Friday, June 06, 2008

The Charmas Friedhammer Gas Tax

For years, Thomas Friedman has endorsed substantial increases in the gax tax. Recently he took a different tack, suggesting a tax to the level of $4/gallon, something that is perhaps best described as a "windfall profits protection tax" or a "price control". Today, Charles Krauthammer claims, "That's my idea":
For 25 years and with utter futility (starting with "The Oil-Bust Panic," the New Republic, February 1983), I have been advocating the cure: a U.S. energy tax as a way to curtail consumption and keep the money at home. On this page in May 2004 (and again in November 2005), I called for "the government - through a tax - to establish a new floor for gasoline," by fully taxing any drop in price below a certain benchmark. The point was to suppress demand and to keep the savings (from any subsequent world price drop) at home in the U.S. Treasury rather than going abroad. At the time, oil was $41 a barrel. It is now $123.
Sure, because (as with Friedman's version) no players in the market would notice that they could simply increase their profits to the amount of the tax, and all oil companies are based in the United States.

Krauthammer complains that instead of imposing his beloved price control, the federal government attempted various forms of regulation, such as CAFE standards, that he sees as having failed to achieve their goals. It's obviously not the case that Krauthammer opposes government meddling in the marketplace, as his tax proposals and price controls do just that. Perhaps he sees taxation as the best way for the government to mold individual behavior.

Krauthammer no longer sees price controls as sufficient - now he's incorporating Friedman's call for periodic, substantial increases in the gas tax:
Want to wean us off oil? Be open and honest. The British are paying $8 a gallon for petrol. Goldman Sachs is predicting we will be paying $6 by next year. Why have the extra $2 (above the current $4) go abroad? Have it go to the U.S. Treasury as a gasoline tax and be recycled back into lower payroll taxes.
Krauthammer believes that the price of oil on the world market is pegged to the U.S. gas tax, such that oil prices will stabilize if the U.S. imposes a $2/gallon gas tax? Really? And then by recycling the money back into the hands of consumers, they'll what? Buy televisions instead of filling up their cars? Or perhaps they'll notice that public transportation continues to be overwhelmed and underfunded and wonder why, despite their enormous common ground, Krauthammer parted with Friedman on the use of gas taxes to fund and expand public transportation.
Announce a schedule of gas tax hikes of 50 cents every six months for the next two years. And put a tax floor under $4 gasoline, so that as high gas prices transform the U.S. auto fleet, change driving habits and thus hugely reduce U.S. demand - and bring down world crude oil prices - the American consumer and the American economy reap all of the benefit.
Thank you Charmas Friedhammer. And once this fantasy comes true, and the public is "thanking" Congress for setting an effective price floor on gasoline at $6/gallon, demand for an overstretched public transportation system is way past its limits, and crude oil prices have continued to climb because (as it turns out) the price per barrel isn't defined exclusively by U.S. gasoline prices, what will Krauthammer say when his "conservative" peers are blasting President Obama (or, if McCain is elected, President Clinton) for for the weaknesses of his plan? That is to say, will Krauthammer join them or will he ignore them - I doubt he would even see a third potential approach.

And am I supposed to overlook Krauthammer's timing here? He didn't propose a $2 gallon gas tax back in 2001. Back then, he claims he "only" wanted a price control that would create windfall profits for gasoline refiners. He still doesn't favor providing states and local governments with the resources they need to upgrade and update their public transportation systems. People will still be stuck driving cars, because his policies don't involve the creation and expansion of alternatives. The poorest workers who are still stuck driving will be paying $75-$100/tank to fill up their cars, and we're supposed to believe that lower payroll taxes will put that back in their paychecks? Krauthammer has an amazing ability to make pretty much any idea regressive and retrograde.

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