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.
Rebuilding our strength has to start with healing our economy. In that regard, it feels as if our budget drama has dragged on for so long that it has not only been drained of all emotional energy but nobody even remembers the plot anymore. It’s worth recalling: What are we trying to do?
We’re trying to put America back on a sustainable growth track that will expand employment, strengthen our fiscal balance sheet to withstand future crises and generate resources to sustain the most needy and propel the next generation. That requires three things: We need to keep investing in the engines of our growth – infrastructure, government-financed research, education, immigration and regulations that incentivize risk-taking but prevent recklessness. We need to reform Social Security and Medicare so they can support all the baby boomers about to retire. And we need to raise more revenues, in the least painful way possible, because we can’t just cut everything. As I’ve said, you can lose weight quickly by cutting off both thumbs, but that will be a problem at work.
It was good to see President Obama put out a budget proposal that addressed all three needs. The attacks on him from the left are unfair because, ultimately, we will need to do all three even more. As Bloomberg News recently reported: “Typical wage-earners retiring in 2010 will receive at least $3 for every $1 they contributed to the Medicare health-insurance program, according to an Urban Institute study.” That’s unsustainable. The Republican budget plan, though, would cut so much so fast – including taxes – that it would leave virtually nothing for investing in our growth engines. That’s irresponsible.
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.
A phased-in carbon tax of $20 to $25 a ton could raise around $1 trillion over 10 years, as we each pay a few more dimes and quarters for every gallon of gasoline or hour of electricity. With that new revenue stream, we’d have so many more options. One, preferred by Republicans like the statesman George Shultz and the Nobel laureate Gary Becker, is to make the carbon tax “revenue neutral.” It could be offset entirely by a rebate or by cutting tax rates for every U.S. citizen and corporation, which would increase spending. Another option, the one I’d prefer, would devote half the carbon-tax revenues to individual and corporate tax cuts, use a quarter for new investments in infrastructure, preschool education, community colleges and research – which would create jobs now and tomorrow – and then use a quarter on deficit reduction.
In short, if you added such a carbon tax to Obama’s budget, you’d have the makings of a radical grand bargain: Republicans would have the income-tax cuts they want; Democrats would get the additional infrastructure stimulus they want, plus a new revenue stream to start gradually addressing the deficit, while reducing the amount that we’d have to bite from entitlements now; and the country would have a vehicle to address climate change, to drive clean-tech innovation (and to take money away from people who fund jihadist hate sites on the Internet).
However we divide the money, a carbon tax would enable a radical grand bargain that would be more fiscally responsible for the long run and more stimulative in the short run, paving the way to more sustainable growth. (Yes, a carbon tax is not painless. We would have to, and easily can, cushion the poor from its impact.) We’d be serving the present and the future. Here’s one example how: Today states are slashing budgets for community colleges, just when every good job requires more skill. That is truly cutting off our thumbs to lose weight. I recently interviewed Gary Green, the president of Forsyth Technical Community College, in Winston-Salem, N.C., with 10,000 students.
“We have a labor surplus in this country and a labor shortage at the same time,” Green explained to me. Workers in North Carolina, particularly in textiles and furniture, who lost jobs either to outsourcing or the recession in 2008 often “do not have the skills required to get a new job today” in the biotech, health care and manufacturing centers that are opening in the state.
If before, he added, “you just needed a high school shop class or a short postsecondary certificate to work in a factory, now you need an associate degree in machining,” a two-year program that requires higher math, IT and systems skills. In addition, some employers are now demanding that you not only have an associate degree but that nationally recognized skill certifications be incorporated into the curriculum to show that you have mastered the skills they want, like computer-integrated machining.
I know: If we can’t get some simple gun control, how do we get a carbon tax to pay for all of this? With both, you have to try and keep trying, until the unimaginable becomes the inevitable. Our goal is not just balancing the budget. It’s generating the resources in the most intelligent way possible to renew America for the 21st century. I hope the president swings for the fences. It’s the only way to revive the country and a moribund Republican Party.
“Margaret Thatcher’s big ideas set the context for the creation of New Labour,” said Don Baer, the former Clinton administration communications chief. “Ronald Reagan’s big ideas did the same for the New Democrats.” Maybe only big ideas from Obama can give birth to New Republicans – and the revival of the country. Competition works. But if we treat every good big idea as “dead on arrival,” then so are we. We cannot allow that. A more interdependent world desperately needs an America at its best.