Maria Cantwell and the CLEAR Act, a carbon market that works

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Saturday January 02, 2010 · 9:13 PM PST

2010/01/02 · 21:13

The best piece of legislation proposed in 2009 was the Cantwell-Collins CLEAR Act. It has gotten zero attention from the blog chamber newsgames. But it has the potential to make the carbon market concept work.

It forces carbon producers or importers to buy permits (within a price range), which sets the price on carbon and brings this so-called externality into the market.

It then rebates the proceeds directly on a per-capita basis to Americans. Presto, no downside to households. If they want to burn it, they have the money to pay for it. But if they want to avoid the tax by not burning it, they make a profit.

No funky offsets. No casino cap-and-trade schemes for Wall Street to screw up.

Big Oil and Big Coal are forced to toe-tag themselves.

Cantwell's web site is impressive, with many, many endorsements from all over the place.

DemandSide

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Friday December 05, 2008 · 11:23 AM PST

2008/12/05 · 11:23

Aggregate Demand

Retail sales, bankruptcies, foreclosures, job losses. Collapsing, cascading, accelerating, ever more massive. When a company tightens its belt, lays off or downsizes, it is doing what it needs to do to remain profitable.

But when all companies do this, and all shrink their payrolls, the demand for all goods shrinks and the business climate soon calls for another round of downsizing. Whatever else this moment in economic time is, it is a good look at demand destruction and a good opportunity to examine the key Keynsian concept -- Aggregate Demand.

Auto makers come to Washington for bailouts to save three million jobs. Part of their business plan to solicit the money is to downsize their workforces. Robert Reich here called this "paradoxical."

As a condition of getting a federal bailout, the Big Three are promising, among other things, to cut costs. Among the costs to be cut ...

DemandSide

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Wednesday November 26, 2008 · 5:31 PM PST

2008/11/26 · 17:31

A great deal of hand wringing has been wasted on account of the leaks from and the composition of the new Obama administration. Anxiety on this score is by no means universal on the Left (e.g., witness Robert Kuttner), but it is notable. Of particular concern to many are the number of Clinton era figures that are emerging as key players in the first Obama government. That list begins with Hillary Clinton herself, but also includes Larry Summers and Tim Geithner, who will be point men on economic policy at the National Economic Council and the Treasury Department respectively.

Below is our quizzical look at some of the odd fetishes of the media and others.

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Part 2 of A Pundit's Guide to John Maynard Keynes

DemandSide

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Monday November 24, 2008 · 11:21 AM PST

2008/11/24 · 11:21

My diary "A Pundit's Guide to John Maynard Keynes" raised some intersting interaction last week. I thought I'd take a stab at principle #5, though perhaps a little more ambitiously, for the benefit of those pundits such as Amity Schlaes or George Will who talk a lot about Keynes without knowing very much.

A Pundit's Guide to John Maynard Keynes

In times of low employment (high unemployment), the public sector and the private sector are complements, not substitutes.

To get at the core of this, we need to look at one of the most lethal, if least substantial, arguments against Demand Side economics. It is what I call the Cave Man Metaphor. I have read George Lakoff and understand his framing a little bit. This is not about that. It is about finding the metaphor that includes and explains all elements. And here is my attempt. The family farm.

DemandSide

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Monday November 17, 2008 · 11:21 AM PST

2008/11/17 · 11:21

I was disgusted again today when market fundamentalist Amity Schlaes got a seat on the APM Marketplace broadcast. It was equivalent to a Neocon talking about the Iraq invasion. Events have so exploded their flimsy ideology that they are reduced to making things up. In this case it was,

"Consumers rule the economic world. That idea comes from the father of modern economics, John Maynard Keynes. If consumers are grumpy, markets get sour. Politicians monitor consumers like hawks. And recovery? It's all about the consumer too. If the consumer is unhappy, the recovery won't come."

(Marketplace)

This is not only nonsense, it is condescending. But mostly it is nonsense. Aside from the consumer, there is the public sector. I believe the public sector is acting to produce recovery. So today I offer Ms. Schlaes a quick "Pundit's Guide to Keynes."

DemandSide

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Friday October 31, 2008 · 1:07 PM PDT

2008/10/31 · 13:07

The election of Barack Obama is a first and probably necessary step to getting the nation back on the road economically, God willing it comes to pass, but it will not be sufficient.

A case in point, an object lesson, is the fate of the first stimulus package passed in February and implemented in May and June. It was not sufficient. The more targeted, more substantial program advocated by many -- including yr. obt. svt. -- would have begun a recovery that is now still far off.

What we needed then and need now is a recovery plan, not a stimulus hope.

First realize that the U.S. economy under Bush was always weak. The housing boom simply papered over this weakness with debt. When the flood of debt ebbed, it left the wreckage on the beach.

Stimulus which is intended to jump start spending and get the consumer back in the game is simply not going to work. The consumer is buried. The public sector is going to have to lead the way.

DemandSide

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Monday October 27, 2008 · 11:23 AM PDT

2008/10/27 · 11:23

The great call today is for a new international financial order to replace the Bretton Woods agreement of 1944. Politicians and peoples are panicking. Economists are offering lame excuses and wringing their hands.

This is a do-able thing.

The old order has broken down, and the choice is between no system and a new system.

As panic in international markets and currency calamities across the world emphasize, no stable exchange rate system exists. The Bretton Woods I scheme was unilaterally abandoned in 1971 by Richard Nixon.

A key institution of Bretton Woods I, the International Monetary Fund has long since abandoned its original mandate and morphed into an arm of Market Fundamentalism Inc. Past interventions by the IMF have been to benefit Western financial interests at the expense of developing economies.

The dollar may be the only legitimate reserve currency standing at the moment, but that cannot last, since it is working for nobody except the U.S., and not very well for the U.S.

This realization, that the current system has not, is not and cannot work, is the only necessary motivation to fix things.

DemandSide

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Saturday October 18, 2008 · 9:49 PM PDT

2008/10/18 · 21:49

Point one. Weak economy no longer papered over by housing bubble.

Point two. Weakness in the financial sector exacerbated by Fed and Treasury malfeasance.

Now Point three. The commodities bubble.

Remember with me. The first half of this year, when oil kept climbing, climbing, climbing. Will it really break $100? And it did, all the way to $147. "Better get used to it," we were told. Insatiable world demand, isn't it obvious? A great opportunity in alternative energy products. Priuses sold like hotcakes to the economically sophisticated.

But the fall of commodities does not leave us in the same economic world as we left when it rose. Ford, GM, Chrysler and the other auto makers got sliced and diced like a subprime mortgage by the bubble. It left them worth just about as much as a CDO.

Things don't pencil out at $55 oil the same way they did at $120 oil. Consumers were hammered on the front end, and producers on the back end. Maybe the ex-Enron traders on the Goldman Sachs floor did well, but not many others.

DemandSide

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Sunday October 12, 2008 · 2:17 PM PDT

2008/10/12 · 14:17

or Thinking the Unthinkable

The pressing question of the day is whether the G-7 finance ministers will come up with a plan to stabilize the financial house of cards long enough to take it down without breaking everything. Let's call it a house of glass cards.

Luigi Zingales of -- disgustingly enough -- the University of Chicago, has proposed Plan B, a two-part plan that would recapitalize the banks and restructure home mortgage debt without government financial exposure, by harnessing the market through contracts and regulatory changes. It would work. Probably one reason it will not be selected by those in charge.

On the other hand,

Why bother to hope? Finance ministers have been getting a fairly unified message from economists for weeks. They may have a marginally better understanding today than they did six months ago. But they are plainly from the same school and on the same page as Henry Paulson and Ben Bernanke. That means they are woefully behind the curve. Their constituents are the banks and entrenched interests, so their answer will tend toward burdening the citizens with the costs of keeping the current actors in their places.

DemandSide

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Tuesday September 30, 2008 · 9:46 PM PDT

2008/09/30 · 21:46

If the bailout bill had passed the House, your concerns about whether it was necessary would have been put to rest. Had sufficient numbers of Republicans voted against their individual political futures 35 days before the election, it could only have been because the economic results were too obvious to deny.

It turned out the bill did not pass. Two-thirds of Republicans could not vote against their individual political futures. And so they voted against their collective political future. Immediately the stock market tanked. It has recovered today. But absent any bill, credit may be a thing of the past. The recession may double in depth and length. In any event, all economic bad news now comes with a question, "What if the bill had passed?"

The Republican Party must hope this does not come to pass, because if it does, the GOP will not survive.

DemandSide

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Saturday September 20, 2008 · 8:09 PM PDT

2008/09/20 · 20:09

For more than a year the Treasury and the Fed have been trying to chase down house prices by reflating the housing bubble, creating a market price for housing by feeding the top of the food chain things it cannot digest. It has been a supply side plan with its focus on the toxic loan products, and it has not worked.

A demand side plan to put a floor under house prices began in the Dodd-Frank short refi bill which was included in the omnibus housing legislation two months ago. This is a close cousin of the Home Onwers Loan Corporation of the 1930s which put a floor under house prices then, partly by keeping qualified buyers in their homes.

This is the only way out of the mess, and has to be coupled with the creation of a sound banking structure, not obscenely large megabanks.

DemandSide

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Monday February 18, 2008 · 8:27 PM PST

2008/02/18 · 20:27

A banking crisis is looming, and what has worked in the past is not going to work this time. The scale is global. The cost is enormous. There is no capacity to pay for it.

The banking (by which I mean the whole financial sector) meltdown is coming on quickly. It was a dry forest, as Treasury Secretary Henry Paulson said in last week's Senate Banking Committee hearing, that was vulnerable to the spark of the subprime mortgage crisis.

Bush is practicing his best Herbert Hoover, "Economic fundamentals are sound," and "Prosperity is just around the corner." It's working just as well as it did for Hoover. Of course, we'll need to see more blood on the ground before action is politically possible, that could occur in very short order. Leadership in the Democratic Party may have to take the virtual helm before the ship hits the rocks.

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