Friday, June 16, 2006

Altman misses a chance

Roger Altman, deputy Treasury secretary in the first Clinton administration, has an op-ed in today's Wall Street Journal in which he worries about energy dependence and global warming. I agree with him about this:
Recent talk of price gouging, windfall profits and CEO pay is a distraction.
However, I am less attracted to what he proposes:

Corporate average fuel efficiency standards (CAFE) must be raised sharply, perhaps together with a stretch-out of legacy costs for the U.S. auto producers. Owners of the oldest, least efficient vehicles should be paid to turn them in. And we need much deeper tax incentives for production of hybrid and clean diesel engines and for consumer purchases of them. The expected growth in our oil consumption could be cut by 25% to 50% with these steps.

The permanent solution to oil vulnerability and climate change, however, lies in technology. My generation has seen breathtaking technologies emerge, but they will pale before the next ones. Thus, we should aim for technologies to truly end our use of oil and gas. The front-end risks must be financed at the federal level.

From my perspective, this all sounds like micro-managing the problem with more government regulation and more government spending.

In my view, the solution to the problems Altman identifies is simple: higher Pigovian taxes, such an increased tax on gasoline or a tax on carbon. Policymakers could then sit back and let market forces figure out the rest.

Altman's avoidance of this policy option is all the more surprising because the first Clinton administration proposed a BTU tax, which as I recall was a lot like a carbon tax. The BTU tax failed politically, and since then former Clinton administration officials have stopped pushing for it in the public debate. That is a shame. It was one of their best ideas.

By the way: Does Altman mean by a "stretch-out of legacy costs" what I think he means? It sounds like he is saying that GM can take its time funding its obligations to retirees. If I am interpreting him correctly, that is a troubling piece of advice.