2:16pm

Thu October 18, 2012
Planet Money

Two More Policies Economists Love And Politicians Hate

Originally published on Wed October 24, 2012 10:32 am

Watching a presidential campaign, it's easy to think that the nation is deeply divided over how to fix the economy. But when you talk to economists, it turns out they agree on an enormous number of issues.

So we brought together five economists from across the political spectrum and had them create a platform their dream presidential candidate. This is the second in our four-part series. We'll have more tomorrow.

This morning, we rolled out three ideas that economists love and politicians hate. Here are two more.

Tax Carbon Emissions

Economist love to tax bad things. Pollution is bad. So: Tax carbon emissions. This would drive up the price of gas. It would make electricity more expensive. Our economists love it.

Legalize Marijuana

From an economics perspective, banning marijuana doesn't make sense.

"We spend a huge amount of resources putting people in jail and trying to catch them and discourage them, and all it does is make nasty gang members rich," says Russ Roberts of George Mason University.

Our economists are unanimous. They say marijuana should be legalized, taxed and regulated.

Coming tomorrow: We take our plan to real political consultants, and launch a fake campaign.

Copyright 2012 National Public Radio. To see more, visit http://www.npr.org/.

Transcript

ROBERT SIEGEL, HOST:

Now to some big ideas about reforming our economy, big ideas that you won't hear from the presidential candidates. Our Planet Money team noticed a divide between the bold plans put out by economists and what politicians are willing to say.

So NPR's Robert Smith brought together five economists from across the political spectrum and he asked them to create a dream presidential candidate.

ROBERT SMITH, BYLINE: It turns out there is a reason why economists are hidden in the back rooms of presidential campaigns. Their ideas can seem a little bit blunt. Let's walk through three of these ideas that economists love and that politicians hate. Here, I'm going to put number one in the mouth of a fake presidential candidate giving a stump speech.

(APPLAUSE)

UNIDENTIFIED MAN #1: My opponent is always talking about those of you without health care. I understand that's a problem, but I alone am tackling a problem equally as great: those of you with too much health care.

KATHERINE BAICKER: When you say it out loud, it sounds wrong.

SMITH: This is Katherine Baicker from the Harvard School of Public Health. And she says no politician will admit it, but you can have too much health care.

Our panel of economists brought it up because, although you may not realize it, the U.S. government subsidizes health plans. If you get health insurance through your job, you don't pay taxes on that benefit. And your employer doesn't either. This deduction costs the U.S. Treasury something like $180 billion in lost taxes a year. And the wealthier you are, the better your health plan, the more subsidy you get and the more health care you use even if you don't need it.

BAICKER: Should the tax code be subsidizing extra, extra, extra care that's producing lower and lower and lower health benefits when those monies could be going to alternative uses like education or housing or welfare or national defense.

SMITH: This is a concept that you will only hear from an economist's dream candidate.

UNIDENTIFIED MAN #1: And so I pledge, costlier and more restrictive health plans for most working Americans.

SMITH: And you can hear the problem we ran up against over and over again with our panel of economists. Even though we could get them to agree on these big bold ideas, bold ideas require some sacrifice from the public before the economy sees any benefit.

A perfect example: bold idea number two.

UNIDENTIFIED MAN #1: I promise to raise the price of gasoline by 60 cents, 70 cents, dollar on the gallon, maybe more, whatever it takes.

SMITH: Why increase the taxes on gasoline? Because economists think that the best use of taxes is to tax stuff that is bad. Economists love to tax bad things. Luigi Zingales is with the University of Chicago Booth School.

LUIGI ZINGALES: For example, smoking is considered sort of a damage into health, not only of yourself but other people as well. And so we tax it to try to force people to internalize the costs they produce on other people.

SMITH: Pollution, our economists say, is just like smoking - only on a global scale.

ROBERT FRANK: Raise taxes on gasoline, raise taxes on pollution of all forms.

BAICKER: Tax energy use or carbon emissions in a way that reflected the cost to the environment that we all share.

DEAN BAKER: I mean, we're causing damage and we, you know, we can't seriously deny this.

SMITH: That was Katherine Baicker. Also, Robert Frank from Cornell. And Dean Baker from the Center for Economic and Policy Research.

And since at this point, our economists' approved fake presidential candidate isn't getting too many votes, we might as well toss in something to make the pain go down easier. The third thing every economist on our panel said they'd like to hear a candidate talk about: illegal drugs.

RUSS ROBERTS: Make them legal.

SMITH: Russ Roberts spoke for all of our economists, both conservative and liberal. From an economics perspective, having something like marijuana be illegal makes no sense.

ROBERTS: We spend a huge amount of resources putting people in jail and trying to catch them and discourage them. All it does is make some nasty gang members rich.

SMITH: And the government misses out on the chance to regulate it and tax it.

The problem for our economist dream candidate is that it might take a little longer than a 30-second ad to explain these policies. That's why tomorrow on MORNING EDITION, we will talk to professional political consultants. What do they think people will say about the fake candidate?

UNIDENTIFIED WOMAN: You have a radical plan which will bankrupt families.

UNIDENTIFIED MAN #2: A lot of these things can't be sold.

SMITH: But the consultants promised to give it a try.

Robert Smith, NPR News, New York. Transcript provided by NPR, Copyright National Public Radio.