As Democrats and Republicans in Congress settle into an August recess after passing a debt ceiling and spending cuts agreement, many questions remain. The $1.5 trillion in discretionary spending cuts over the next 10 years will be left to a committee that will likely meet behind closed doors.
Since Congress consistently tries to cut spending from the Department of Energy (DOE) and Environmental Protection Agency (EPA), it is safe to assume that many of the future cuts will also come from these agencies and other environmental programs.
The deal excluded revenue increases, but there is speculation that President Obama may have further opportunities to increase revenues at some later point. After signing the debt ceiling deal into legislation, Obama told reporters in the Rose Garden, “We’ll need a balanced approach where everything is on the table… It also means reforming our tax code so that the wealthiest Americans and biggest corporations pay their fair share. And it means getting rid of taxpayer subsidies to oil and gas companies, and tax loopholes that help billionaires pay a lower tax rate than teachers and nurses.”
So, revenue increases, while not in the deal, are still on the table.
One option was explored at RFF by Senior Fellows Ian Parry and Roberton Williams III in Moving U.S. Climate Policy Forward: Are Carbon Taxes the Only Good Alternative?. They examined the effect a carbon tax would have at reducing the deficit and generating revenue. The numbers show that if carbon is priced at $65 per ton by 2030, it could generate $324 billion in revenue. It may be a drop in the bucket, but it is a cheap way to control greenhouse gas emissions while reducing the deficit.
Others have also said that this debt ceiling deal leaves open the possibility of a carbon tax to generate revenue. While a carbon tax makes sense economically, it is far from being politically viable at the moment.
With the debt ceiling crisis over, Congress and the White House now need to look at the economy and unemployment figures. In the second quarter, the U.S. economy grew by only 1.3 percent, and only 0.4 percent in the first quarter, the worst figures since June 2009. Unemployment figures remain unchanged at 9.2 percent.
The EPA and DOE are often scapegoats for a failing economy so will likely see extra cuts.
“At a time when we are enduring 21 consecutive months of 9 percent or higher unemployment, we cannot afford to rush sweeping regulations that have the potential to do more harm than good,” said House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) earlier this year regarding air pollution rules.
“What we need to do is pass the mother of all repeal bills, but it's the repeal bill that will get a job killing regulations. And I would begin with the EPA, because there is no other agency like the EPA. It should really be renamed the job-killing organization of America,” said Michelle Bachmann (R –Minn.) during CNN’s Republican debate.
A carbon tax is often viewed in the same light, so even though the revenue generating numbers are there, these figures are unlikely to dissuade members of Congress from blaming climate policy for killing jobs, making a carbon tax not politically feasible.
