Kling on Social Security and Global Warming

A really interesting post today on EconLog. Mark Thoma muses:

Here's what I've noticed. Some of the same people who argue there's too much uncertainty about the climate 75 years in the future to justify drastic action now use the so-called crisis in Social Security funding 75 years from now (which is far more uncertain than climate change) to argue for drastic change today.

Arnold Kling responds:

Now, for my guilty plea. The reason we should try to fix Social Security now is that the cure can be painless now. The problem is that under conservative assumptions about productivity, promised future benefits exceed future revenues by an ever-growing amount. So cut promised future benefits, and then if productivity does well, you can restore benefits if you like. The point is, planning for the worst case scenario does not hurt anybody in the non-worst-case scenario.

In the case of global warming, taking drastic steps now to prevent the worst-case scenario has real costs, against benefits that are potentially nil--in fact likely nil, for a variety of reasons.

As far as Kling's argument goes that we can painlessly "fix" Social Security, I'm going to have to think about the argument he's making here. I'd think that if you cut promised future benefits just to re-raise them again, that would alter people's decision making which would involve adjustment costs. But like I said, I'm going to need to think about it more. It's an thought-provoking argument.

Where I fundamentally disagree with Prof. Kling is the suggestion that taking steps against global warming necessarily has real costs. The research I've seen suggests otherwise, that if a carbon tax is introduced and the revenue from it used to offset taxes with greater deadweight losses, there can in fact be a net gain, not a cost. One such study was conducted by global warming skeptic Ross Kitrick, who found for some tax switches, a net gain can occur. His 1998 paper "Double Dividend Environmental Taxation and Canadian Carbon Emissions Control" is available here (PDF). The abstract:

The possibility of using revenues from environmental taxes to reduce other distortions in the tax system (the so-called double dividend approach) has been much discussed recently. This paper reviews the current debate and presents empirical evidence to suggest that the double dividend approach can significantly reduce the costs of CO2 emissions control in Canada and possibly eliminate aggregate welfare and output reductions due to implementation of a carbon tax.

I hope Prof. Kling finds this research compelling. He would make a great addition to Prof. Mankiw's Pigou Club.