Losing ballast for a faster recovery: Slashing the government

Almost every developed country worldwide is nowadays fully immersed on its own fight for economic recovery. But this fight is made tougher by high unemployment rates, sovereign solvency doubts, inflation and financial speculation. The resultant situation is hard to tackle for governments: they need their economies to grow but they must ensure they are solvent and responsible, thus being a stable soil for said recovery to grow on. 

I am not going to discuss the measures for economic growth here, but the ones used to keep the state under control. These measures to try to lower government spending range from budget cuts, the end of some subsidies, establishment of debt ceilings, social services restrictions... to issuing (more) debt to be able to keep public spending at actual levels. Some of these moves are smart, some of them are insane, specially the debt issuing one... But all of them are late, very late.

2011 data from The Heritage Foundation , The Wall Street Journal via Wikipedia 

 

In the last decades we have grown accustomed to bigger and bigger states, with a never-ending growth in civil servants, entities, organizations, committees... Just have a look at the table above on the column for Government expenditure in percentage of GDP and you will see some unbearably high numbers (I will come back to analyze this table in a future post). This growth in size and cost was associated with the growing complexity of running a state in modern times, the never-ending appearance of new social measures and so on. Everybody let the parasite grow deep inside us, and when the ride was smooth nobody seemed to care about the extra weight that was being placed on the shoulders of the economy. But what now that we are on one of the bumpiest sections of this one-way road that is history? No matter how much horsepower your car has, if you start putting rocks in the trunk its performance will fall to the ground.

Stopping the government growth and its crazy spending is not enough, we must shrink its size and cost to reasonable levels. But how do you shrink a government without stopping its functions?

Crazy or genius ideas: Individual Carbon Emissions Cap (II)

On the previous post I put on the table an idea to help control carbon emissions at an individual level while at the same time creating a way for citizens to monetize from their energy efficiency. I named it the Individual Carbon Emissions Cap (ICEC for short). After explaining its inner workings on the first post, now is the turn to explain why I think it could be highly beneficial for the economy.

Motivation

I am fed up of seeing the utility companies promoting energy saving and efficiency (even though one could think, on first instance, it goes against their business) but governments doing nothing but subsidize renewable energies producers. Renewable energies, as of today, are not capable of covering our whole energy consumption and they will not in the short term either, at least if we follow our historical trend of growing consumption. For renewable energies to really become alternative energies, efficiency measures must be applied to our daily life.

That is where ICEC kicks in, by setting a comprehensible limit on individual carbon emissions it promotes energy efficiency while at the same time boosting non fossil-based energies as they do not emit any CO2.

Prize efficient people, punish wasteful spenders = Prize the economy

I do not want anybody to think about the ICEC as a tax, because it is not. It could only become a tax for someone who is not capable of living without wasting a lot of energy by doing so. If that was the case, then tax him like you would with a normal business... The ICEC limit is high enough to not disrupt you usual life habits, but at the same time giving you an incentive to be efficient. For those who find the way to be efficient, the prize could not be more obvious: cash. Well, apart from the peace of mind of helping the environment and such... This cash could be forced to be for consumption only (if needed), then it would give a much needed boost to our weak economic recovery by increasing goods consumption. The best part? it would come at zero cost for the government, no need to raise taxes to the already tax-massacred citizens and, collaterally, it would mean increased earnings from VAT and other already existant taxes on consumption.

Crazy or genius ideas: Individual Carbon Emissions Cap (I)

This marks the start of a new series of posts that, from now on, will share the blog's spotlight together with the habitual posts analyzing the situation of the global economy. These series will be far more subjective than the economic analysis posts, I will just expose some ideas that cross my mind. That means I could incur in some inaccuracies from time to time, so take it with a grain of salt. 

When there is so much talk about carbon emissions, lowering carbon footprints, global warming, the problem with fossil fuels, etc. what if  we began helping by setting a yearly CO2 quantity that people are allowed to emit? I am talking about creating an "Individual Carbon Emissions Cap", similarly to what it is done with industrial emissions as stated by the Kyoto Protocol but taking it a step further by making citizens part of it. 

What does this mean? Every participant country would set an Individual Carbon Emissions Cap (from now on I will call this ICEC for clarity's sake) for its citizens; a defined number of kilograms of CO2 that one person was allowed to emit to the environment over a year. For some people ICEC would instantly become an asset, for others it would mean a new tax, but in any case a tax you have control over... People would be able to trade part of their ICEC on a newly-defined public market (obviously with fixed prices per year to avoid the speculating vultures from spoiling the idea) and they could also make their cap grow by planting trees, sharing cars, installing or buying energy efficient devices and similar tree-hugger 'activities'.