March 30, 2009

Using Cap-and-Trade to Fund Universal Health Care

There's a bit of a "Nuts n' Gum" aspect to this proposal from Harry Reid, but it's kind of fascinating anyway. I'd be interested to see someone work out the distributional effects of this proposal compared to a straight cap-and-dividend program, or a health care plan funded through general revenues. My guess is that most of the people who would benefit most from a climate rebate plan are also uninsured or underinsured, but that making the argument for tying climate change and health care like this would be too complicated to make it worth the effort.

As an aside, Reid's proposal also shows up one of the big dangers of auctioning off carbon emissions credits: The big wad of money it would generate will be very, very attractive to politicians who want to fund this or that project. Some of those projects are no doubt worthy, but one needs to keep being reminded that the purpose of a cap-and-trade system is to put a price on carbon emissions, not to be a cash cow.

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