Bernie Against the Billionaires

By Meagan Day, Jacobin

06 February 19

Bernie Sanders is right to want to hike the estate tax — there’s no reason for billionaires to exist, and there’s definitely no reason to allow their failsons to inherit their fortunes.

epublican senators Mitch McConnell, Chuck Grassley, and John Thune introduced legislation early last week to repeal the estate tax, the tax on large inheritances that currently applies to only 1,700 American families per year. Their bill would provide up to $63 billion in tax breaks for the Walton family, which owns Walmart, and $39 billion for the Koch brothers’ brood.

That money could go toward universal health care, tuition-free public college, housing the homeless, paying public school teachers a living wage, or solving any number of social problems faced by the American working-class majority. Instead, Republicans want to put it toward the strengthening of modern dynasties.

Vermont senator Bernie Sanders isn’t just trying to stop them. He’s gone a step further and introduced his own bill to beef up the estate tax. As he unveiled his proposal, Sanders said:

Instead of repealing the estate tax, we should substantially increase this tax on the multi-millionaires and billionaires of this country, and in doing that not only come up with much-needed revenue to address the needs of working families, but also to reduce wealth inequality in America. And that is why this week I will be introducing legislation for an estate tax bill that would do exactly the opposite of what my Republican colleagues propose to do.

Under Sanders’s bill, inherited estates worth more than $3.5 million will be taxed 45 percent or more. The scale is steeply progressive, culminating in a 77 percent tax on inheritances over a billion dollars — nearly double the current rate.

Conservatives will react to Sanders’s bill in a few predictable ways. First, they’ll probably try to trick people into believing he wants to impose a massive tax on all inheritances, not just those beginning at a multimillion-dollar threshold. This is the same maneuver they pulled in response to New York representative Alexandria Ocasio-Cortez’s proposed 70 percent top marginal tax rate, and something they’ve tried with rhetoric about the “death tax” before.

And second, they will tell us that rich people earned their money and should get to keep it as a reward for their hard work. For an example, take a look at this op-ed calling Sanders’s bill an “inherently immoral” attempt to “penalize innovators.”

To this, there are two responses. First, we’re talking about dead people here, and dead people’s children. Did Wyatt Koch, the Koch heir who designs money-themed patterned shirts when he’s not partying at Mar-A-Lago, lift a finger to build his father’s and uncles’ fortunes? No, he did not. In fact, Wyatt has never needed to work at all — the shirt thing is just a hobby, sort of like the cosmetics line of Peter and Harry Brant, the “dandy teenage boulevardiers of New York society” who can be spotted at charity galas in “ensembles that would have made Little Lord Fauntleroy blush.” What exactly do these kids “deserve,” and why? They haven’t done anything but be born into rich families.

Second, it’s impossible for anyone to earn a billion dollars. An individual can acquire a billion dollars, but that fortune is not proportional to difficulty of work or value added to society. A recent viral tweet shows why:

Do you know how rich a billionaire is? Let’s say you earn $50k/year & save every. single. penny. After 20 years, you’d have saved $1 million. After 200 years, you’d be dead, but would have saved $10 million. Only after 20,000 years(!!!), would you have saved $1 billion.

People do not receive a billion dollars in exchange for work. They receive a billion dollars in exchange for owning enormous companies that employ tens of thousands of people, whose labor makes the entire enterprise possible. Conservatives argue that if a billionaire boss built his company or keeps it running, he’s entitled to the perks of ownership. But which is a company like Amazon or Walmart more likely to survive: two weeks of radio silence from its CEO, or two weeks of its workers going on strike? The answer tells you who really builds a company and keeps it running.

All corporations function by paying workers only a portion of the value that their labor produces. The leftover value is taken by bosses as profit. The stuff we need doesn’t have to be manufactured and distributed through operations like this — workers can own companies in common and divide the fruits of their labor among themselves.

“You do not need the capitalist,” the socialist Eugene Debs told a gathering of workers in 1905. “He could not exist an instant without you. You do everything and he has everything; and some of you imagine that if it were not for him you would have no work. As a matter of fact, he does not employ you at all; you employ him to take from you what you produce, and he faithfully sticks to his task.” This is the idea behind socialism in a nutshell.

The ultimate utility of bosses aside, there’s no reason for billionaires to exist, and there’s definitely no reason to allow their children to inherit the bulk of their fortune, perpetuating this obscene inequality across generations.

“From a moral, from an economic perspective,” said Sanders, “our nation will not thrive when so few people have so much wealth and power, and so many people have so little wealth and power. This wealth and income inequality is not only unjust and unfair, the truth is it is a real threat to our economy and to our democracy.”

Jeff Bezos makes the equivalent of the median US income every twelve seconds. Meanwhile, 40 percent of Americans don’t have $400 on hand in case of an emergency. A steep estate tax will only begin to address the extent of the problem — but it’s a great start.

The False Choice Between Economic Growth and Combatting Climate Change

By Carolyn Kormann, The New Yorker

06 February 19

n 1974, the economist William Nordhaus described the transition from a “cowboy economy” to a “spaceship economy.” In the former, he wrote, “we could afford to use our resources profligately,” and “the environment could be used as a sink without becoming fouled.” But, in the spaceship economy, “great attention must be paid to the sources of life and to the dumps where our refuse is piled.” He added, “Things which have traditionally been treated as free goods—air, water, quiet, natural beauty—must now be treated with the same care as other scarce goods.” Toward the end of his landmark paper, “Resources as a Constraint on Growth,” Nordhaus discussed the possible adverse effects of energy consumption, most notably the “greenhouse effect.” From a “rough calculation,” he found that the atmospheric concentration of carbon dioxide would increase by more than forty per cent in the next sixty years. “Although this is below the fateful doubling of CO2 concentration,” he wrote—scientists had already predicted that such a doubling could cause the polar ice caps to melt catastrophically—“it may well be too close for comfort.” He was prescient. We are now dangerously on track to hit his estimate, four hundred and eighty-seven parts per million, by 2030.

In the United States, after three years of decline, carbon-dioxide emissions increased by an estimated 3.4 per cent in 2018, according to a report released earlier this month by the Rhodium Group, a private climate-research firm. The authors blame two main factors: a particularly cold winter and fast economic growth. In the past two decades, the only greater annual gain in emissions was in 2010, when the economy was rebounding from the Great Recession. Historically, emissions have aligned with the ebb and flow of the economy. In 2018, economic growth was driven by a higher demand for energy, trucking and air travel, and industrial activity. Companies were manufacturing more stuff, including steel, cement, and chemicals. The carbon intensity of the power sector, meanwhile, did not decline fast enough to offset all those demand increases. As has been common since Nordhaus’s 1974 paper, the report seems to pit controlling climate change against a growing global economy.

The picture could have been much different. Nordhaus went on to publish a series of foundational studies on the economics of climate change. In 1992, he created an integrated economic and scientific model that could be used to determine the most efficient ways to cut greenhouse-gas emissions. His work—and that of many other economists who followed his lead—showed that a low tax on carbon, set to rise slowly over time, could be enough to keep emissions at reasonable levels, saving us from climate change at little, if any, cost. A “spaceship economy” could thrive if governments made sure that companies paid an appropriate price for the environmental damage they caused—what would come to be called the social cost of carbon. Companies that were most easily able to reduce their level of pollution would be incentivized to make the greatest reductions, and to invest in cheaper and better pollution-reduction systems.The dirtiest activities would be the most costly. The tax would promote innovations in new forms of power generation and, eventually, a widespread adoption of clean-energy technologies. The way to break the chain was to reimagine how we fuel the global economy. “It’s absolutely the case that emissions and growth can be decoupled,” Marshall Burke, an assistant professor in Stanford University’s Department of Earth System Science, told me. He pointed to research plotting how thirty-five countries, including the United States, did, in fact, experience economic growth in the past fifteen years while reducing their emissions—and not solely due to recessions. But the decline was not nearly enough. “The technology is available to have faster economic growth while reducing over-all emissions,” Trevor Houser, the head of Rhodium Group’s energy and climate team, and one of the authors of the report, told me. But the switch to nuclear and renewables needs to happen more rapidly. “It takes policy. It won’t happen through markets alone,” Houser said.

In October, Nordhaus and another economist, Paul Romer, won the Nobel Prize in Economic Sciences for, respectively, “integrating climate change” and “technological innovations” into “long-run macroeconomic analysis.” The timing of the announcement from Sweden was painfully ironic. Hours earlier, the United Nations had released its dire report warning that, if climate change’s worst impacts were to be avoided, the nations of the world had about a decade to revolutionize the energy economy. “The policies are lagging very, very far—miles, miles, miles behind the science and what needs to be done,” Nordhaus said after receiving the prize. “It’s hard to be optimistic . . . We’re actually going backward in the United States, with the disastrous policies of the Trump Administration.” The Obama Administration had, in its final years, partially incorporated concepts that Nordhaus had helped to develop, such as putting a price on the economic harm that results from every additional ton of carbon dioxide emitted into the atmosphere. The price was set at forty-five dollars a ton, and used in both regulatory cost-benefit analyses, which undergirded new fuel-efficiency standards, and the Clean Power Plan, which would have propelled a faster retirement of coal-powered electric plants and a broader transition to renewables. Just as such policies were “beginning to bear fruit,” Houser said, “that whole framework was dismantled.” Under Trump, the social cost of a ton of carbon is as little as one dollar.

As emissions keep growing, and climate change advances, there is less and less time to make the necessary cuts. “The pace we needed to decline was already much larger than what was happening,” Houser told me. “Now we have to go even faster to meet our Paris Agreement target by 2025”—on average, a 2.6-per-cent reduction in annual energy-related carbon-dioxide emissions in the next seven years. “That is considerably faster than at any point in history,” he said. And it will need to go even faster if declines in other greenhouse gases, including methane and hydrofluorocarbons—which endure in the atmosphere for much shorter amounts of time than carbon dioxide but are much more potent—do not keep pace.

A modest carbon tax of the sort Nordhaus proposed decades ago—one that was then palatable to conservatives—will therefore no longer bring us anywhere near the Paris Agreement targets. But it’s one of many weapons in the arsenal that policymakers need to employ. “The real challenge is finding ways to reduce emissions and maintain economic growth on the timeline demanded by the nature of climate change,” Kenneth Gillingham, an associate professor of economics at Yale University, told me. But, as much as the costs of climate mitigation will undoubtedly increase, the question is whether the benefits of mitigation exceed those costs. “It’s a straw man—and terrible economics—to just point out the costs while ignoring the benefits,” Burke said. He and two co-authors published a paper in Nature last May that shows that the economic benefits of mitigation are going to be much larger than previously believed. Cooler temperatures would help maintain and grow productivity, and reducing carbon emissions means reducing air pollution—specifically particulate matter, or soot—which brings immediate health benefits. They found that keeping global warming to one and a half degrees Celsius (which is nearly impossible at this point), as opposed to two degrees Celsius, would potentially save more than twenty trillion dollars around the world by the end of the century, and significantly reduce global inequality. Beyond two degrees, they wrote, “we find considerably greater reductions in global economic output.” If nations met their commitments under the Paris Agreement, the world would still see the average global temperature rise by two and a half to three degrees Celsius, which, according to Burke’s paper, would result in a fifteen-to-twenty-five-per-cent reduction in per capita output by 2100. “To just complain about the costs of this transition and ignore the benefits, as is common in the discussion from this Administration,” Burke said, “is some pretty poor cost-benefit analysis from an Administration that prides itself on economic savvy.”

As a small but growing coalition of congressional Democrats, led by Representative Alexandria Ocasio-Cortez, have outlined as part of their Green New Deal, transforming the energy sector—and, really, the entire economy, in a just and more equitable way—will require some sort of carbon tax (preferably a “fee and dividend” approach, which distributes tax revenues as rebates directly to citizens), and also new regulations and huge investments. “We can decarbonize the electric sector at a fairly low cost,” Gillingham told me. “That’s where some of the cheapest emissions reductions are to be found.” Extensive government subsidies could hasten the spread of renewables—specifically, solar, wind, and batteries—and offset any rise in emissions elsewhere. As Gillingham said, “We might want to be careful about fighting climate change by preventing people from staying warm in the winter. If a winter is really cold enough, emissions increases are to be expected.” Still, there are ways to reduce the use of fossil fuels in heating; utilities, for instance, can create incentive programs so that homeowners have a motivation to replace their boilers with electric heat pumps.

Houser told me that total emissions are expected to remain flat in 2019. Economists and other market observers predict that over-all economic growth will be slower, and the full impact of recent cuts to coal-plant capacity (2018 was a near-record year) has not yet been recorded. Still, in the absence of major policy changes—which is mostly dependent on a new President who makes climate policy a top and urgent priority—there is almost no chance that the U.S. will achieve the average emissions cuts necessary to meet the Paris targets by 2025. Houser told me that our only hope would be extremely favorable market and technological conditions. “If, over the next couple of years, no more nuclear power plants retired”—more than a dozen are scheduled to retire in the next seven years—“wind, solar, and battery prices fall far faster than the currently most optimistic projections estimate, it is possible that we could come pretty close to meeting the Paris Agreement targets,” he said. States, cities, and private organizations would also have to pick up a tremendous amount of slack from Washington. Even warmer winters would help. “Everything would really have to light up in the right direction,” Houser said. “It’s also, of course, possible that, if there was a massive global recession, we’d see a significant decline, too. But that’s not the reason we want emissions to decline.”