As the U.S. Congress is now controlled by the Democrats and as calls for bipartisan policies are now rhetorically raised by all sides of the political spectrum, which would be a good first policy action that could have  broad bipartisan support and help to address many problems faced by the U.S. economy?
 

Think of a policy action that would:
 

• Help reduce the large U.S. budget deficit and even make permanent some – but not all – of recent tax cuts
• Reduce the unsustainable U.S. trade deficit
• Reduce truly – not just rhetorically - the U.S. dependency on oil and energy imported from unstable regimes in the Middle East and other regions and would improve U.S. national security.
• Start seriously dealing with the problem of climate warming induced by greenhouse emissions, a problem prominently addressed by the recent Stern Report.
• Reduce the pre-tax equilibrium global dollar price of oil and thus improve the terms of trade of oil importers
• Reduce the power of unstable “Petro-States” (to use the Tom Friedman expression)
• Reduce road congestion and our demand for gas-guzzler vehicles
• Have broad bipartisan support 

What is that policy? A “Carbon Tax”.  It is not just Democrats who support this idea that was, among others, proposed by Al Gore and President Clinton in the form of a BTU Tax. There is now an increasing number of Republicans who support this tax. These Republicans include Greg Mankiw – the former head of Bush’s Council of Economic Advisers – who recently proposed in the WSJ a $1 carbon tax to be phased in over ten years (10 cents per year); David Frum, former Bush speechwriter and now resident fellow at the conservative think tank American Enterprise Institute, who wrote today in the Wall Street Journal in support of such a carbon tax. Other supporters of the carbon tax include many distinguished and respected economists on both sides of a partisan spectrum including Bill Nordhaus and Ken Rogoff. Bipartisan supporters also include former Secretary of State George Shultz (a Republican) and former National Security Adviser Anthony Lake (a Democrat) who chaired the Princeton Project on National Security that called for a national gas tax that would start at 50 cents per gallon and increase by 20 cents each year for the next 10 years. A long list of other economists and policy makers on both sides of the political spectrum have come in support of the idea of an energy or carbon tax including Larry Summers, Alan Greenspan, Martin Feldstein, Paul Krugman and Gary Becker.

A tax that reduces the budget deficit, the trade deficit, helps to solve the global warming problem and cleans up the environment, reduces the power of unstable regimes that export oil, strengthens the U.S. national security, has broad bipartisan support. This is a place where the new Democratic Congress could start delivering on its promise of sounder economic and social policies for the United States.