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Why Global Warming Is Now an Economic Tax on the Middle Class

Bill Roth | Tuesday July 17th, 2012 | 10 Comments

Given its costs, global warming can now be thought of as an economic tax on the middle class. A recent NOAA report found that 56 percent of the continental U.S. is currently experiencing drought. Exaggerated by global warming, enhanced drought is reducing America’s corn crop and sending the futures price for corn soaring by 34 percent over the last four weeks. This will generate a painful new economic tax on a middle class whose food supply is largely tied to corn as an ingredient and as animal feed. “Let them eat cake” is not an answer either as this drought has similarly damaged the U.S. wheat crop.  To put this damage in perspective, consider that France is now positioned to exceed the U.S. in wheat exports!

Global Warming’s economic tax on consumer electric bills
An economic tax is now hitting the middle class as they open their electric bills following the recent heat wave. The middle class had to crank up their air conditioners to preserve their health and work performance during the recent extreme heat and humidity and will suffer higher electricity bills as a result. There is even a multiplier effect where the global warming’s induced extreme heat and humidity reduces the operating efficiency of air conditioning equipment that further increases consumers’ electricity demand and electric bills.

Other “unsustainability” taxes on the middle class:

Global warming is just one symptom of the “unsustainability” of the 20th century’s economic system.  The industrial scale use of antibiotics is a good example: 80 percent of antibiotics designed to improve human health are now actually used to mass-breed animals on an industrial scale to achieve least-cost-unit production. While this system is delivering 99¢ meals, it is also endangering the long-term health of consumers. A just-released report in Emerging Infectious Diseases, a publication of the U.S. Centers for Disease Control and Prevention, reported 85 percent of urinary tract infections impacting 8+ million American women are linked to antibiotic use in chicken manufacturing. The telling quote in this research article is:

We are also concerned about the selection and amplification of drug-resistant E. coli on the farms because of improper or overuse of antimicrobials during food animal production.

The economic benefit of feeding antibiotics to chickens from egg to execution is a lower priced supply of meat. The unintended cost consequences are human suffering and an economic tax placed on the middle class in the form of higher health care premiums.

Poor, unsustainable product design adds to the economic tax.  Plastic bags, those infernal packages wrapped in impregnable plastic, styrofoam take-out containers and all our e-waste in the form of obsolete computers, printers and phones are tossed by consumers without economic consequences to the manufacturer. The natural economic ramifications are product designs where the cost of disposal/recycling is accounted for as “regulatory compliance.” In this type of economic system even a heavily regulated “green” state like California dumps 123,000 tons of plastic bags annually into landfills! But disposal and recycling is not free so in our current system this cost falls on the middle class through higher garbage collection fees, municipal taxes, bond issues to fund additional landfills and income taxes to pay for the massive growth in state and Federal environmental regulation. And then on top of all this is the environmental damage of the trash.

China’s global warming economic tax on the American middle class
In a free enterprise system businesses and consumers typically respond to economic signals like those being delivered by global warming and unsustainability before a political system can align around consensus actions. That is exactly what is happening today in the United States. Since 2006, the U.S. has jumped to world leadership in reducing CO2 emissions. In 2011 the U.S. reduced CO2 emissions by 2% as utilities shifted from higher emissions “clean coal” to lower emissions natural gas, as car companies introduced and consumers bought more fuel efficient technologies and the vast majority of businesses implement building/manufacturing efficiencies. While it is hugely encouraging that the U.S. is producing business leaders pioneering sustainable products the sobering reality is that the United States is still the world’s second largest emitter of CO2.

China is now world’s worst polluter. China’s pollution pushed the entire world to record levels of emissions in 2011. Even more concerning is that China’s emissions are the fastest growing in the world. Plus, China’s pollution is adding to the economic tax on America’s middle class. While buying “Made In The USA” is patriotic, doing so also serves to eliminate the economic tax of global warming by rewarding cleaner domestic companies.

Public policy to stop taxing the middle class with global warming
I hesitate to propose public policy because I am an economist and not (thankfully) a politician. But the economics are so clear that eliminating the economic tax that global warming and unsustainabilty creates should be a consensus public policy issue for conservatives and liberals alike. Art Laffer is a noted conservative economist who advanced the Reagan administration’s public policies on supply-side economics. The following quote, by Laffer, is telling regarding the economics of global warming and unsustainability:

All I need to know is, you’re taxing something you want more of, which is income, and you’re not taxing something you arguably want less of, which is CO2. Change what you tax.

The public policy option seems clear, reward businesses and products that are cleaner with more favorable tax policy and place a large enough tax on emissions and waste to tilt all businesses and consumers toward healthier and greener products. The net result will be to remove the growing global warming tax now hitting the American middle class’s pocketbooks.

This posting is the first in a new series of articles to be published over the next few months that will profile examples of businesses and business leaders who are pioneering sustainable best practices delivering products that are healthier, cleaner and increasingly more price competitive.

Bill Roth is the Founder of Earth 2017. His latest book, The Secret Green Sauce, profiles the best practices of business making money offering smarter, healthier and green products.


▼▼▼      10 Comments     ▼▼▼

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  • ozonator

    Thank you for connecting the dots.  Connecting the dittoheads, the GOP claims AGW and other unregulated death and destruction is their freedom of speech.

  • Michael Jones

    I can here them now in the boardrooms now….but it will increase economic growth this global warming…folks will buy more air conditioners, use more electricity, ect ect. sick isn’t it?

    • Bill Roth

      Hi Michael, thanks for the comment! The great news is that higher prices reduces demand when income levels remain constant or are weakened as is our current economic situation. As a country we are actually using less gasoline as the price soared above $3 per gallon. Over half of American businesses plan to reduce their electricity consumption by 25%. Wait until those folks that suffered the recent heat and humidity open their electric bills. They will be highly motivated to find ways to reduce their demand. The end result is lower emission!

  • Sustainablemcleod

    Bill:  Excellent piece!  And I love the Laffer passage on smart taxation!!!

    • Bill Roth

      Thanks Mark for your comment! Conservative or liberal the economics are the economics (not sure I got that in graduate school but it is true!).

  • Dave Bishop

    Too many people is what it comes down to. Not to mention so many striving to live like us the US. I see so many people displaying their patriotism but yet only care about the cheapest product. I always look to see where it’s made and almost always try to buy US. I don’t even do it for patriotic reasons, but for common sense. Now days it’s like an archeological dig trying to find that one thing still made in the US.

    Yes, people and businesses alike should be rewarded for being greener and cleaner. How do people separate themselves from this? Like it’s not effecting them. When 20% of the smog in California is from China, you know the Earth has shrunk almost as much as it can.

  • Hwana88

    Hello I am Korean and work as an intern at KOSRI(Korea Social Responsibility Institute). I interpretted your article in Korean and plan to deliver your writing to Korean :)

    • Bill Roth

      Thank you for translating the article. Global warming is a world problem requiring collaboration between countries. Your efforts are greatly appreciated.

  • Rodney North

    And lets not forget that global warming/climate change is also a severe tax upon the poor. In fact, the poorer one is the more vulnerable they and their communities are to the volatility and extreme weather that comes with climate change.
    We in the coffee trade have been watching this – aghast – for a few years now as increasingly abnormal and severe weather cause havoc for coffee farmers and wipe out crop after crop, or reduce the quality of the what coffee can be harvested.

  • Nick86

    After what hurricane Sandy did to the northeast, you may start to see a lot of people change their position on this issue.

    Nick
    http://www.maslercpa.com