Can We Cap-And-Trade Our Way Out Of The Debt Ceiling Crisis?

If the EPA enacted a cap-and-trade system on the gas we all use on our cars, we could start collecting enough revenue to deal with our financial issues. Best part: Congress doesn’t need to be involved.

The upcoming debt ceiling fiasco has prompted some recent brainstorming by the folks over at Slate on how the President can work around a recalcitrant Congress to avert the debt ceiling standoff. Last week, Eric Posner argued that the President can ignore the ceiling, given his discretion in the face of conflicting commands from Congress. Matt Yglesias recommends the Treasury Department just mint a $1 trillion platinum coin, while Posner worries that such a solution could result in impeachment hearings.

Here’s a different idea: President Obama can instruct the Environmental Protection Agency to enact a cap-and-trade system on automobile fuels (i.e. gasoline), auction emissions allowances to oil refineries, importers, and manufacturers, and use the money to make up for current tax revenue shortfalls.

A gasoline cap-and-trade system enacted by the EPA requires no congressional approval and should enjoy wide support from thinkers across the political spectrum, bringing leading liberals together with conservatives who have previously voiced support for new gas taxes—including former Romney advisor Greg Mankiw, Senator Tom Coburn of Oklahoma, and former George W. Bush advisor Emil Frankel.

The EPA is currently sitting on a petition delivered to the agency by the Institute for Policy Integrity in 2009 to create a cap-and-trade for the transportation sector under its existing authority. Granting the petition now would raise much-needed federal revenue and would reduce greenhouse gas emissions, improve local air quality, reduce dependence on foreign oil, and help clear traffic congestion in high-population areas.

Of course, even if wonks on both sides of the spectrum like the idea of a gas tax, the politics have never been particularly attractive. But, the debt ceiling may create the political cover necessary for actual progress on this issue: the President can say (truthfully) that Congress forced his hand, and Congress can complain that it was the President’s fault. If a price on carbon from gasoline is ever to become politically viable, it might need to spring from this kind of immaculate political conception.

Granted, there are some policy kinks to figure out. To ensure low-income households do not bear a disproportionate share of the burden, the EPA should provide states with a share of the allowances that can be used to protect qualified families from the effects of price increases. Also, a $1 per gallon gas price increase can’t be implemented tomorrow and would have to be phased in gradually over time, so new revenues would not be able to plug the entire debt ceiling hole.

But the fact is: Despite all the talk over grave dangers posed by the upcoming debt ceiling debacle, it may in fact be an opportunity in disguise for President Obama and the entire country. As Posner nicely summarized, President Obama "should not twiddle his thumbs waiting for lawmakers to get their act together…it is time for him to wield the big stick." If the President is looking for the right club, a win-win policy that generates revenue, helps address climate change, and weans the country from its oil addiction should look awfully attractive.

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  • Matt_PrecisonMetalCrafts

    As i read about ideas like this i start to feel a little sick.  More regulation, more taxes, more government all equates to more businesses and jobs down the drain.  

  • Dhodge82

    You guys are out of your effing minds.  Why does every forward looking publication try and act as a psuedo pr firm for the current administration?  Do you really believe that MORE govt involvement in our day to day lives is the solution?  Look, the first point that needs to be agreed upon is "Does the deficit matter"?  If our govt reaches consensus (which they don't appear to have now) that it is a "real" problem then we need to see "real" solutions proposed.  If the "solution" could include working around congress or minting a magic coin to reduce the deficit, have the balls to go all the way and propose to make the whole thing go away?  Just issue an executive order stating that we consider all debts paid and there will be no more "payments" forthcoming.  I mean what does it really matter at this point, we have no intention of ever paying off our debt, especially as far as the Federal Reserve is concerned (debt is money).  If you had to borrow an increasing amount each month just to make the payments on your personal debt, would you ever see your self getting debt free?  Since we have nothing but a balance sheet backing our currency, why not just make a 16 Trillion Dollar "payment" and call it a day.  But you brilliant journalists propose that we impose an additional burden on the working man just to keep the illusion of responsible leadership alive.  

  • Malafactor

    Gas prices are already very high, any higher and it will slow this weak economy even more. Fuel prices are tied into everything, the cost of food to manufacturing. This is a very, very bad idea.