By Samuel Rubenfeld
Former Treasury Secretary Paul O’Neill proposed a “floating” carbon tax to keep gas prices above $5 a gallon during a forum Tuesday at the John Cranford Adams Playhouse.
The panel included another former Treasury secretary, Robert Rubin, who served during Bill Clinton’s presidency, and was moderated by New York Times business reporter Floyd Norris.
“We need a carbon tax to effectively cause the market to…keep gas at $5 or more,” O’Neill said. “It is hard to find a politician to tell you that.”
The tax would dissuade Americans from continuing to use natural gas and crude oil, instead causing them to begin using renewable and alternative energy sources, O’Neill explained.
He said the U.S. has $5 trillion worth of unfunded liabilities, including trillions worth of Social Security and Medicare entitlements the federal government has to pay as the baby boomers retire. The up to $200 billion bailout of Fannie Mae and Freddie Mac, two government-sponsored enterprises, GSEs, that bought mortgages from banks so the banks could make more mortgages “will seem like child’s play” if the government doesn’t deal with the liability problem soon, O’Neill said.
The stock value of the two GSEs plummeted amid the housing market meltdown, and a “backstop,” or promises from the Treasury Department to fund the GSEs to stop their failing, was still not enough to prevent the bailout.
In his opening remarks, Rubin agreed with much of what O’Neill said, but added that the next administration must prioritize its actions or it will be unable to accomplish anything.
“The longer we wait to address these fiscal issues, the worse they become,” Rubin said.
After the opening remarks, Norris led the discussion by asking the two economists questions, during which both endorsed the Fannie and Freddie bailout. “He [Treasury Secretary Henry Paulson] had no other choice,” O’Neill said.
Rubin did not address the carbon tax until the question-and-answer session at the end of the forum, when he was asked to comment on it.
“It has to be wedded to making that [the tax] progressive so middle- and low-income people are shielded from its effects,” he said.