed an intuitive understanding on the connections between carbon emissions and climate change, but it is actually quite complex and not very intuitive, and I think educated elites who have been steeped in this world for a long time just have lost a sense of how much all of this just does not register with the average person.
A general problem that plagues the left is that they all believe that the government has a "moral" responsibility to address various ills that plague society (climate change, poverty, racism, lack of healthcare coverage, gun violence, income inequality, etc.), so when it comes time to try and prioritize campaign and legislative issues, they fight over whose issue deserves the highest "moral" priority, which essentially becomes a religious debate divorced from political realities. This view of the government's "moral" obligations is treated as self-evident in progressive circles, as if you are an inherently shitty person if you don't subscribe to it, but I would like to see some writing outlining where precisely this view of "morality" comes from, especially in a left that is increasingly secular.
Having a moral commitment to a livable planet in the future is great so long as you advocate for policies that will actually do that at least cost: a tax on net CO2 and methane emissions.
If you confronted them about how unpopular many of their proposals are I think many will admit that this is true, but that's different from acting as if it's true. What MY is trying to help them realize is that many of their actions don't match reality. Yelling at Manchin over his beliefs that are politically popular is counter productive in that framing.
But I agree that they see this in a moral framework and you can't dissuade people about a good vs evil subject by using practicality arguments.
I think it’s also compounded by the fact that there is alignment in the “feels good” and “is financially beneficial / clout increasing” for them to indulge and there is quite a lot of money / funding at stake these days….
I think the thing that most Bernie folks never truly got about Sanders (though MY clearly gets) is that Bernie Sanders is clearly bullshitting when he says he "believes" that Medicare For All or the Green New Deal can pass...
It's clear that others, like AOC, get this (remember she basically said the quiet part out loud before Nevada?) but there are some folks who just completely miss the wink AND the nod that Sanders is doing...and ultimately...that's what ends up sinking so many of these movements in the long term. A lack of expectation management just burns people out very quickly....as you perpetually seem like you are losing BIG time if you compare gains to asks....
Two words: cancel culture. When you live in an ideological bubble and silence out any possibility for debate even within your own camp the most basic doubts, indeed not even doubts, just pointing out of factual errors, will inevitably be missed. People seem to forget that the strongest case for free speech was based on a very simple and, I should think, self-evident premise: no one is infallible.
“Do Democrats want to emphasize the (true) idea that the IRA should moderately reduce inflationary pressures in the economy”
Who says so? Because the eggheads at Wharton say otherwise:
“The impact on inflation is statistically indistinguishable from zero.”
https://budgetmodel.wharton.upenn.edu/issues/2022/7/29/inflation-reduction-act-preliminary-estimates
Nothing fiscal affects inflation without a link through monetary policy.
Larry Summers says otherwise, and, like him or loathe him, he's A) not an intellectual lightweight, and, B) he's been more right than wrong recently.
What specifically did Summers say? According to WaPo,
“The two men spoke this week, and Manchin listened as Summers talked in detail about why Democrats’ proposed economic package — including its energy provisions — would not lead to higher prices.”
That’s not different from what the Wharton economists said.
https://twitter.com/LHSummers/status/1552445404637466624?s=20&t=RNtqSOIejxsS8JsJSVVnHg
So the leftist staffers vetoed a visit to “ a steel factory in the Midwest that was using union labor to manufacture steel with hydrogen rather than coal. ” ?? Well, kids, this is why we can’t have nice things. Seriously, this is fable-level stuff. So much so that I suspect that it is, in fact, just a fable, but a very effective one.
Replace "leftist staffers" with Ron Klain and I suspect it's closer to the actual story Matt is describing.
So you think that there is such a plant in the Midwest and the story literally happened more or less as told?
Based on 30 minutes of Googling, I'd guess it was this plant, but obviously that's pure speculation.
https://www.clevelandcliffs.com/operations/steelmaking/toledo-dr-plant
>> Do Democrats want to emphasize the (true) idea that the IRA should moderately reduce inflationary pressures in the economy, or do they want to emphasize the (also true) idea that it’s the most important climate legislation in history? <<
Surely the correct answer is (c), emphasize the bipartisan infrastructure bill.
Matt says there is no carbon price, but methane is charged $900 per ton in 2024 rising to $1500 per ton in 2026.
It’s not a comprehensive price but it’s a pretty good start for a GHG with a large multiple of global warming potential compared to CO2.