Yeah that’s a gas tax.
If I were President Obama, I would propose a new blue ribbon commission with the above gobblygook title, and charge them to find economically efficient, market-based approaches to reducing gasoline consumption in this country. In this season of acrimony and genuinely deep partisan differences, this presents a rare opportunity for bipartisanship without either side’s needing to compromise core principles.
Everyone who reads the paper knows that we must reduce gasoline consumption to address a host of externalities and market failures from urban congestion to particulate pollution to national dependence on politically volatile or hostile petroleum exporters. In a billion ways, we need to change our lives, gradually but surely, to address global warming. We must also provide incentives to develop new energy sources and to develop more efficient ways to use fossil fuels. Command and control regulation has a role to play. So does targeted investment in new energy technologies. Yet markets need to play a central role.
And that means a gas tax to signal a long-term rise in the price we pay for this very problematic product. We must signal consumers to drive less, use public transportation more, to spend more money on energy-conserving cars and other products. We must signal firms to streamline their inventory and transportation infrastructure to consume less fossil fuel. We must signal energy producers that if they develop more efficient technologies or new energy sources, that their ingenuity will be rewarded. For many important things, the financial calculus won’t work with $2 gasoline.
Whether you are a vegan socialist, a libertarian, or a firebrand social conservative, the case for such Pigouvian taxes is compelling. Every nonhack economist, commentator, and policy analyst knows this. Greg Mankiw, a Republican who served in the George W Bush administration, has been pushing this idea for years. Yet many across the political spectrum—from Paul Krugman to Gary Becker– have joined him to say so.
Mankiw’s blog lists many others, too, including William Nordhaus, Martin Feldstein, Robert Frank, Kenneth Rogoff, Thomas Friedman, Joe Klein, Andrew Sullivan, Al Gore, Alan Greenspan, George Schultz, Nicholas Stern, Hal Varian, Larry Summers, Richard Posner, David Frum, Nouriel Roubini, Joseph Stiglitz, Rob Stavins, Ray Magliozzi, Robert Samuelson, Dan McFadden, Charles Krauthammer, Jason Furman, Paul Volcker, Isabel V. Sawhill, David Leonhardt, Gilbert Metcalf, Arthur Laffer, and a majority of economists.
And I’ve heard something about the federal government running a deficit. A gas tax would raise vitally needed revenue. In 2010, the United States consumed 138,496,176,000 gallons of gas. If a $1/gallon failed utterly to reduce our gasoline consumption, it would raise something like $138.496176 billion in tax revenue every year. That’s enough, for example, to finance our unfunded long-term Social Security liabilities. If people cut down their driving, somewhat less revenue would be raised because the policy would have its intended effect. Given pretty inelastic demand, significant sums would be raised.
This is a tough political issue. It should not be a partisan or ideological one. Gas taxes are unpopular. The smart money in DC assumes that the American electorate is irredeamably stupid, selfish, and shortsighted about these issues. Yet political leadership can make a difference. During the 2008 campaign, both the McCain and Clinton campaigns promoted dubious gas tax holidays. Obama did not. This ultimately served him well.
A gas tax should be phased-in, giving people time to adjust. I’m sure technical questions would need to be answered. Messy political bargains would need to be struck, shmearing some revenue around to get this done. Some revenue should be distributed to specific constituencies who might be hurt by this measure. Some money could be distributed in lump-sum to taxpayers, maybe with greater payments to rural areas and states. This would ease the pain. It would also improve the program’s sustainability by providing politically attractive uses to dedicated monies.
This won’t happen overnight. We should keep pushing. It needs to be done. Who knows? Appointing some bona fide liberal and conservative experts to say so might help. At least it would keep the conversation going.