Wednesday, February 23, 2011

It's Time for $5 per Gallon Gas?

Three years ago, Thomas Friedman was observing how $4 per gallon tax influenced consumer behavior. There was truth in his observation - when gas prices passed $4 per gallon, many consumers had a hard time filling their gas tanks. We had people who literally had to choose between buying gas to get to work and making timely mortgage payments. Before you knew it, two of the "Big Three" U.S. auto manufacturers were in bankruptcy and the housing bubble burst. Ah, good times, good times.

Some of us see the return of $4+ gasoline as an inevitability have wondered what effect that will have on our largely jobless recovery from our post-housing bubble recession. It's easy to imagine gas pass $4 per gallon and having the nation plunge back into recession. To somebody like Friedman, who floats above the working world in his hybrid SUV, there are no such worries - his concern appears to be that $4 per gallon is too little.
The smart thing for us to do right now is to impose a $1-a-gallon gasoline tax, to be phased in at 5 cents a month beginning in 2012, with all the money going to pay down the deficit. Legislating a higher energy price today that takes effect in the future, notes the Princeton economist Alan Blinder, would trigger a shift in buying and investment well before the tax kicks in. With one little gasoline tax, we can make ourselves more economically and strategically secure, help sell more Chevy Volts and free ourselves to openly push for democratic values in the Middle East without worrying anymore that it will harm our oil interests. Yes, it will mean higher gas prices, but prices are going up anyway, folks. Let’s capture some it for ourselves.
I'm not sure how we would be capturing "some of" the windfall profits heading to the Middle East by having a $1 per gallon gas tax, but it's easy to see how such a tax, implemented now, would create incredible financial hardship in what, to Friedman, seems to be economic flyover country. I wish Friedman had linked to what Blinder actually wrote, so I would know if he's making an appeal to authority that isn't based upon what Blinder actually wrote, or if we're dealing with some sort of metaphorical case of the Blinder leading the blind. (And what happened to poor Michael Mandelbaum, his authority of days gone by?)

It's not that, were we to roll back the clock to the time when Friedman first proposed an incremental gas tax, it would be a bad thing. It's that there's such a thing as timing, and... let's face it, back when the economy was stronger he proposed (a smaller tax with) a larger vision:
I know it is a stretch - that the president announced tomorrow that he wanted an immediate 50-cents-a-gallon gasoline tax - the "American Renewal Tax," to be used to rebuild New Orleans, pay down the deficit, fund tax breaks for Americans to convert their cars to hybrid technology or biofuels, fund a Manhattan Project to develop alternatives for energy independence, and subsidize mass transit systems for our major cities.
Now it's just implement a regressive tax to "pay down the deficit"? I recognize that this idea has no political legs, which is perhaps why Friedman feels such liberty to keep raising it, but if we're working in the realm of fantasy why be so limited in imagining how the newly raised tax dollars will be spent?


  1. There is a real case for an increase in the gas tax - funding road maintenance. We are (according to experts, and I am certainly not one) not maintaining our highway infrastructure. Since drivers are the users of the roads, they should be paying for them.

  2. A gas tax isn't the only way to fund transportation infrastructure, although it's an appropriate one.