Sen. Marco Rubio (R-Fla.) admitted Sunday that human activity is leading to increased global temperatures and that steps should be taken to mitigate the impact of climate change. But, when pushed for concrete policies, he argued that he’s “not going to destroy our economy.”
This betrays a consequential misunderstanding of not just how economies work but of what economies are. The idea that economies are somehow inherently unable to repel existential threats belies logic and common sense: There is absolutely nothing in the construct of this creature we call an economy that precludes mechanisms to fight global warming. To the contrary, such mechanisms abound, as I explain below.
Rubio is making two big mistakes here. First, he’s defining “our economy” in a way that has little to do with “us” and a lot to do with pay-to-play politics. Second, he’s claiming there is no trade-off that improves social welfare (not gross domestic product, but people’s broader well-being) while enhancing environmental sustainability.
To the contrary, standard-issue economics is extremely clear about the necessity of policies to offset pollution. In fact, the concept is fundamental to classical economics, which places price signals at its core. If a polluter fails to face the costs of her actions, she will generate “negative externalities” that make others worse off. The classical solution is to “internalize the externality” through policies that shift the cost back onto the person or company causing the degradation.
Two ways of doing so in this context are taxing carbon and regulating production.
Both solutions — which, to repeat, are totally consistent with standard economics — have not only been disallowed by current politics, but, as Rubio’s comment on CNN’s “State of the Union” reveals, also have been prohibited by his perverse definition of “our economy.” In a twist that Orwell would have appreciated, we can’t save our economy because to do so would destroy it.
Status quo supporters arrive at this illogic by conflating human welfare with GDP and then defining anything that might lower GDP as a destroyer. They couldn’t be more wrong.
First, when, for example, we destroy protective wetlands (as in Houston) or degrade clean-water rules, we add to corporate profitability, which raises GDP but reduces society’s welfare relative to a scenario that protects such resources. Worse, when hurricanes destroy property because natural buffers have been destroyed (and warming has intensified the power of storms), any rebuilding adds to GDP. If the folly of such measurement practices with regard to people’s well-being escapes you, just look at any paper on the devastation from Hurricane Michael.
Second, even if we must bow down before GDP growth, there’s no evidence that taxes necessarily lower growth. That’s an outgrowth of the fairy dust known as supply-side, trickle-down economics, in which tax cuts, especially on the rich, boost jobs and growth (and spin off enough revenue to offset their cost). In fact, the U.S. economy has historically grown much faster when taxes were much higher. To be clear, that’s correlation, not causation, but it underscores why you should never accept this “taxes-kill-growth” nonsense.
Third, there is a potential growth dividend to be paid from sustainable investment. While we’re dithering around with tariffs and trade wars, more forward-looking countries (which for now include pretty much all of them) are trying to figure out how they can grab global market share in batteries to store renewable energy. Even a simple regulation like requiring industrial scrubbers in smokestacks leads to more, not less, employment. “Renewable portfolio standards” — state requirements that some percentage of energy consumption comes from renewables by a later date — have been found to generate innovative economic activity to meet the goals.
Finally, when Rubio says “our economy,” he’s not talking about you and me. Paul Krugman put not too fine a point on it, tweeting that “The idea that climate policies would ‘destroy our economy’ is disinformation spread by fossil-fuel interests and right-wingers.” The investigative journalist Jane Mayer has shined bright lights on the dark money the oil-rich Koch brothers have poured into the politics that Rubio’s phrase so perfectly captures.
At this point, someone typically objects that because low-income households spend a larger share of their income on energy, a carbon tax would be unfair to them. But such arguments ignore that these same households also have the least resources to insulate themselves against the consequences of climate change. And here again, economics is well-equipped to deal with this outcome, by crafting policies that rebate a portion of the tax to those hardest hit by it. (Smart carbon taxes change relative prices, not relative incomes; true, they could lower the income of the Kochs, but I’d call that a feature, not a bug.)
Two notable, related things recently occurred in this space: The United Nations' panel of climate scientists issued a report on the increasing urgency of the problem, and economist William Nordhaus, a longtime advocate of much of the economics discussed above, was awarded a Nobel Prize. You could argue this is some higher power’s synchronous sign that we need to get real about this existential threat, or you could argue that it’s a fortuitous coincidence.
What you cannot argue, no matter how much you’re paid to believe otherwise, is that there is any inherent contradiction between economics, environmental sustainability and not just our well-being, but our very survival.