Choosing American Job Creation Over Environmental Protection

The foreign trade provisions in the upcoming climate change bill will determine whether that bill kills American jobs or saves them. The Peterson Institute just recommended killing American jobs as part of the bill in order to avoid a trade war.

That recommendation came in the Peterson Institute's new book, Global Warming and the World Trading System, Hufbauer, Charnovitz and Kim pointed out that a cap-and-trade bill for reducing carbon emissions would drive up the cost of American products, making them less competitive in U.S. and world markets. As a result, a cap and trade bill would have to include border provisions, such as export subsidies and import duties, to prevent the leakage of jobs out of the United States.

So far, so good. But then the authors of the Peterson Institute book advocated that the border provisions be suspended for a predetermined "peace" period, following passage, in order to avoid a trade war. During the suspension, the United States would negotiate from a position of weakness, even while American jobs would be hemorrhaging and American market share would be falling to foreign producers. After the "peace" period passes, we would implement some puny export subsidies and import limitations. The Europeans, Chinese, and Japanese would pass counter tariffs designed to go after politically-sensitive American exports. Eventually, the United States would withdraw the subsidies and duties, while continuing to hemorrhage jobs in our self-destructive attempt to save the planet.

Instead of bending over backwards to avoid the trade war, as the Peterson Institute recommends, Congress should prepare to win it. Congress should turn the puny subsidies and import restrictions that they plan into Warren Buffett's muscular Import Certificate (IC) plan to balance trade. Here is how Buffett summarized his plan:

We would achieve this [trade] balance by issuing what I will call Import Certificates (ICs) to all U.S. exporters in an amount equal to the dollar value of their exports. Each exporter would, in turn, sell the ICs to parties – either exporters abroad or importers here – wanting to get goods into the U.S. To import $1 million of goods, for example, an importer would need ICs that were the byproduct of $1 million of exports. The inevitable result: trade balance.

The Peterson Institute fears the trade war, but with Warren Buffett's ICs in our arsenal, the United States would win it. Usually ICs are not country specific. Exports to any country allow imports from any country. But should a country, say China, respond to the IC program by restricting its imports from the United States, the U.S. Treasury should have the option of specifying that imports to China must use ICs generated by exports to China. Then, China would be hurting its exports to the United States whenever it limited its imports from the United States. Country-specific ICs let the trade deficit country win any trade war.

The Peterson Institute is concerned about working within WTO rules. But the United States would be much better off withdrawing from the WTO altogether. The WTO was founded upon the false premise that the world could achieve free trade through a set of international rules designed to reduce trade barriers. Governments eventually found ways around those rules, the most obvious being currency manipulations. The great recession that began in October 2008 was caused by the global imbalances that the WTO rules permitted.

If the world had only listened to the greatest economist of the 20th Century, John Maynard Keynes, it would have set up a sustainable alternative to the WTO that would have produced balanced trade, benefiting all parties. Unlike free trade, balanced trade can be established simply by each trade deficit country balancing its own trade through ICs.

The upcoming climate change bill will be a watershed for the Obama administration and the Democratic congress. It will determine whether they solve our economic problems or make them worse. If they follow the Peterson Institute's advice, then American products will become less competitive in U.S. and world markets, destroying American jobs and sending the United States into an even deeper recession. If they adopt Warren Buffett's Import Certificates plan as part of their climate change bill, then they create American jobs and jumpstart America's long-term growth. Their choice will determine America's economic future and whether the Democratic Party continues to win elections.

I would rather see no climate change bill at all than a bill that destroys American jobs. The man-made global warming theory has not yet been proven. An alternative theory has been gaining credence in scientific circles ever since global temperatures and sunspots peaked together in 1998. This alternative theory holds that changes in cosmic ray flux cause temperature changes with the most convincing evidence coming from

Israeli Nir J. Shaviv and Canadian Jan Veizer

who found that the earth cycles through predictable ice ages and greenhouse ages as the solar system cycles through the spiral arms of the galaxy. Apparently, cosmic rays cause ionization that forms low level clouds which reflect the sun's heat back into space, resulting in lower temperatures. Sunspots fit into this theory because they block out cosmic rays, leading to temporary periods of rapid warming.

The pressing question is not whether the Democratic Party saves or destroys the planet. Due to the solar system's position in the galaxy, the earth will continue to warm, gradually, for the next tens of millions of years whether or not the Democratic Party passes a climate change bill. The pressing question is really whether the Democratic Party saves or destroys the American economy. The climate change bill may answer that question.

Comments

[atlasman]

"The pressing question is really whether the Democratic Party saves or destroys the American economy. The climate change bill may answer that question."

Obama answered your question by placing cap and trade/tax in his budget. The question remaining is does the republicans have the guts and ability to stop him from the continued destruction of the American economy. Watching their incompetence over the last decade leads me to believe the answer there is no.

2009 Apr 01 07:08 AM

[Trane250]

There is a strong body of evidence to suggest that the accumulation of greenhouse gases in the atmosphere causes the average surface temperature to rise. In 1941, a Serbian geophysicist named Milutin Milancovic showed that the main culprit in climate change was the variation in the earth's tilt and its orbit around the sun (not around the galaxy). An increase in CO2 will amplify the earth's natural tendency to warm up and also slow the inevitable cool down.

2009 Apr 01 08:47 AM

[Howard Richman]

Trane250,

I like your idea that CO2 may accentuate the results of cosmic rays (i.e., what you call the "earth's natural tendencies.") As we gain an improved body of statistics we should be compare the theories to see how much of the variance in temperature can be explained by each.

During the Phanerozoic period, studied by Shaviv and Veizer, only about 0.62 degrees centigrade variation of water temperature (at the equator) was left over for carbon dioxide and other factors to explain, after the cosmic ray theory was taken into account.

Howard

2009 Apr 01 09:37 AM

[biomedlives]

"...their incompetence over the last decade.." Remember that we had a Republican president for the last eight years and a Republican-controlled congress for six of the eight.


On Apr 01 07:08 AM atlasman wrote:

> "The pressing question is really whether the Democratic Party saves
> or destroys the American economy. The climate change bill may answer
> that question."
>
> Obama answered your question by placing cap and trade/tax in his
> budget. The question remaining is does the republicans have the
> guts and ability to stop him from the continued destruction of the
> American economy. Watching their incompetence over the last decade
> leads me to believe the answer there is no.

2009 Apr 01 09:40 AM

[Ferdinand E. Banks]

Cap-and-trade is nonsense and would recognized as such if the persons who proposed it could add and subtract. Since they can't they have learned how to make fools of people who can. What about free trade? Free trade with exceptions makes all the sense in the world to me. The main exception would be that your country - whatever that means - doesn't lose the global trade 'game'. In addition, I hope that it is understood that no industrial country would gain by an American depression featuring large job losses and lower incomes. Calling Keynes the greatest economist of the 20th century probably doesn't work in this forum, but he probably was. Import certificates - sounds fruitcake to me, but I would like to hear more about them.

2009 Apr 01 09:45 AM

[Howard Richman]

Ferdinand:

If you wish to learn more about Import Certificates, a good place to start would be my review of the Levy Economics Institute's analysis of Buffett's plan:

tradeandtaxes.blogspot...

Howard

2009 Apr 01 10:07 AM

[fireball]

remember kyoto. it was a scheme to make the u.s. comply to all these eco-nut rules at great cost to us while china (and others continued to belch filth into the air. the whole world seemed to want us to comply. of course they did. the treaty was ridiculous.
cap & trade is obamamama's revenge on america and his scheme to further his socialist ambitions by making industry even more prone to flee and taxing even more those dumb enough to stay. the eco-nuts think we should live in wigwams and ride bicycles obama just wants us desperate with our hand out to big brother.
hear that vast sucking sound. it is obama sucking the vitality out of this country and the middle class. all in the name of government help and socialism for all. in reality he is paying his campaign debts. beware the altruistic air of this piece of marxist trash. pay no attention to the men behind the curtain or the butte-loads of money they are taking from us. i am not talking about ceo bonuses. that is just more misdirection.
obamamama is the master of silken lies and illusion. he makes bubba (see pimary) look like a bumbling idiot. in the kingdom of liars (d.c.) obamamama is supreme. anytime someone gets on the scent of this disaster to liberty he points in twenty misdirections.
his trip to europe was at a cost that most presidents spend in a year. it appears this "most loved president" suffers from extreme paranoia judging by the massive protection and precaution that surrounds him. the joke is on america but some of us aren't laughing.

2009 Apr 01 10:55 AM

[CLH]

There is little or no good science to make anyone believe that man has anything to do with the climate. This is only a way that governments can use to take control of all people. Energy is the most important thing in life at the present time. We must not let any govt. control it.

As oil and coal disappear we will move to nuclear power.

2009 Apr 01 01:23 PM

[henarl]

American jobs and the average American's standard of living are immediate concerns. Saving the world environmentally is a long term concern. Immediate concerns will always trump long term ones politically if not morally and politics, not morality, rules.

2009 Apr 01 01:32 PM

[Gedankonomist]

Why is it cold in the winter and warm in the summer? Is it because there is more CO2 in the summer and Less in the winter? No, it's because we receive a small percentage more solar radiation in the summer than we do in the winter.

If there is any "warming" then it not caused by CO2, and further, there is nothing we can do about it.

The only reason why the corporate/government/a... elite are propagandizing "global warming" is because they want more control over you. Why can you not see this?

Keynes was the "greatest economist?" Is this the economist who says that the way to prosperity is to "spend, spend, spend?" What do you think the US (and other) governments are doing now?

2009 Apr 01 01:35 PM

[Howard Richman]

Gedankonomist,

You asked if Keynes were the economist who said that the way to prosperity is "spend, spend, spend." The answer is "No."

Keynes had different economic prescriptions for trade deficit and trade surplus countries. He would advocate that the way for trade surplus countries to get out of a depression (America in the 1930s, China today) would be to "spend, spend, spend."

He had different ways to get trade deficit countries out of a depression (Britain in the 1930s, America today). Britain was out of the Great Depression by 1932, perhaps because they followed Keynes advice. The United States languished in the Great Depression until World War II, perhaps because we ignored his advice.

Howard

2009 Apr 01 02:14 PM

[Buckoux]

Climate Change is nothing but a religion garbed in a cloak of polyester science. As H.L. Menken wrote: "Americans have an appetite for bogus revelation". The scientific theories, studies and statistics of dubious value that attempt to "prove" anthropomorphic climate change are but the secular equivalent of Biblical Creationists torturing science to prove "Intelligent Design". Both frauds spring from mans desire to do what? Foretell the future! Neither theory should instruct the US economy.

Prophecy! Isn't that what Moody's, Standard & Poors, the Fed, the SEC, etc, were/are supposed to be able to do? Predict! After all, they are the "experts" and they have (had?) all the data and all the computer models of the world economy and they still could not predict this economic "Global Economic Cooling"! And Oh God, most of them were from Harvard!

"Oh man! thou feeble tenant of an hour,
Debased by slavery, or corrupt by power,..
Thy love is lust, thy friendship all a cheat,
Thy smiles hypocrisy, thy words deceit!"
....Lord Byron.

2009 Apr 01 02:17 PM

[Tony Petroski]

Since the earth is in fact cooling, we are going to have to subsidize the release of greenhouse gases in order to reverse the damage already done by the measures taken so far.

2009 Apr 01 08:27 PM