Coyote Blog

Thomas Friedman outlines what he would do first to attack climate change

Well, the first thing we would do is actually slash income taxes and corporate taxes and replace them with a carbon tax so we actually encourage people to stop doing what we don't want, which is emitting carbon, and start doing what we do want, which is hiring more workers and getting corporations to invest more in America.

Friedman is a bit disingenuous here, as he proposes this in a way that implies that deniers (and probably evil Republicans and libertarians) oppose this common sense approach.  Some may, but I would observe that no one on the alarmist side or the Left side of the aisle is actually proposing a carbon tax that 1:1 reduces other taxes.  The only person I know who has proposed this is Republican Jeff Flake, who proposed a carbon tax that would 1:1 reduce payroll taxes.

As I said back then, I am not a big fan of taxes and think that the alarm for global warming is overblown, but I could easily get behind such a plan.  Payroll taxes are consumption taxes on labor.  I can't think of anything much more detrimental to employment and economic health.  So Flake's proposed shift from a consumption tax on labor to a consumption tax on carbon-based energy sources is something I could get behind.  I probably would do the same for Friedman's idea of shifting taxes from income to carbon.  But again, no one is proposing that for real in Congress.  The only plan that came close to a vote was a cap and trade system where the incremental payments would go into essentially a crony slush fund, not reduce other taxes.

Of course, since this is Friedman, he can't get away without saying the government should invest more in infrastructure

 the federal government would borrow money at almost 0 percent and invest it in infrastructure to make our cities not only more resilient, but more efficient.

In TARP and the stimulus and various other clean energy bills, the government borrowed almost a trillion dollars at 0% interest.  How much good infrastructure got done?  About zero.  Most of it just went to feed government bureaucrats and planning studies or ended up as crony payments to well-protected entities (Solyndra, anyone?).  The issues with government infrastructure investments, which Friedman has never addressed despite zillions of articles on infrastructure, are not the borrowing rate but

• The incentive and information problems the government has in making investments of any sort.
• The vast environmental, licensing, and NIMBY factors that make it virtually impossible to do infrastructure projects any more, at least in any reasonable time frame.

I missed this editorial from back in April, but it is a classic.  If you want one of the greatest illustrations of the phrase "if all you have is a hammer, everything looks like a nail", here is is.

UNTIL we fully understand what turned two brothers who allegedly perpetrated the Boston Marathon bombings into murderers, it is hard to make any policy recommendation other than this: We need to redouble our efforts to make America stronger and healthier so it remains a vibrant counterexample to whatever bigoted ideology may have gripped these young men. With all our warts, we have built a unique society — a country where a black man, whose middle name is Hussein, whose grandfather was a Muslim, can run for president and first defeat a woman in his own party and then four years later a Mormon from the opposition, and no one thinks twice about it. With so many societies around the world being torn apart, especially in the Middle East, it is vital that America survives and flourishes as a beacon of pluralism....

So what to do?  We need a more “radical center” — one much more willing to suggest radically new ideas to raise revenues, not the “split-the-difference-between-the-same-old-options center.” And the best place to start is with a carbon tax.

I have been toying with a concept I am calling national adolescence.  My emerging theory is that civilizations go through phases much like that of a human male, and the most dangerous to all around it is adolescence.  Adolescent males can do crazy, unproductive things to show off, to count coup, to bolster their ego and perceived status.  They are more prone to being violent and dangerous, to pick stupid fights to prove their alpha-maleness rather than to achieve rational goals.

Nations often go through an adolescent phase.  Sometimes it can last for decades or centuries.  Two symptoms of this phase are 1) Imperialism and over-readiness to fight and 2) monument-building and other such show-offery.

I have written a number of times about monument building, for example here.  We see it in countries trying to build record-tall buildings -- note who is doing it, they are always the nouveau riche (e.g. Dubai).  We see it in cities wanting to have light rail systems in order to be considered a real city (ie as a status project).  We see it in every Thomas Friedman column about China doing big things while we are not.  And we see it now in the fear that somehow having China sending men into space 50 years after the US and USSR did so somehow is a marker in the decline and fall of the US.

I don't buy it.  What you are seeing, what Thomas Friedman is seeing, is adolescence.  We may regret lacking as much youthful vitality, but we should not aspire to the adolescent's poor judgement.  Our sixties space program went exactly nowhere, except to let us count coup on the rest of the world and cement our status.  The Chines space program as currently configured will achieve nothing more.

PS-  The Egyptians may be a good example.  All the great Pyramids were built when the Egyptian civilization was really young.  There are a variety of reasons why pyramid building ended, but surely a maturing confidence in their civilization's greatness must be one.

This is my favorite chart I have seen in a while:

I don't know how one would even think to graph these two variables, but it is an interesting picture of the life cycle of development, where infrastructure improvements are initially an important part of the development equation, and then fall off, percentage wise, as wealth is enhanced with softer goods.

Anyone off the chart on the high side are going to be what I would call the triumphalists, who do what Thomas Friedman seems to want and pour a disproportionate share of money into high-visibility monuments (e.g. tall buildings, dams, bridges, high speed rail, etc).  I don't see Dubai on here but if they were they might be off the top of the chart.

Zero Hedge links this chart to make a point they have made for a while about a massive bubble bursting coming soon to China, a position with which I agree (though the timing is always a question in such things -- the state has the ability to delay the reckoning at the cost of a worse crash when it eventually comes).

Disclosure:  I am short Chinese real estate and stock funds.

I don't have time today to link all the evidence, but the combination of crashing real estate markets and the Chinese government jamming liquidity into its banks tells me the China bubble is bursting as we speak.

This is an interesting test of the Austrian view of depressions vs. the Keynesian / Krugman / Thomas Friedman / MITI view of government-orchestrated prosperity.  If the latter are right, then China is doing more right to keep their economy going than any country in history and you should go invest all your money in Chinese real estate.

However, if one believes the Austrian model about government-enforced mis-allocation of capital and labor leading to bubbles and crashes; if one believes that the technocrat-beloved MITI was largely responsible for the Japanese lost decade; if one believes that the US govenrment through articially low interest rates and government-directed reductions in underwriting quality helped create the housing bubble -- then the mother of all crashes is looming in China.  Because no country has done more to reallocate resources and capital based on the whims of a few technocrats  and well-connected industrialists than has China.  After all, this is why Thomas Friedman loves China, that it does not rely on the judgement of millions of individuals to allocate capital, but instead on the finger pointing of a few at the top.

When it comes to high speed rail, the Left tends to have a Santa Clause mentality.   They want the rail, but refuse to even discuss its costs vs. benefits, as if it is going to be dropped in place by Santa Clause.

I have actually had pro-high-speed rail writers call me a dinosaur for taking a cost-benefit approach.  After a reasoned article on why our rail system, with its focus on freight, makes more sense than China and Europe's focus on high speed passenger rail, Joel Epstein wrote me that I should get out of the country more, as if I am some backwoods rube that would just swoon if I saw a nifty bullet train.  For the record, my actual experience on a high-speed rail train in Europe confirmed that it was a nice experience (I knew it would be) and that it was a financial mess, as my son and I were the only passengers in my car.  I would be all for HSR if Santa Clause dropped in down from the North Pole, but it costs a lot of real money.

How much money?  Well take the system in China that Friedman and Epstein and many others have begged the US to emulate:

The rail ministry that builds and operates the trains has an incredible 2.1 million employees, more than the number of civilians employed by the entire U.S. government. Moreover, the ministry is in debt to the tune of 2.1 trillion yuan ($326 billion), about 5 percent of the country’s GDP.

Chinese exceptionalism, or do we just notice it because it is so large.  I clicked through to this chart from a link on Instapundit that said to note how Chinese fertility fell off the map.  When I watched the video though, what I saw was ALL the fertility rates falling at roughly the same pace, at roughly the same point.  The lesson seems to be that fertility tends to drop with increasing mortality, wealth, and technology -- which is what many of us have been saying in response to Paul Ehrlich for years.

I am probably over-reading this, but I am sensitive that there is a sort of storyline of Chinese exceptionalism -- due to their taking some sort of totalitarian third way -- that seems to be admired among certain US socialists and environmentalists and Thomas Friedman.  This hearkens back to all the admiration for the Japanese MITI-managed economy, right before their economy crashed for two decades or so.

China flourishes because it has a culture, never fully suppressed by Mao, whose people take well and quickly to capitalism -- much of the development around Southeast Asia in previous decades was led by expat Chinese.  The totalitarianism that is, depressingly, so admired by the US intelligentsia is just going to lead China into the abyss.  Already we can see bubbles emerging due to the state's forced mispricing of key economic inputs, from capital to oil.  The burden of spending on triumphalist projects like super-bridges and mega-buildings and Olympics and high speed trains is going to start appearing over the next few years.

Here is my prediction:  The Chinese are going to have a bubble burst that will rival any such economic explosion that we have seen in the last century.  I have been looking at the situation and by a number of metrics, the bubble is already huge.  I would bet against China, but the problem (as with all shorts) is timing.  Government officials, if they really dedicate themselves to the task, can extend bubbles for a long time.  Even in the US, which is less authritarian and more transparent, it can be argued that Fannie and Freddie and Barnie Frank and Alan Greenspan helped push off the reckoning by at least 5 years.   Of course, the longer you push it off, the worse it gets.  Which means the Chinese bubble is going to be a doozy.

Postscript: Here is a nice example -- admiration from US environmentalists for China gutting their economy to make arbitrary goals

It's interesting to note the dedication China has displaying in achieving its [energy efficency] target -- shutting down entire operations and even executing rolling blackouts. Surely there would have been some amount of embarrassment for the nation on the world's stage if it had missed its target, but that likely would have been minor. It's worth noting the difference in political culture: What do you think would have happened if the US had such an energy-reduction target to hit, but a sagging economy got in the way?

I can tell you with some certainty: We would have missed that mark.

Will there never be an end to Americans who take advantage of our uniquely strong speech protections to laud totalitarians?