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David Brodwin's blog

Businesses’ Responsibility in Public Policy to Address Climate Change

The damage from this year’s storms in Texas, Florida, and Puerto Rico is only the most recent and high-profile example of the dangers posed by extreme weather. Most business people, like voters as a whole, understand the issues of extreme weather and other impacts of greenhouse gas emissions. For most, the question is what to do about it? They want government to help solve the problem in a way that aligns with their political leanings, the way they see the world and problems that matter most to them.

Many business people see the risks of extreme weather in their own business. Severe storms, rising sea levels, and multi-year droughts ruin businesses and disrupt supply chains. The damage that results ripples across the national economy. Changing rainfall patterns increase food prices and reduce consumer spending. The rise in extreme weather leads to higher taxes to cover the huge costs to repair and rebuild damaged infrastructure, and address new public health challenges.

A Bipartisan Solution

Of all the potential solutions, one is emerging that can pass muster with both conservatives and liberals: putting a price on carbon. For conservatives (including libertarians), the best way to achieve a social and environmental goal in the economy is with a tax rather than through regulations. Taxes preserve market incentives; they are simple and hard to game.

Setting a meaningful price on carbon would send a clear market signal that the United States is moving towards a clean energy future. It would spur more investment in the renewable energy sources we need to power our economy going forward. Revenues from a carbon tax could also be used in a variety of ways: to support heavily affected industries and populations, including coal miners and coal-dependent communities; and/or to improve the nation’s aging infrastructure. Increased energy costs for heating and gasoline can be offset by tax credits for middle and low income households, while still encouraging industries to reduce greenhouse gas emissions.

Will Bipartisanship Prevail?

Behind the scenes, members of Congress from both sides of the aisle are working on solutions like this. Most important is the Climate Solutions Caucus, which now has 58 members, evenly split between Republicans and Democrats. It's being serious and pragmatic about trying to address differences - even within parties - to find a solution that works for all constituents. This is an exciting development, especially at a time when it seems that politicians are just trying to score political points and pander to their base. This pragmatism is what most business people want.

Many Republicans now quietly accept the reality of climate change and the fact that it is caused by human activity. They’re not yet ready to speak out for fear of primary opponents funded by the fossil fuel industry. But behind the scenes, they continue to work on solutions with roles for limited government and strong markets.

As these Republicans find their way toward a more public position, a framework all sides can live with. Democrats will need to compromise as well.  For example, if Republicans accept a new tax in the form of carbon pricing, will Democrats accept an approach that doesn’t increase taxes overall? Will Democrats relax their demands for stricter carbon regulations?  Pragmatic policymakers can find such solutions through the political process.

But success is far from inevitable. Lawmakers are under intense pressure to preserve the status quo for the fossil fuel industry lobby and their fellow travelers.

Business Needs to Provide Political Support
Lawmakers need to hear from business leaders who will back them on finding a solution. For many Republicans, only if they know that business leaders and small business owners want a solution, can they buck the fossil fuel lobbies and push for compromises that will be a net win for the environment.

While most business people do want the government to address this issue, many are novices when it comes to advocating in their state houses or on Capitol Hill.  A large part of our work at American Sustainable Business Council is to provide support for business people in ownership, and senior management positions in companies of all sizes, to boldly step into the arena. Many of ASBC’s 250,000 members are executives and investors representing a wide range of industries but, prior to joining ASBC, they lacked experience meeting with policymakers.  We provide our members with training and support to make them successful advocates.

For example, we recently facilitated groups of CEOs and business owners to confer with members of Congress and their staff in Washington, DC. These behind-the-scenes meetings are important for reminding policymakers that the traditional business lobbies don't speak for most businesses. Because members of Congress and their staff hear so frequently from the traditional business lobbies, hearing directly from business people who support finding green solutions is often extremely persuasive.

In every state house as well as on Capitol Hill, finding the right solution to a problem as vexing as climate change can be difficult. Support from the business community could make the difference. See how to engage in ASBC’s push to put a price on carbon here.

David Brodwin is Vice President and Co-founder of the American Sustainable Business Council.

Budget Battle Deja Vu

With efforts to repeal Obamacare all but dead, the 2018 budget has taken center stage. It's easy to let your eyes glaze over on this, but don't: The proposed House budget dramatically reallocates both national priorities and taxpayer dollars.

The politics of the budget bear an uncanny resemblance to those of the health care bill, and the outlook for budget legislation may not be much better. Too many conflicting promises have been made to too many different factions. The GOP health care proposal aimed to make good on multiple promises: to repeal Obamacare, to NOT repeal the parts of Obamacare that people liked (for example, protecting people with preexisting conditions) and to cut government spending on health care so as to pave the way for future deep for tax cuts. Ultimately these three objectives proved irreconcilable and the repeal effort halted.

On the budget front, Congress and the president have again made mutually exclusive promises: to cut taxes, to increase defense spending, to not impair Medicare and certain other entitlements, and to not increase the federal deficit. Without resorting to magical thinking, it's simply impossible to do all four of these. The equivalent for a homeowner would be something like this: take a lower paying job, remodel the kitchen, don't steal money from the kid's college fund and don't run up credit card debt. It just doesn't work.

Faced with this impossibility, the proposed budget goes half way and then makes misleading assumptions to conceal the likely results. Yes, it cuts income taxes, mainly to highly paid individuals and corporations. It increases defense spending, by much more than what the president requested. It cuts many other programs, consistent with President Donald Trump's campaign promises, and then goes further to cut Medicare, which Trump promised to protect.

The proposed budget claims to eliminate the federal budget deficit within 10 years. But in order to zero out the deficit, the budget makes the wildly optimistic assumption that the U.S. economy will grow 2.6 percent per year, whereas most economists think 1.9 percent to 2 percent is much more realistic. That may not seem like much of a difference, but the economy is so huge that a small difference in its growth rate makes a big difference in federal income, and hence the deficit. Under realistic assumptions, the deficit balloons to about $1.4 trillion instead of shrinking to zero (according to Congressional Budget Office estimates).

The numbers are so big they are mind-boggling to imagine. But let's try to get a sense of the scale of the changes. As of 2016, the federal government raised $3.3 trillion and spent $3.9 trillion, so the deficit was the difference between these two numbers, or about $300 billion.

Government revenue will fall under the proposed budget as taxes are cut. In 2018, the tax cuts would amount to $62 billion, which is a relatively small portion of total taxes collected (about 3 percent) though nearly all the cuts go to corporations and the top brackets.

Defense spending goes up by about 6 percent. It is now about 15 percent of the federal budget.

Mandatory social spending (also called "entitlements") includes Social Security, Medicare and Medicaid. This is the largest portion of federal government spending – about 62 percent. This would be knocked down by about $200 billion or 8 percent. Social Security is not cut explicitly, and the cuts fall mostly on Medicare and Medicaid. But Social Security could be cut implicitly by such measures as raising the retirement age.

The next category is called "Non-defense discretionary" and you can think of it as "everything else." In other words, it's what is left over in the budget after subtracting defense and the mandatory spending. This part of the budget takes a huge 24 percent reduction which will affect a lot of programs that many people depend on. Some of these cuts – like student loans -- will hit the middle class hard, and others like nutritional assistance hit the poor.

Finally, the way reconciliation works, this budget provides a means to kill certain regulatory programs without formally and explicitly repealing them after public debate. For example, the Dodd Frank financial regulations could be scaled back or killed under the argument that the government can't afford the cost of implementing and enforcing them.

Different camps within the Republican Party have already staked out opposing positions on the budget, The battle lines are very similar to those in the health care fight. The House GOP Freedom Caucus opposes the proposed cuts to Medicare and Medicaid, saying they don't go far enough. Meanwhile the centrist Tuesday Group of roughly 50 moderate Republicans in the House opposes the same cuts because they go too far and will cause too much pain for constituents. Either the House factions will find a way to compromise with each other, or they will have to seek allies on the Democratic side to get a budget passed.

David Brodwin is a co-founder and board member of American Sustainable Business Council. This blog is adapted from a column recently published in U.S. News & World Report July 24, 2017.