Republicans have fought cap and trade wrong, and they're going to lose because of it. If the bill passes, they've lost a policy fight; if the bill fails, Republicans will not get credit for lower prices, but they will be blamed (fairly or not) for obstructing progress on environmental problems.
Let's stipulate a few political realities: (a) the public generally agrees that something must be done about climate change, (b) cap-and-trade is expensive, complicated, inefficient, unpopular, subject to industry gaming and political manipulation, (c) cap and trade is widely regarded (including by environmentalists) as inferior to a carbon tax, but (d) Democrats are pushing for cap and trade anyway, because it is "politically possible."
What should Republicans do instead? Propose a carbon tax.
But, instead of a straight tax increase (as Democrats want), Republican should propose a carbon tax that replaces the payroll tax. That is revenue neutral, meaning there is no total tax increase.
There are many reasons this works.
- Environment: Republicans would be offering the most pro-environment solution to climate change.
- Cost: A Carbon-for-Payroll tax would address the climate change problem without imposing any additional tax on Americans (unlike cap and trade).
- Externalities: The payroll tax disincentivizes positive externalities - labor and employment. The carbon tax disincentives negative externalities - congestion, pollution, greenhouse gas emissions/climate change, dependence on foreign oil, money sent to tyrants and enemies, foreign debt, the trade deficit, price volatility.
- Tangibility: A carbon tax is a consumption tax (e.g., a gas tax), which consumers feel in a tangible way and can adjust behavior to optimize their exposure to the tax. Payroll taxes is money they never see, so the cost is much less noticed. The more sensitive the public is to the price they're paying for government, the more rational they will be about government spending.
Finally, the key: The idea of swapping the payroll tax for a carbon tax was proposed by....Al Gore. So you've got a coalition composed of environmentalists, foreign policy hawks, the Chamber of Commerce (and businesses in general), Exxon, the auto industry and Republicans who want to stop higher taxes.
Republicans should be offering The Al Gore Amendment to every piece of energy/environment legislation in sight. And if Democrats oppose it, then the burder is on Democrats to explain why they refuse to support the most pro-environment and pro-economic growth proposal to address climate change.
That's good policy and good politics.