The Fletcher School, Tufts University and The University of California, Berkeley
As of early 2018, more than 25 national or subnational carbon tax systems had been implemented or were scheduled to be implemented around the world. New evidence is emerging on the way they work and their effects on greenhouse emissions and on the economy in general. What can we learn from international experience?
British Columbia provides an example of structuring a carbon tax plan that lowers greenhouse emissions and, at the same time, is revenue neutral, fair, and promotes economic activity. Yet a domestic carbon tax alone will not curb greenhouse emissions. It is fundamental to invest part of the revenues generated by carbon taxes in R&D (as the Swiss have done) so that new inventions (like advanced battery storage, carbon capture and storage, and inexpensive, safe and modular nuclear power) and production processes are developed and successfully introduced into the market. And strong political leadership is required to make all these changes that will have a positive impact on many generations to come.
An increase in stock buybacks has raised concerns about whether they disproportionately apportion company earnings to wealthy stockholders and happen at the expense of greater capital investment. But is the increase in stock buybacks cause for concern?
While stock buybacks reached record levels in 2018, it is not clear that this represents a barrier to overall corporate investment or that it calls for legislation to limit buyback activity. There is an intrinsic similarity between paying dividends and repurchasing shares of a corporation. Thus, one likely immediate consequence of only allowing firms to repurchase shares when certain conditions are met would be a pivot from repurchases to dividends as a method for distributing excess cash to investors. Over a longer horizon, forcing a corporation to go through a “gate” before it can repurchase their shares would likely act as a deterrent to new investors who want to invest in equity in the American corporate sector.
William G. Gale of The Brookings Institution, and EconoFact co-founder Michael Klein discuss the distributional effects of fiscal policy and the progressivity of the US tax system.
Fiscal policy plays a role in income redistribution. This occurs through spending, by apportioning funds to programs like Social Security, the Supplemental Nutritional Assistance Program (food stamps), and housing assistance, for instance. But taxes also play a role. The share of income that you pay in taxes goes up as your income goes up, for example. Nonetheless, the overall progressivity of fiscal policy in the United States is relatively low as compared to other countries with similar levels of income.
Climate scientists agree that the warming of the Earth is extremely likely to be the result of human activity. That conclusion is based on models of the climate system, which are complex and hard for non-specialists to understand. Are there simpler statistical methods that provide a similar conclusion and thus provide independent validation of the model-based conclusions? Can standard econometric tools be used to estimate how much of this warming is anthropogenic, that is, due to human activity?
The earth is warming, with consequences including storms, heat waves, and droughts that we already see. Climate models attribute those changes to greenhouse gases emitted by human activities, but the complexity of those models provides an opportunity for muddying the waters in the political debate over climate. In fact, however, the core relationship between temperature and greenhouse gas emissions can be analyzed using standard statistical methods used in economics, with no need for a complex climate model. That relationship stands up over time and clearly attributes nearly all the observed warming to human impacts. That this result, which stays close to the data, aligns with results from climate models provides external validation of those models and the warnings they provide about future climate change as we continue to emit greenhouse gases.
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Recently, the Trump Administration proposed closing the U.S. border with Mexico. The United States has strong economic ties with Mexico and such an action could have ripple effects across the country. An actual border closure could slow or halt trade flows between the two countries, affecting more than one million U.S. jobs and we estimate could cost Americans as much as $130 billion a year, or nearly 350 million dollars per day.
A border closure would disrupt economic relationships for communities across the United States with companies and workers in industries involved in trade with Mexico, shrinking U.S. real GDP by as much as 0.62 percent, or $130 billion per year, according to our estimates. The impact would be felt well beyond the border due to integrated supply chains and to the fact that Mexico is an important market for firms in all states in industries across the agricultural, manufacturing and service sectors.