A Proposal to Save the Middle Class … by Cutting Carbon Pollution - by David Roberts

All comprehensive climate policies are equally impossible in our current political milieu, so we might as well have some blue-sky discussions.  It was in that spirit that I recently read With Liberty and Dividends for All:  How to Save Our Middle Class When Jobs Don’t Pay Enough, the new book by Peter Barnes, co-founder of Working Assets and the earliest and most articulate defender of cap-and-dividend. ...

Yes, I keep saying “cap and dividend” without explaining it, which is annoying.  Before getting to that part, though, let’s take a step back and look at Barnes’ larger framework.

He starts with a simple premise:  the good-paying jobs that created and supported the U.S. middle class in those halcyon decades after World War II are never coming back. The reasons range from globalization to automation to hyper-capitalism that favors capital over labor, but none of the trends show any signs of reversing.  America has disguised this grim situation with cheap consumer goods and cheap consumer credit, but those are no longer enough. Stagnant wages, low-paying jobs, and escalating inequality are the new normal.

As far as I know, there is no credible plan to halt the decline of, much less restore, the American middle class.  There’s lots of hand-waving about education reform, small-beans efforts to boost manufacturing, idle dreams of some day restoring the power of unions, and occasional meliorative gestures like raising the minimum wage, but nothing that promises to reverse the larger trends. (See Alan Blinder’s list for a representative example.)

This video explains how to make you richer and protect the climate



If the service jobs that now dominate U.S. job growth don’t pay enough to get people into the middle class, Barnes reasons, then we need some systematic way of increasing incomes, not just among the low-income (which is what minimum wages hikes do) but across the board.  And if capitalism favors capital over labor, then what people really need is some non-labor income.

What might serve as the source of that income?  What sort of capital stock do Americans own that produces value?  Well, just by virtue of citizenship, they co-own an enormous amount of common resources.  Barnes identifies several pools of common wealth, including the atmosphere, the electromagnetic spectrum, the copyright system, and the financial system.  Some of the biggest businesses in the world succeed almost entirely by drawing on such common resources.  Without them, no one would be able to get rich at all.  (Elizabeth Warren memorably made this point in her notorious “factory owner speech” — Obama’s clumsy retelling helped inspire the GOP’s “you didn’t build that” mania in 2012.)

Barnes proposes that Americans receive some of that shared value as annual income. That is the basic idea behind “dividends for all”:  to charge a fee to companies that access common resources and distribute the funds equally among America’s shareholders, i.e., anyone with a Social Security number.  It is, he says, the only credible prospect for boosting American incomes enough to support a middle class.  And distributing dividends would drive consumer spending, which in turn would stimulate demand and drive economic growth.

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As an example of how it would work, Barnes cites the Alaska Permanent Fund, which distributes part of the value of the state’s oil leases equally among state citizens each year. (This year Alaskans are getting $1,884 apiece.)
... Barnes proposes something like Alaska’s system on a national level: distributing equal, universal dividends from pools of common wealth.

For each of the pools, there would be a different system for collecting the money:  a charge added to auction prices for slices of the electromagnetic spectrum; a small financial-transaction fee; a small fee for copyright protection; and so on.

Obviously, it’s the atmosphere that’s of most interest to us Gristies.  That’s where “cap and dividend” comes in.  To generate climate dividends, Barnes would implement a hard, declining carbon cap.  (A tax or fee, he says, is not enough to guarantee the necessary reductions.)  Permits would be auctioned (no trading!) only to upstream sources, where carbon enters the economy — think wells, mines, and oil tankers.  As the number of permits declined, permits would become more valuable and dividends would increase, driving a virtuous political cycle that brings public support behind carbon reduction.

Barnes calculates that by tapping common pools of wealth, America could generate $5,000 a year in dividends for each citizen, $20,000 a year for a household of four.  That won’t make anyone rich, but it’s a hell of a safety net — a complement, not a replacement, for social insurance, Barnes says.  And by transferring money down the income scale, it would serve as a form of ongoing economic stimulus.

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