Shadow Government

On Kurt Campbell, I vote yes

By Peter Feaver

Dov's thread about sub-cabinet appointments is one useful role for this blog, I think. We all have extensive experience working with the folks who are getting named to sub-cabinet positions, or at least mentioned, and perhaps we could help handicap the field. 

In this vein, one I would rate positively is Kurt Campbell for the Assistant Secretary at State for East Asia and Pacific Affairs. Dr. Campbell is from the hawkish wing of the Democratic party, and while he has been stinging in his critique of Bush policy on some grounds, he has also been at the forefront of warning the incoming Administration from being reflexively anti-Bush. More so than most, he understands just how much was achieved in Asia over the past decade, and he is likely to build on that with modest course corrections rather than bringing the strategy grinding to a halt through abrupt reversals.

Indeed, he had a hand in creating some of the policy lines that have produced positive results, including the deepening of the U.S.-Japanese alliance.  Campbell is also quite the entrepreneur.  In 2007, he launched, with Michelle Flournoy (the incoming UnderSecretary of Defense for Policy, another solid pick) the Center for a New American Security, and it has had a remarkable run in terms of shaping the beltway debate. (Full disclosure: I am on the board of advisors, though in the interests of even fuller disclosure, when Campbell first told me about the idea for a new center I was quite bearish on the prospects and told him so. I did not think there was room in DC for yet another think tank, but I was very, very wrong.) 

One further point worth mentioning: paired with Tony Blinken, Biden's national security advisor and another responsible voice in an influential position, the Obama Administration may be fielding the Dream Team for the ASEAN skit night should that venerable tradition return.

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.