From Fiddling While Fuel Burns ($):
Congress and President Bush are promising to solve the crisis of $3-a-gallon gasoline. But before we get to their eight-point plan and other scams, a brief digression: How about trying something that works?
If your goal is to get Americans to burn less gasoline, then we've already hit on the best strategy. As long as the price of gas is high, people will drive less and buy cars with better gas mileage, just as they did during past price spikes. But there's no guarantee the price of gas won't soon plummet — unless it's propped up by a tax.
A gas tax is a far better way to encourage conservation and combat global warming than the method mentioned by Bush this week: mandating more fuel-efficient cars. A tax would work much more quickly than the mandate, since it would affect all cars now on the road, not just new ones. The tax would also cost Americans about 20 percent less to achieve the same fuel savings as the mandate would, according to the Congressional Budget Office.
The fuel-economy mandate is more expedient politically because the costs are hidden in the prices of new cars instead of being visible at the pump. But automobile executives know how expensive it is to comply with those rules. They don't like advocating a gas tax on the record, but privately some of them consider it the lesser of two evils.
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The problem would be selling the tax to voters, but it could be phased in discreetly — say, a new dime of tax whenever the gas price declines 20 cents — with the promise that all the money would be given back. The new revenue could be evenly divvied up each year, either by mailing a check to every car owner or (my pet proposal) by putting it into a new private account for every worker now paying into Social Security.
A 50-cent gas tax would probably raise enough revenue to give each worker over $400 per year, much more impressive than the $100 checks that Republicans are now proposing to appease angry motorists this year. Instead of being a one-shot gimmick, these gifts would be an annual ritual — a chance for everyone, voters and their representatives, to congratulate themselves for another year of sensible conservation.
I hate the idea of gas tax rebates when a government runs a deficit and a gas tax is a highly efficient way of raising revenue (relative to taxes on labor and capital). But, if this is necessary to get one passed ... I retract my opposition (and everyone lets go a sigh of relief! I'm sure.).
But I know it's naïve to think anyone in Washington really cares about sensible conservation. Both parties have been too busy this week blaming each other, demonizing oil companies and repeating the mistakes of the 1970's energy crisis.
Republicans promise the kind of investigations into "price gouging" that proved fruitless in the past. Democrats want to revive a version of the "windfall profits" tax of the 1980's, which reduced domestic oil production and increased imports of foreign oil — without even generating much revenue.
With Big Oil the new enemy, both parties want to take away some of its tax breaks, an idea that's not bad. But both parties are still determined to help out their favorite industries. And just as the 1970's energy planners lavished money on fuels of the future that turned out to be duds, Congress still seems to have a knack for backing losers.
And he finishes up on cheap ethanol from Brazil not expensive ethanol. I didn't know there was a difference.
