Tuesday, December 01, 2009

Money Is Only Fungible When It's Convenient

When it comes to defeating... I mean, funding healthcare reform, the editorial board of the Washington Post has been clear: it wants additional funding in the form of a middle class tax hike, and that funding should come from a tax on employer-provided health insurance plans. Completely unacceptable to the Post? An income tax surcharge on the wealthy, or any other measure that might increase taxes on the wealthiest Americans. Within that context, the Post could not bring itself to view money as fungible:
The deeper issue, though, is whether it is wise to pay for a far-reaching new federal social program by tapping a revenue source that would surely need to be tapped if and when Congress and the Obama administration get serious about the long-term federal deficit.
It's a wonderful argument that can be recycled for any occasion - we can't tax the rich now because we may need to tax them later, so what we really need to do is impose a regressive tax directed at those working Americans fortunate enough to have decent health insurance. It's also absurd, because the order in which a tax is imposed (the working masses first then the rich, or the rich then the working masses) has little impact on the revenues that any given tax will raise. If we raise taxes on the wealthy first, we can still later tax health insurance benefits.

As you would expect if you follow their unsigned editorials, or the writings of Fred Hiatt and his crew, the Post's arguments are entirely situational. When it comes to funding war, money suddenly becomes fungible. It no longer matters that there be a connection between the tax and what the tax ostensibly pays for (such as taxing health insurance benefits to pay for an extension of health insurance to the uninsured). The only constant is the Post's insistence that the burden should fall on working Americans, and that taxing the wealthy should be off-limits.
As we have pointed out before, the federal gas tax of 18.4 cents a gallon has not been raised since 1993 and is long overdue for an increase. Two federal commissions have proposed one in the past couple of years. In January the National Surface Transportation Infrastructure Financing Commission said its recommended hike of 10 cents a gallon for gasoline and 15 cents for diesel would raise $20 billion a year.

A 40-cent increase over five years, proposed by a second federal commission, would cover most or all of the war's costs and still leave gasoline prices well short of where they were in the summer of 2008. Those months showed that higher prices could do much to reduce U.S. carbon emissions1 - another national imperative. While most proponents of a higher gasoline tax want to use the money for highway infrastructure, or refund it to taxpayers, Congress could shift funding to those purposes once the U.S. mission in Afghanistan begins to wind down.
I do think that a carefully implemented gasoline tax increase could be a good thing, if the funds are appropriately applied to measures that reduce the need to drive, increase fuel efficiency, repair broken infrastructure, etc., ideally with the money kept out of the general fund to avoid its being applied to other projects even as our nations' infrastructure continues to crumble. (We arguably could deficit spend to pay for major capital investments, but war proponents seem to only favor deficit spending to pay for war.)

The editorial mentions peak gas prices - a time when people who were well off might have grumbled when they filled their tanks, but where many working people had a difficult time affording their commutes to work. Has Hiatt's crew forgotten how the spike in gas prices triggered the collapse of the domestic auto industry and contributed to mortgage defaults, helping to burst the housing bubble that nearly collapsed the world economy? I have come to accept that regressive taxes are the only kind that the Post's editorial board likes, but if we must have one we really should be directing the tax revenues at preparing for a future where gas again exceeds $4/gallon, not frittering it away indefinitely on one of Fred Hiatt's pet wars. Hiatt has to know that once that money goes into the general fund, it's exceptionally unlikely to be later set aside for other purposes, but what are the odds that he actually cares?
1. Yes, global economic collapse does result in reduced carbon emissions. I'm just not convinced it's the best means to the desired end.

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