12/24/2009 - Politics is the art of making the impossible inevitable.
Higher taxes on gasoline or another tax on carbon or energy use seem politically impossible today, as well as undesirable in an economy struggling to gain momentum.
But two unrelenting forces are likely to push gasoline or carbon taxes onto the public stage in the next year or two, provided the economy regains its health: the swelling U.S. government budget deficit and global resolve to reduce the risk of catastrophic climate change.
Take the deficit first. Over the past year, U.S. government debt has risen from 41% of the nation's output of goods and services, the gross domestic product, to 53%. Without big changes in taxes or spending, it'll rise to 85% of GDP by 2018, 100% by 2022 and 200% by 2038, the Peterson-Pew Commission on Budget Reform estimated recently in a report the band of deficit fighters dubbed, "Red Ink Rising." That trend is unsustainable. Among other things, it would mean an ever larger share of the federal budget going to pay interest, much of it to foreigners. (The panel recommends stabilizing debt at 60% by 2018. That would take spending cuts or tax increases that sum to about $300 billion in that year.)
Read the full article Economic Reality Drives Agenda on the Wall Street Journal's Web site.