Shadow Government

Exxon to Congress: Tax us please

By Philip Zelikow 

In a set of suggestions for a global perspective on fiscal policy in the crisis, I offered some suggestions about spending and some suggestions about taxes. On taxes, payroll tax cuts (not a one-off rebate) could be coupled with some kind of carbon tax. I noted that Lawrence Lindsay and Charles Krauthammer had made similar points.  

The payroll tax cut gets a quick demand boost by providing a lasting increment in income to folks most likely to spend the extra money. A carbon tax meanwhile reinforces our global credibility on fiscal sustainability (essential for the success of the stimulus). Such a tax could have many other positive macroeconomic effects that could complement an overall spur of aggregate demand: e.g., reduce the long-term current account deficit, dampen reliance on inflation-prone commodities (oil prices are likely to spike again as growth returns), and stimulate R&D on energy productive technologies where U.S. firms may gain a global edge. And then there are the energy and environmental arguments.

The political window for bipartisan policy action has just widened some more. Steve Coll helpfully called attention to an important speech last week by Rex Tillerson, chairman and CEO of ExxonMobil. Tillerson's topic was global energy security. He was not speaking off the cuff. This was a carefully prepared address from the head of one of the largest energy companies in the world. The following passage repays especially close study and is worth quoting in full:

As a businessman it is hard to speak favorably about any new tax. But a carbon tax strikes me as a more direct, a more transparent, and a more effective approach. It avoids the costs and complexity of having to build a new market for securities traders or the necessity of adding a new layer of regulators and administrators to police companies and consumers. And a carbon tax can be more easily implemented. It could be levied under the current tax code without requiring significant new infrastructure or enforcement bureaucracies.

A carbon tax is also the most efficient means of reflecting the cost of carbon in all economic decisions -- from investments made by companies to fuel their requirements to the product choices made by consumers.

In addition, such a tax should be made revenue neutral. In other words, the size of government need not increase due to the imposition of a carbon tax. There should be reductions or changes to other taxes -- such as income or excise taxes -- to offset the impacts of the carbon tax on the economy.

Finally, there is another potential advantage to the direct-tax, market-cost approach. A carbon tax may be better suited for setting a uniform standard to hold all nations accountable. This last point is important! Given the global nature of the challenge, and the fact that the economic growth in developing economies will account for a significant portion of future greenhouse-gas emission increases, policy options must encourage and support global engagement.

This is not the occasion for examining the cap-and-trade issues in detail.  But, in short, I think Tillerson is right. The current UN and EU systems for international offsets and globalization of carbon credits are broken, yet such structures are essential to make cap-and-trade work globally.  Senator Bob Corker's critiques last year had much merit. 

Yet doing nothing is not a good answer either, substantively or politically.  Hence I welcome Tillerson's move to open up political space for an approach that may appeal to traditional Republicans and for Democrats willing to join in a bipartisan approach coupled, for stimulus, to a durable cut in payroll taxes.

Shadow Government

47 questions for Hillary Clinton's confirmation hearing

Here's a list of questions that we here think Senator Hillary Clinton should be asked in her confirmation hearing on Tuesday to become secretary of state.

Steve Biegun:

1. What will be the timetable for the Obama administration's pledge to withdraw U.S. troops from Iraq? How many U.S. troops should we expect to remain in Iraq?

2. How many more troops would you like to see European allies deploy to Afghanistan? On what timetable?

3. Would the Obama administration find it acceptable for Iran to possess a nuclear weapon? Would the use of force by the United States be an option in stopping Iran's nuclear weapons program?

4. If North Korea agrees to abandon the pursuit of nuclear weapons, should the United States be willing cease its criticism of North Korea's oppression of its own people as a condition? 

5. With Hamas rockets falling almost daily on Israeli civilians, did the Israeli government act within its rights to attack Hamas targets in Gaza?

6. Should the United States ratify the U.S.-Korea Free Trade Agreement? The U.S.-Colombia Free Trade Agreement?

7. Should Japan play a more active military role in defending peace and stability in the Asia-Pacific region?

8. Should Ukraine and Georgia be permitted to join the NATO Alliance?

9. The Russian government is clearly seeking to create a cartel to coordinate the global production of natural gas in a manner similar to what OPEC does with oil. Do you see this as a problem and, if so, what will the Obama administration do to counteract it?

10. According to its founding declaration in 1975, the G-8 (then G-6) stated that the world's leading industrial nations came together because "[w]e are each responsible for the government of an open, democratic society, dedicated to individual liberty and social advancement." Do you believe the Russian government is democratic and dedicated to individual liberty? Does Russia belong in the G-8?

11. Do you consider Taiwan to be an independent, democratic state?

12. Is Darfur a genocide? Will the Obama administration send U.S. troops to Darfur?

Christian Brose:

13. The Palestinians have scheduled a presidential election for this year and a legislative election for next year. In light of Hamas's electoral victory in 2006, will you encourage the Palestinians to hold these elections or cancel them?

14. Will the Obama administration support the expansion of permanent members in the G-8? The U.N. Security Council? If so, which countries would you favor adding?

15. Was the Bush administration correct to encourage NATO's involvement in Afghanistan?

16. Should the United States have a cabinet-level agency for international development?

17. What is the Obama administration's plan to meet its campaign promise of doubling U.S. development assistance?

18. Do you believe the Millennium Challenge Account and the Emergency Plan for AIDS Relief are succeeding? If so, is it because of or in spite of the fact that these programs are operated completely outside and independent of USAID?

19. What are the Obama administration's threshold criteria for authorizing unilateral military strikes into sovereign Pakistani territory?

20. If southern Sudan votes in favor of independence in its 2011 referendum, will the Obama administration support the creation of a sovereign state of southern Sudan?

21. With U.S. troops stretched thin globally, would the Obama administration support the deployment of private security contractors as part of a peacekeeping force in Darfur?

Peter Feaver:

22. Can you name three or four prominent foreign policies of the Bush administration that you think were wise and that you will seek to continue under President Obama's tenure?

23. When General Petraeus testified in September 2007, you said: "I think that the reports that you provide to us really require the willing suspension of disbelief." Do you now believe your assessment was wrong?  If so, why? - if not, why not? 

24. What is the difference between, on the one hand, explaining, defending, and promoting the foreign policies of the United States to audiences both foreign and domestic - and, on the other hand, engaging in propaganda?

25. What is your view about the proper role for partisan politics in the formation of U.S. foreign policy? What is the responsibility of Republicans in critiquing your policies?

Aaron Friedberg:

26. What kind of verification regime should the United States insist on in order to ensure that North Korea is living up to its commitments to abandon its nuclear weapons programs?

27. Should the United States seek to create a global "coalition of democracies" through which it can pursue its objectives with countries that share common values and similar institutions?

28. What is your vision of a peace agreement between Israel and the Palestinians? What is the best strategy for achieving it?

29. In your view, is the United States engaged in a war against Islamist terrorism?   If so, what should be our definition of victory?  If not, how can the current situation best be described and how should we define our objectives?

Mitchell Reiss:

30. Historically, the United States has adopted one of four grand strategies, or some combination of the four: neo-isolationism (avoidance of foreign entanglements), selective engagement (traditional balance of power realism that works to ensure peace among the major powers), cooperative security (a liberal world order of interdependence and effective international institutions), and primacy (American unilateralism and continued hegemony). Which grand strategy, or combination of strategies, do you think best describes how you would seek to promote U.S. national security today?

31. When Great Britain drew down its military forces in southern Iraq in 2007, al Qaeda proclaimed a great victory, saying it was responsible for the British "retreat and humiliation." President-elect Obama has announced that he intends to withdraw U.S. forces in 16 months after taking office. It should be expected that al Qaeda will again proclaim victory. It should also be expected that al Qaeda will use the U.S. withdrawal as a propaganda weapon and recruiting tool in the Middle East and across the Muslim world.  How can Washington best counter this narrative from al Qaeda?

32. How does globalization impact the three overarching threats identified in the 2002 National Security Strategy and the 2003 European Security Strategy: terrorism, fragile and/or failing states, and the proliferation of weapons of mass destruction?
33. It has been over seven years since the 9/11 attacks. The United States has launched a "global war on terror" and initiated a number of policies and programs around the world. How do you assess the U.S. response seven years on?  What have been the major accomplishments?  What have been the major shortcomings?

34. It is sometimes said that "everyone knows the shape of a final Israeli-Palestinian peace settlement," by which they mean an agreement roughly along the lines proposed by President Clinton in December 2000.  Yet the parties have failed to reach agreement for the past eight years along these or any other lines. Please identify the key obstacles to peace, an all sides.

35. By 2025, China is expected to have the world's second largest economy and be a leading military power. It also could be the world's largest importer of natural resources and the biggest polluter. Is China a national security threat to the United States, a cooperative partner for a common security agenda, or some combination of the two? 

36. It has been reported that there will be a Special Envoy for South Asia. What will be this person's mission?  What problem is he trying to solve? Also, after years of trying to "de-hyphenate" our relations with India and Pakistan during both the Clinton and Bush administrations, does appointing a Special Envoy for South Asia send exactly the opposite message - that we see the two countries as joined?

Kori Schake:

37. Do you believe the State Department is adequately funded? If not, what should the Department's budget top-line be?

38. Would you support transferring money from the Defense Department budget to the State Department?

39. Given previous opposition within the U.S. diplomatic corps to assignments in war zones, do you support mandatory assignments?

40. Some say there is a cultural problem in the diplomatic corps - that it considers itself superior to elected officials and has been outright insubordinate on Iraq. How would you handle such a circumstance if it occurred on your watch?

Michael Singh:

41. Do you believe that the United States should promote democracy in the Middle East?  What does the Obama administration mean when it says that it will seek a better balance between democracy promotion and U.S. interests?

42. Will you seek to promote democracy and human rights in Iran? If so, how? And how are these goals consistent with your stated intention to engage the Iranian regime?

43. You have indicated that we need "tougher" diplomacy with respect to Iran? What does that mean? What new sanctions will you seek to impose on the Iranian regime?

Dov Zakheim:

44. We have an explosive situation on our southern border. Mexico's economy is starting to falter, while the government is facing a major drug-driven insurrection. What initiatives would you recommend vis-à-vis Mexico? Would you support a significant increase in funding for the Merida Initiative???

45. India has long sought to provide more support to Afghanistan, and Pakistan has blocked India from doing more. The Afghans would welcome more assistance from India. Would you advocate having a significant military contribution to the coalition in Afghanistan?

46. Would you talk to Hamas? To Hezbollah? To Iran?

47. What would you advocate the U.S. should do to rid Zimbabwe of Robert Mugabe?