April 30, 2005

JUST RAISE THEM HIGH ENOUGH:

Oil-rich Norway is taxing on cars (Simon Romero, APRIL 30, 2005, The New York Times)

Norway, the world's third-largest oil exporter, is home to perhaps the world's most expensive gasoline.

But drivers here greet high pump prices of almost 11 kroner a liter, or $6.60 a gallon, with little more than a shrug.

Yes, there was a protest from the Norwegian Automobile Association, which said, "Enough is enough," And a rightist party in Parliament, the Progress Party, once again called for a cut in gasoline taxes, which account for about two-thirds of the price. But "those critics are but voices in the wilderness," said Torgald Sorli, a radio announcer with the Norwegian Broadcasting Corp. who often discusses transportation issues. "We Norwegians are resigned to expensive gasoline. There is no political will to change the system."

Norway, has been made wealthy by oil, trailing only Saudi Arabia and Russia in exports. Last year alone, oil exports jumped 19 percent to $38.4 billion. But no other major oil exporter has attempted to reel in its own fuel consumption with as much zeal as Norway. These policies have resulted in one of the lowest car-ownership rates in Europe and fuel-efficient Volkswagens and Peugeots far outnumber big sport utility vehicles on its roads.

Always strange to hear normally sensible conservatives who rage against the effects of taxation claim that higher gas taxes wouldn't have any effect on driving habits. But then cars, like guns, are an emotional issue, not a logical one.


MORE:
Taxing America Clean?: The gas tax is still a terrible idea. (Chris Pope, 04/28/2005, Weekly Standard)

AMERICA IS THE LAND OF THE AUTOMOBILE. Cars are the keys to adulthood, the grail of status, the lifeblood of the economy, and the passport to a vast land. They are also Public Enemy Number One.

The automobile has long been blamed for global warming, respiratory diseases, and the destruction of the countryside, but it has also recently been indicted for treason in the war on terror. Though it made possible the most extraordinary social progress, opened up a world outside cramped cities to the millions, and almost every sector of the economy would grind to a halt without it, the internal combustion engine is now almost universally condemned as A Bad Thing.

One need not believe that fear of global warming should motivate an end to car use (or that an end to car use would end global warming) to believe that the "external cost" to society of car use is a potential reason for taxing gas. Conservative economists Martin Feldstein, Gary Becker, and Greg Mankiw have all joined the chorus for a gas tax, though their arguments are admittedly based as much on the income tax being bad for the economy, as they are on the gas tax being good.

Since Thomas Friedman warns us that there is also an imminent groundswell from "an alliance of neocons, evangelicals and greens," surely it is only a matter of time before congressmen swarm to the call of the gas tax?

Like most disastrous liberal schemes, astronomic gas taxes have already been tested on the British, where taxes account for 76 percent of the pump price, and regulation has further forced prices up to £3.73 ($7.13) per gallon. Even though the whole of Britain is essentially urban, and people are never far from a variety of kind of public transportation, roads are just as full in the United Kingdom as they are in the United States. For all the promises of environmental salvation through gas taxation, car use has been limited more by the fact that roads are so jammed that people now get to places quicker by train. Yet despite the enormous popularity of cars in the face of a high gas tax, Britons still hear claims that an even higher tax is what is needed to save the environment. The fig-leaf of economic rationale has, however, fallen.

Posted by Orrin Judd at April 30, 2005 1:00 PM
Comments

oj-

Norway is not the USA. Your one size fits all ideas regarding energy policy are wrong. You have the mind of an unaccountable bureaucrat or a Supreme Court justice.

Posted by: Tom C., Stamford, Ct. at April 30, 2005 9:16 AM

Accountable politician.

Posted by: oj at April 30, 2005 9:23 AM

Accountable to whom? The earth-firsters or the guy who has to do business across a region of the country 3 times the size of Norway?

Posted by: Tom C., Stamford, Ct. at April 30, 2005 9:45 AM

Both. Voters.

Posted by: oj at April 30, 2005 9:51 AM

Higher gas taxes may well have an effect on people's choices on driving, but what most people are getting at when they claim that additional taxes won't do much to reduce demand is that the elasticity of demand for gas- in reality the convenience, speed, comfort and self-determination that a car offers- is very low. It takes a very large and dramatic move in the cost of gas to prompt any noticable change in behaviour.

Myself, over the last two years since I began driving, I've seen a 25% increase in the price at the pump. I drive no less than before and I have not modified my driving to consume less gas (drive slower, accelerate slower, etc). As a practical reality, I cannot modify the amount I drive until the cost reaches the ridiculous.

To produce an appreciable change in behaviour, the rise in the prices would have to be doubled, and in a short enough space of time that I wouldn't get used to the new price levels as they rose. (Like a boiling frog) The pricing of the substitutes, such as public transit, would also have to increase by a lesser amount.

Of course, once I move to suburbia in August, I will have very little choice about driving, irregardless of the gas price. The only alternative at that point would be trading in my Taurus for something small as hell.

Futher, how many other things would I be willing to give up spending on in order to keep driving? If it came down to it, I would rather axe a lot of my discretionary spending than reduce my driving. I doubt that I'm rare in this, so increasing taxes in an attempt to wean people off their cars could be expected to have costs to other areas of the economy as well.

(I would also cease going to the gym, which in the long term would have negative effects for me.)

Posted by: BC Monkey at April 30, 2005 10:07 AM

BC:

Uh-huh, you'd kill yourself to drive.

Posted by: oj at April 30, 2005 10:11 AM

Prohibitive gas taxes would end up creating fights to develop another level of tax breaks, as shippers of goods across the country sought rebates for their trucking fuel tax costs, less the price increases in fuel be passed on to the consumer and affect domestic inflation rates (the irony being a pro-tax place like New York City and southern New England would get nailed worse than other areas, since there's virtually no way to ship goods into the city by rail -- everything comes via truck to to Hudson River freight crossing limitations).

Posted by: John at April 30, 2005 10:57 AM

Gas taxes are very bad for the economy. Our income is the result of cooperation between people in different locations. Increasing the cost of travel increases the cost of cooperation. That reduces the quantity of cooperation, which reduces our income.

It would be hard to come up with a more damaging target for taxation - perhaps telecom taxes.

Posted by: pj at April 30, 2005 11:05 AM

John:

Great. Let someone run on giving tax breaks to corporations.

Posted by: oj at April 30, 2005 11:06 AM

It's a consumption tax on a destructive item, far preferable to income tax.

Posted by: oj at April 30, 2005 11:10 AM

[The] elasticity of demand for gas- in reality the convenience, speed, comfort and self-determination that a car offers- is very low.
It takes a very large and dramatic move in the cost of gas to prompt any noticable change in behaviour.

It takes mostly a sense that gas costs will stay higher. It does, however, have an effect on gas consumption. Numerous studies have shown such.

You are right to notice that the demand is not truly a demand for gas. The elasticity of demand for miles driven is fairly low, although present. That is different from the elasticity of demand for gas consumption. When gas prices rise, people shift car purchases to more fuel efficient vehicles. The problem is that cars are a long-term purchase, so people get stuck with choices that they made when the situation was different.

Posted by: John Thacker at April 30, 2005 12:40 PM

Everything is expensive here in Norway and the gasoline is no exeption, but if you look a little closer it's not as bad as the NYT would want it to appear?

If you compare the price of gasoline to our wages the gasolin in Norway actually is pretty cheap compared to the rest of Europe. If we were paid in gasolin for our work norwegians would get 11 litres pr.hour, only beaten by Denmark(14 litres) and Germany(13 litres) in Europe. At least according to our newspaper Dagens Næringsliv who has been busy with their calculator:-)

Posted by: Hjorthen at April 30, 2005 12:43 PM

Hjorthen, do you read Bjorn Staerk?

Posted by: Sandy P. at April 30, 2005 1:03 PM

Mr. Judd: The fly in the ointment is exactly that you would have high gas taxes and high income taxes. I'd go for a consumption tax in a second if we repealed income tax. But the likely scenario is they'd sell us on gas or consumption taxes saying they will get rid of income taxes, and then keep both. And both would go up, thanks to AMT, etc.

Posted by: Buttercup at April 30, 2005 1:23 PM

In the US, median income is about 25 liters per hour.

OJ: I'm not aware of anyone arguing that high gas taxes wouldn't effect miles driven. That's the argument for CAFE standards. Obviously, as the price per mile increase, all other things equal, the miles driven would decrease. Note, however, that the popularity of SUVs and trucks is a voluntary movement to increase the average price per mile, both because of lower gas mileage and higher capital costs. Over time, increased gas prices will be at least partly compensated for by smaller and more fuel efficient cars which will, caterus parebus, decrease the cost of each mile driven and thus increase miles driven again. The net effect is governed by the elasticity of demand, and no one knows what would happen.

But why bother. One reason is pollution. Pollution is a function of miles driven, and as we note it is impossible to say how much miles driven will decrease over the long term. You might say that any decrease in pollution is worth any price, but no one else other than the Green party believes that. When the Green Party starts winning elections, we'll see.

Further, auto pollution is caused, almost entirely, by the oldest 10% of cars on the road. Buying all those people a new Accord or Camry would be cheaper and more effective than a gasoline tax.

The usual argument about externalities, to which I am sympathetic, doesn't really work here. The benefits of the transportation system as a whole are so widespread, and so uniform, that even those who don't drive would be hard-pressed to show that they don't benefit from the pollution producing activity.

Which brings us to the next point. It is hard to imagine a less popular tax in the US than a large increase in the gas tax. No politician, responsive to the voters, or just in fear for his job, is going to push it, other than on the coasts.

Finally, that brings us to the fantasy that higher gas prices are going to spark technologies that wouldn't otherwise be developed. First, as noted here, Europe has $6.50 per gallon gasoline, but it has developed no new technology. Instead, they've developed small crappy cars. (We have a picture from our last trip to Paris of me standing next to a Smart car that is hilarious.) Second, any technology that is developed because gas has been taxed up to $10.00/gallon (as I know you don't think that $6.50/gallon is enough) will only be economical at some point between the market price and the taxed price -- in other words, the amount spent on it over the market price of gas per mile driven is a dead-weight loss to society. Any technology that won't be economical until the market price of gas is three to five times higher than it is now is not worth it.

And it's just wrong to say that after a while returns to scale will reduce the price. First, we don't even know what tech we're talking about, so this is just sheer speculation. Second, if so than that will happen when the price of gas naturally rises high enough to make it worth someones while to develop the tech. Third, you clearly don't understand how finance works.

And, still, nothing we can do with cars would have as much effect on our use of energy and pollution generation as expanding our use of nuclear power -- which is, of course, what Europe has done.

In the end, you don't like the automobile culture and you wish (futilely) that it was possible to be an environmentalist and a conservative. Those are perfectly fine personal preferences. Go out and convince a majority of citizens likewise and you'll get your way. Trying to use the government to cram it down our throats, on the other hand, is statism.

Posted by: David Cohen at April 30, 2005 1:28 PM

Just link them.

Posted by: oj at April 30, 2005 1:45 PM

Europe isn't creative. We are. Nor did they ever get a chance to develop our infantile attachment to cars.

Posted by: oj at April 30, 2005 1:59 PM

While reading Mr. Cohen's eloquent, well thought out post, I thought to myself, "I bet Orrin's going to respond with a single, smug three-word sentence that ignores virtually the entire argument." And hey, what do you know I was right! I'm a damned psychic!
Orrin, do you realize how incredibly rude it is to your readers and to regular posters like Mr. Cohen when you do that? The next time you cry about the decline of civilized society, perhaps you should be working to remove the mote from thine own eye.

Posted by: Governor Breck at April 30, 2005 2:12 PM

Excuses, excuses, oj. What about our infantile attraction to covered wagons as we pioneered the west? They didn't fall for that either.

Posted by: Tom C., Stamford, Ct. at April 30, 2005 2:13 PM

Gov:

Want to try answering our comments for a week?

Posted by: oj at April 30, 2005 2:15 PM

Wrong, wrong, wrong. Cars, like guns, have spiritual significance. The driver drives: he is not driven. Some of us may not like the car culture (lots of pedantic curmudgeons reflexively scorn popular institutions--it sort of goes with the job description), but we should be glad that this is a nation of drivers, not umbrella-carrying, bus-awaiting wimps.

Posted by: Lou Gots at April 30, 2005 2:34 PM

Exhibit A

Posted by: oj at April 30, 2005 2:37 PM

Just thought I'd check:

US personal income, 2004: $9,673 billion (source: www.bea.gov)
wage and salary disbursements: 5,356 billion
employment: 140.5 million (source: bls.gov)
wage and salary income per employee: $38,121
Based on a 40 hr x 50 wk yr: $19.06/hr
Price of gas: $2.10/gallon = $0.55/liter
ratio, wages per hour to price liter of gas: 34.7
ratio, income per worker per hour worked to price liter of gas: 62.6

Posted by: pj at April 30, 2005 2:41 PM

pj:

The important ratio is what % of federal revenues come from gas taxes and what from taxes on income.

Posted by: oj at April 30, 2005 2:51 PM

Tom:

We quickly built railroads to replace them.

Posted by: oj at April 30, 2005 2:54 PM

Gov: Thanks for the praise, but you're being too hard on OJ. I was being a jerk. I was surprised that he was so restrained.

PJ: I started with a mean wage of $30,500 per year, mean hours worked of 39.9 per week, 1 liter = .26 gallons and an average price of regular gas of $2.24 per gallon.

OJ: Your point about Europe's creativity and their lack of our infantile love of cars are at cross purposes. Without our emotional attachment, they should have done a lot better than they have in coming up with a better transportation system. Instead, they just sell us big, powerful cars.

Posted by: David Cohen at April 30, 2005 3:08 PM

What's wrong with their transportation system? They seem to get around fine.

BTW: Governor, I do plead guilty to giving short shrift to arguments we've gone over repeatedly:

http://www.brothersjudd.com/blog/archives/cat_gasoline.html

Posted by: oj at April 30, 2005 3:38 PM

European cities are laid out so that one does not need to drive much if at all in order to live well. In America, pretty much everywhere the basic necessities of life require access to a car. Americans will not change their driving habits until that changes, and given the centrifugal pull of exurbia, it is unlikely to happen.

If you really want to reduce oil consumption, a legitimate national security goal, it would be a simple matter to allow the sale and manufacture of cars(including SUVs and Hummers) that get at least 40 MPG and/or to mandate the use of coal as the base to manufacture fuels rather than oil. Forty percent of all oil used in the US is for vehicular fuel. If we were to combine this with a $20/barrel oil import fee for OPEC oil, we could effectively break the cartel and eliminate most of the funding for terror in the world.

However, I don't think the K Streeters and Bush's Saudi paymasters will allow this to happen.

Posted by: bart at April 30, 2005 4:00 PM

Obviously CAFE standards should be raised to.

Posted by: oj at April 30, 2005 4:06 PM

"the elasticity of demand for gas- in reality the convenience, speed, comfort and self-determination that a car offers- is very low. It takes a very large and dramatic move in the cost of gas to prompt any noticable change in behaviour."

Is that So?


According to a USA Today/CNN/Gallup poll released April 4, respondents ranked high gas prices below terrorism and health care costs as priorities for the president and Congress. The same poll suggested that about 50 percent of Americans have cut back significantly on the amount of driving they do; more than a third of the respondents said they had reduced their spending significantly because of the higher prices.

Lesli An Orio, 38, a Web site manager for a bank in Charlotte, N.C., is one of those who has reacted strongly to the price increases.
Returning from her honeymoon last April to ever-rising gasoline prices, Mrs. Orio decided to leave her brand-new silver Subaru Outback at home and ride the bus to work. She moved her two young boys to a public school closer to home in January so they would not have to ride 38 miles to their private school in the family's supersize Ford 150 pickup truck.
A year later, Mrs. Orio has grown used to her new routine, which saves her about $368 a month in gasoline costs and another $125 in parking fees. (In addition, she said, her 35- to 45-minute commute now permits her to get ahead on her reading; she recently finished James Michener's thousand-plus-page epic "Hawaii.")
"I will never take my car again," Mrs. Orio said in a telephone interview. "Public transportation in Charlotte is archaic, but I've gotten to enjoy my time on the bus. And the money I save goes to a college fund for the children. I would not have done this if it had not been for high gas prices."
Posted by: Robert Schwartz at April 30, 2005 4:37 PM

In little old NH car dealers are seeing SUV types piling up on their lots, according to one interviewed on TV this week.

The Smart Car is in the process of being imported into the US, and reworked, with an impressive number of advanced sales committed.

Hybrids still have a six month waiting list in NH.

Conversely, Alcohol is taxed prohibitively in Norway to minimize alcoholism, but from my personal observations it seems to be widely enjoyed there, if not somewhat excessively.

Posted by: Genecis at April 30, 2005 4:37 PM

Obviously CAFE standards should be raised too.

Already happening, feel free to check the official website. However, raising CAFE, all things being equal, increases emissions. It's a terrible idea, compared to the gas tax.

When you raise fuel efficiency without raising the price of gas, you make the marginal cost of a mile lower. The result, inevitably, is a higher number of miles driven. Since, Mr. Judd, by your own admission, you believe that higher gas prices lead to less driving, surely you must admit that higher CAFE regulations lead to more driving. Absolutely more emissions, and enough to reduce and even negate any savings in fuel consumption.

Merely raising the gas tax itself leads to a demand for more fuel efficient vehicles and for less driving without having to raise CAFE. It's just a more economically sound idea.

Posted by: John Thacker at April 30, 2005 6:46 PM

First, as noted here, Europe has $6.50 per gallon gasoline, but it has developed no new technology. Instead, they've developed small crappy cars. (We have a picture from our last trip to Paris of me standing next to a Smart car that is hilarious.) Second, any technology that is developed because gas has been taxed up to $10.00/gallon (as I know you don't think that $6.50/gallon is enough) will only be economical at some point between the market price and the taxed price.

Mr. Cohen--

These well reasoned arguments are exactly part of why arbitrarily raising CAFE makes no sense. If the technology cannot be produced and consumers will not shift to the more fuel efficient cars even with the obvious benefits and price savings once the price of gas is around $6-6.50 per gallon, then it clearly makes no sense to raise CAFE. I don't see how you can call for an increase in CAFE at the same time in your post.

CAFE increases make little sense, especially if your goal is to reduce fuel consumption and emissions. The goal of CAFE is achived with less deadweight loss through gas tax increases.

Posted by: John Thacker at April 30, 2005 6:52 PM

Bart says:
It would be a simple matter to allow the sale and manufacture of cars(including SUVs and Hummers) that get at least 40 MPG...

There are certainly allowed to be manufactured and sold. Are you seriously one of these conspiracy theorists? Any auto company would be able to make an absolute killing if they could come out with a car with double the fuel efficiency but the same performance.

Posted by: John Thacker at April 30, 2005 6:58 PM

It's easy enough to ratchet up the taxes as mpg rises.

Posted by: oj at April 30, 2005 6:58 PM

John: My mistake. OJ suggested that people argued that higher gas taxes wouldn't effect driving habits. I responded that no one makes that argument. I then meant to say that the argument against CAFE standards is that they don't effect driving habits. You are absolutely right. By lowering the cost of the marginal mile, CAFE standards, if anything, increase miles driven and leave gas consumption pretty much unchanged.

Posted by: David Cohen at April 30, 2005 7:10 PM

Sandy P: Yes, the norwegian blogosphere isn't all that big, I think I'm well aware of the best and best known of them. I read Bjørn Stærk from time to time and I suspect he also drops by my blog every now and then.

Posted by: Hjorthen at April 30, 2005 7:13 PM

Except that the second article cited--from the Weekly Standard this week--makes precisely the argument that taxes won't reduce driving. We're at least agreed that it's stupid.

Posted by: oj at April 30, 2005 7:14 PM

Mr. Judd:

Yes, the Weekly Standard article is stupid. Perhaps the author is consistent and also calls for CAFE rises. Then he's wrong but consistent.

Posted by: John Thacker at April 30, 2005 7:22 PM

Raise CAFE and raise taxes even higher.

Posted by: oj at April 30, 2005 7:27 PM

Robert, The woman in the article was spending $22 per day to commute plus private school costs for 2 children and was driving a truck getting 14mpg city-18mpg hwy. Certainly that is pushing the elasticity to the breaking point. The vast majority of people wouldn't save near as much from switching to a bus or train commute. I think her case shows the low elasticity you are arguing against. Look how far she had to be pushed to change her behavior.

Posted by: Pat H at April 30, 2005 7:38 PM

The interesting series of posts above have not discussed what type of "gas tax" would be appropriate. Certainly one that at least over time would discourage consumption. But another would press to the windfall profits of oil companies and their affiliates. One of the things seldom discussed is how oil companies play with our tax system to evade taxes. In the 1970's for example, the oil companies (the "Seven Sisters", Mobile, Shell, Standards, BP, etc.) were able to get Congress to declare that foreign royalties to potentates like the Shah and the House of Saud were really foreign taxes and therefore eligible to be treated as foreign tax credits. Like the oil depletion allowance, this greatly reduced the liability of these companies for corporate taxes and gave these foreign rulers a type of "stake" as joint venture partners in our tax code. (The oil business like steel and other "big business" is subject to the rule of decreasing returns meaning that lower prices to a balance point mean more turnover and higher profits). One of the reason the House of Bush is so close to the House of Saud is because of the heavy investment House of Saud has in this country and our banking system, our currency and our gold. This goes back to the early 1970's when Nixon ended Bretton Woods and sent the country into an "energy crisis" and "currency crisis".

I wonder if the American public could not be convinced to accept a larger taxation of the oil industry through gas tax that increased prices at the pump but which flowed the tax on profits back to mass transit and a more sustainable development.

Some people object to this type of thinking as socialist planning without realizing that oil companies and other big business are engaged in this all the time and are driving our American culture to disaster. The oil supplies will peak soon and we will begin to face increasing pressure of demand on declining supply. Continued use of oil and other carbon fuels will accelerate global warming and the disintegration of our ecosystem.

I would ask about corporations or people what Lewis Carroll once asked: Who is to be master? I would then ask: can any political leader or group pentrate the corporate control of this country to get consensus among human beings? The survival of the human race is now in the balance.

Posted by: jonerik at April 30, 2005 10:14 PM

If the point is to raise prices why punish oil companies for raising them? They obviously aren't as high as the market will bear now.

Posted by: oj at April 30, 2005 10:18 PM

Oil companies are essentially monopolies. Monopolies misallocates resources because their prices are not set by the competitive market. In taxing, one of the goals should be to avoid or correct resource misallocation. By taxing oil companies with excessive profits from inefficiently set prices, the government can correct a market imperfection. I should add that oil profits may not always be accurately reported because of the well known tendency of such companies to retain earnings and capitalize them as investments in subsidiaries and investments in "community", e.g "Masterpiece Theatre" which I personally love. It may be necessary to "pierece the corporate veil" with these firms to draw in the vast investment they have, e.g. in corrupt politicians, here and abroad, and similar nonperforming investments.

Posted by: jonerik at April 30, 2005 10:58 PM

OJ: Now do you see the danger your pandering exposes us to?

jonerik: I hate to burst your bubble, but human beings is all there is. Corporations don't actually exist. If you think that they are too profitable -- go buy stock and they'll share their profits with you. I'm not sure what you're talking about with respect to royalties v. taxes, but obviously money paid out to third-parties as a cost of business is not profit and shouldn't be taxed (ignoring, for the moment, that it is idiocy to pretend to tax corporations in the first place).

Combatting the danger that scarcity will cause the price of oil to rise by raising the price of oil has never made sense to me. When it gets scarce, the price will rise. I, for one, am willing to wait. Sufficient unto the day, and all that jazz.

Global warming is a boogie man. If it really worries you, buy a vacation home in Canada.

Posted by: David Cohen at April 30, 2005 10:59 PM

Oil companies are not essentially monopolies. They're not monopolies of any shape or kind. They're not even nearly monopolies.

If they were monopolies, they would be overpricing the oil. That's what monopolies do. As OJ's whole crusade is to overprice oil, he won't object. But it is absolute nonsense to suggest that the government has the faintest idea what the "proper" price of oil is. Even monopoly pricing is better than that.

Posted by: David Cohen at April 30, 2005 11:06 PM

The proper price is high enough to reduce our dependence on oil--we're nowhere near it.

Posted by: oj at April 30, 2005 11:11 PM

David: I have no bubble to burst on the fact that corporations do not exist. Just tell that to Uncle Sam who believes they do and actually runs a quite profitable business taxing them and letting them play with the results. Sometimes, perceptions do form reality.

You come across as one of those types (libertarian? forgive me if I'm wrong) who thinks that a government tax on corporations is "passed along" in higher prices to the individuals who pay the ultimate prices? Am I right?

Posted by: jonerik at April 30, 2005 11:16 PM

All right, if you want, we can go back to the beginning. Why do you want us to reduce our "dependence" on oil? For that matter, why do you think its "dependence" rather than simple usage?

Posted by: David Cohen at April 30, 2005 11:18 PM

David:

To the contrary, this is what you get from folks who think prices too high.

Posted by: oj at April 30, 2005 11:19 PM

jonerik: No, you're not right.

Posted by: David Cohen at April 30, 2005 11:21 PM

OJ: ?

Posted by: David Cohen at April 30, 2005 11:23 PM

Because it's been government policy to promote driving gas-powered vehicles for fifty years.

Posted by: oj at April 30, 2005 11:24 PM

What was the government promoting before 1955? And what is what I get from folks who think prices too high?

Posted by: David Cohen at April 30, 2005 11:34 PM

Rail.

Attacks on oil companies.

Posted by: oj at April 30, 2005 11:38 PM

A fair question. Why is this not question of simple usage versus dependence. First of all, it is not a simple question of me and you using gasoline and oil, but a complex usage of an internationally traded commodity which also happens to be a natural resource. The natural resource oil depends upon a complex system to transport the raw product crude oil pipelines, which are monopoly, to refineries where it is "cracked" and the byproducts allocated to different markets. This is not done by the "market" but by corporate entities which have amassed the resources to perform such tasks.

Second, because the USA now imports most of its oil, there is an additional question of currency fluctuation and balance of trade factor in. if the US government must finance a large trade deficit bevcause of imports of oil, the value of the dollar and our ability to deal with other problems become linked to the amount of oil.

When you challenged my claim that oil companies were "monopolies" above, younwere right: strictly speaking there are a number of "corporations" doing business under various names on the street that suggest soke type of competition. If you look at the interlocks between big oil, government and banking, you will see that it is realy a "monopoly" in the sense thatr government will not allow "oil" and "banking" to be separated from itself. Because oil is essentially, as VP Dick Cheney recently said, a government business. Everybody knows this.

Finally, if you or anyone thinks global warming is not the result of human excess since the industrial revolution and the Kyoto agreements are not a serious beginning to dealkwith the real dangers to the human specieis in the fifty years, you are sadly deluded.

Posted by: jonerik at April 30, 2005 11:41 PM

First of all, it is not a simple question of me and you using gasoline and oil, but a complex usage of an internationally traded commodity which also happens to be a natural resource.

So's gold, silver, natural gas and, depending upon your definition, pork bellies.

The natural resource oil depends upon a complex system to transport the raw product crude oil pipelines, which are monopoly

And lots of big ships and some tanker trucks. If you want to regulate the pipe-line companies, um, you're too late. In any event, like a lot of other things you say, this shows remarkable ignorance of what the market economy does. Like, for example:

to refineries where it is "cracked" and the byproducts allocated to different markets. This is not done by the "market" but by corporate entities which have amassed the resources to perform such tasks.

Ah yes, the mysterious corporate entities who are not the market, but do apparently have the ability to repeal natural law. Petroleum cracks to give off a certain proportion of different products. The refineries have little or no control over the resulting products. In selling the refined product, the refineries respond to the market and sell their product where they get the most money from it. I assume that you're not suggesting that the oil companies are purposely failing to sell at the highest available rate.

Second, because the USA now imports most of its oil, there is an additional question of currency fluctuation and balance of trade factor in. if the US government must finance a large trade deficit bevcause of imports of oil, the value of the dollar and our ability to deal with other problems become linked to the amount of oil.

We're currently importing about 10 million barrels of oil a day. At $50/barrel, that's $500 million a day, or $182.5 billion a year, or about 1.5% of our economy. Chump change. That is not driving the exchange rate and, by the way, any time spent worrying about the exchange rate is time wasted.

You are, by the way, conflating the trade deficit (which is an artifact of bad accounting) and the government's budget deficit. The trade deficit is not, in any meaningful way, financed by the government.

If you look at the interlocks between big oil, government and banking, you will see that it is realy a "monopoly" in the sense thatr government will not allow "oil" and "banking" to be separated from itself. Because oil is essentially, as VP Dick Cheney recently said, a government business. Everybody knows this.

No, everbody doesn't know this. You've sidled over into paranoia. There really are competing oil companies. If they weren't, they wouldn't bother to buy each other. You do show a remarkable ability to ignore the effing cartel at the heart of the petroleum business. You not only ignore it, but you seem to assume that it is toothless and is giving up all sorts of profit to the oil companies. You might want to rethink that.

As for global warming: It doesn't exist; it would have happend anyway; it is caused by sunspots; the damage will be limited; the overall effect will be beneficial; and it's postponing the next ice age. Your claim that Kyoto is a serious response gives the game away. Nobody thinks that, including most of the signatories to Kyoto. There is no chance that the goals will be met, they were never really intended to be met, nobody has yet taken any steps to meet them, and if met, they would have almost no effect on global warming.

Posted by: David Cohen at May 1, 2005 12:21 AM

"Always strange to hear normally sensible conservatives who rage against the effects of taxation claim that higher gas taxes wouldn't have any effect on driving habits."

I don't see what's so strange, given that "sensible" conservatives are only one short step up the evolutionary chain from the toothless hillbillys that comprise the Republican base. (Oh wait, "evolutionary"? Sorry, I didn't mean to imply that fundamental principles of science have objective validity; your "theory" about the universe having been created 5,000 years ago by God is just as legitimate.) Anyone who advocates raising the tax on gasoline does so precisely because it would decrease automobile use, thereby reducing our reliance on a damaging and wasteful substance largely supplied to us by foreign tyrants.

As to the Weekly Standard article, which makes the contradictory claim that, in England, a high gas tax has had no effect on driving habits, (I wonder what the control group was?), one might also recall that the Brits, on average, drive much more fuel-efficient cars. This is true in Norway as well, despite the fact that in Norway driving a large four-wheel-drive vehicle is made necessary by the harsh weather, and not merely by one's need to feign toughness and importance.

What's really sad about this debate, such as it is, is that there is a perfectly good conservative/Republican reason to oppose higher gas prices. Ready?

"Any tax on gas would fall disproportionately on folks living in rural areas and suburbs, i.e. Red Staters (and conservatives living in Blue States; check your "Bush Maps" people.) These people have less access to public transportation and rely much more heavily on their cars. Meanwhile, urban Blue State-types could enjoy their lattes and Times crossword puzzles on fuel-efficient buses and subways and generally laugh it up at you poor, struggling heartlanders."

There you go. Pander to your base. C'mon, it's not like you don't know how.

Posted by: Stavrogin at May 1, 2005 1:07 AM

The reason to reduce dependence on foreign energy sources is national security. The 182.5 billion is certainly economic chump change, but is a lot of money to sponsor terrorist activity. You can buy an awful lot of suicide bombers for that kind of pelf. (If Saddam's $25000/head is any indication of the market, roughly 720,000)

The notion of a 'windfall profits' tax is laughable. Only the little people pay corporate taxes. Bring in the guys from accounting in Hollywood, and, poof, no windfall profits even at $10/gallon of gasoline. The only way to change things is to mandate a minimum MPG standard for gasoline or to tax gasoline enough to make coal-based fuels or ethanol profitable. My preference is a mandate because any money given to government is essentially flushed down the toilet.

Maybe some of our visiting Democrats can explain how it is that their elected officials can vote against opening up ANWR and against CAFE standards at the same time.

Posted by: bart at May 1, 2005 6:58 AM

It's hardly pandering when you represent your constituents.

Posted by: oj at May 1, 2005 9:23 AM

My preference is a mandate because any money given to government is essentially flushed down the toilet.

Economically speaking, a mandate causes even more money to get flushed down the toilet in the economy. They're horribly inefficient, like burning money. I'm not sure that "well, at least government doesn't get it" is enough reason to carry the day.

Posted by: at May 1, 2005 11:41 AM

It's so easy to feel pessimistic about conservatism and the Republican party. Then I spend some time with leftists and find myself optimistic again.

By the way, our largest single foreign supplier of petroleum is Canada, so good point on that supporting currupt governments thing.

More seriously, here are our imports of petroleum in February 2005 by source:

Non OPEC        216,731    57.18%
OPEC              162,288    42.82%
(Persian Gulf      64,138    16.92%)

and by country, where the country supplies more than 1% of our imports:

Canada   58,031  15.31%
Ven'la     47,319  12.48%
Mexico    44,387  11.71%
Saudi      44,064  11.63%
Nigeria     33,736   8.90%
Iraq        14,635   3.86%
Algeria     14,102   3.72%
Russia     12,826    3.38%
Angola    11,025    2.91%
Equador    9,964    2.63%
UK           9,424    2.49%
US V.I.     9,207    2.43%
Kuwait     5,129    1.35%
Brazil       4,274   1.13%
Argentina  4,102   1.08%
Gabon      3,929    1.04%

On that list, there are only two potential sponsors of Islamic terrorism -- Saudi Arabia and, perhaps, Kuwait. Looking at SA, we purchase about $2 billion worth of Saudi petroleum per month, at $50 per barrel. In a year, that's about $26 billion. Again, chump change, and less than 10% of SA's (pitiful) gdp. In any event, if we stopped importing Saudi petroleum entirely, they would simply sell it to someone else at the same price, which is what a world market means.

Even if the world reduced demand for petroleum over all -- which is the only thing that could cost the Saudi's money and which, given economic growth in China, India and the rest of Asia is practically impossible -- it is absolutely impossible that the reduction would reduce support for Islamic terrorism to such an extent as to end it. 9/11, after all, cost AQ about $500,000. We are not going to walk, or peddle, or otherwise scrimp our way into security.

Finally, let's note what a small percentage of total energy use petroleum for Saudi Arabia represents. We import about 2/3's of our oil, so SA supplies about 8% of our petroleum use. Petroleum supplies only about 40% of our total energy use, so SA supplies only about 3-4% of our total energy. There just isn't much room for improvement there.

Posted by: David Cohen at May 1, 2005 11:51 AM

The issue is national security, including a stable oil supply, more than economics. The mandate ends the need.

David,

A reduction in American usage of OPEC oil would reduce the amount of OPEC oil used. A new Demand Curve for the Industry is created because the underlying factors creating the existing curve have changed. Also, American technologies would be sold across the world reducing other nations' use of OPEC oil for vehicular fuel. The per barrel price of oil from OPEC would then drop as a matter of supply and demand.

A significant reduction in Saudi oil revenue would have a serious effect on the amount of money available for terror. Essentially, the Saudis pay for very few things. They buy lots of defense and mercenaries for home defense against their own people. They buy off religious leaders at home and the bulk of their population with some rice and beans. They spend tons of money in the fleshpots, casinos and whorehouses of the Cote d'azur, Marbella, and elsewhere. And they support an enormous terror network through the madrassas they pay for as well as the direct payments to people like Bin Laden. When the revenue goes down, they will have to make cuts. Of all those areas I mentioned, where are they likely to cut. They keep the bulk of their people on subsistence rations, so they can't cut there. They need the mercenaries and the equipment to stay in power so they can't cut there. And the princelings ain't giving up those trips to St Tropez.

The question isn't what percentage of our energy is produced by the Saudis the question is how much of the energy produced by the Saudis is consumed by us. The addition of fuel-efficient technologies into the equation which are applied all over the world will similarly shift the demand curve for oil downward.

A reduction in OPEC oil usage will also have the salutary effect of toppling Chavez.

Posted by: bart at May 1, 2005 6:23 PM

This may be like talking to the wall but the point here was in response to in support of Norway's agressive gas tax. Maybe Norway's exact tax is not quite right for the United States and I would agree it would not be right in any sense to administer shock therapy but a long range plan for having such a tax is something a majority of us and our government should support because it is environmentally, economically and ethically right.

My previous posts were criticized above for silding into paranoia. Just for the record, there was a law called the Clayton Antitrust Act that untila few years ago prohibited interlocking directors between competing corporations. It was shown by John Blair, an economist with the Federal Trade Commission and special expert for the Senate subcommittee on Banking who in his book on oil in the 1970's demonstrated with charts and exhibits the high degree of integration between the largest petroleum corporations (we're talking oligopoly) and the largest banks. Financial concentration has only increased since 1976 when that book was written so in light of virtual nonenforcement of the antitrust laws and in some cases repeal, it is safe to assume that the interlocks between banking and the petroleum industry not to mention the revolving door between government and such industries (e.g. Cheney as VP, Bush as President both with close ties to the petroleum industry). I do not accept the accusation of paranoia by looking realistically at the nature of this industry and refusing to accept some fantastic conception of a "free market" that governs here.

There is plenty of evidence that any petroleum market in the US is highly concentrated, which is not to say it is not regulated. Regulation in energy industres is primarily to enforce price setting agreements just as in the rail and motor carrier industries years ago. Petroleum companies (or maybe holding companies) are monopolies just like railroads, gas and electric companies are monopolies, especially when you consider their unique relationships to foreign and domestic sovereignties. Governments protect these companies by preventing destructive competition between such companies and protecting their patent monopolies and granting access to government lands for the petroleum to be exploited.

Ultimately, which the previous writeer conceded was the existence of the "effing cartel" by which I assume he means OPEC. He lists a bunch of countries which are petoleum suppliers and all of which are members of OPEC. OPEC sets a single price for crude oil in the world just as the Texas Oil and Gas Commission used to set this price pre-1970. The price is set by allocating production to countries and then allowing every country to participate in the profits.

Allocation of production means setting minimum prices because the thing to be avoided is having chisilers like a Saddam Hussein try to grab a larger share of the market by increasing production and lowering price. This has always been the problem with oil and petroleum products generall:too much supply available for demand in the shorter term.

The problem is setting a price which is not too high where demand is reduced because the high price. OPEC learned that demand is not perfectly inelastic when it tried setting the price too high in the 1970'. Same with US natural gas companies in the 1980's afterthe Natural Gas Policy Act. Consumers began to conserve energy partly with the help of government policies that encouraged conservation behavior. CAFE standards was one and 55 mph spped limits was another. Prices came down and supply outstripped demand.

Today we have allowed loopholes in the CAFE standards allowing light trucks and vans to escape fuel efficiency standards. The huge numbers of such vehicles on the road today has pushed to an even greater dependency on foreign oil today than in 1970's. Some people might not think this is a bad thing. Over all, and combined with the reach the petro-chemical industry has into our lives, I think it is a dangerous thing not just for the economy but for our survival on the planet. Petroleum and petroleum byproducts are not just burned for fuel but is used in our food, medicine and other aspects of our lives.

This brings me to the point of the thread: if OPEC can increase minimum prices to encourage conservation, why can't government increase such prices through a tax for a good purpose? The taxes cod be used to fund mass transit and more sustainable modes of development.

Whether this is doable is a separate question having purely to with politics, not economics or anything else. The maion obstacle to doing anything in the public interest today is the opposition of ideologues and narrow vested special interests. People who oppose these proposals are entitled to hold their views but in the final analysis, I would hope that being practical would trump ideological opposition in the end. It serves no one to belittle ideas by calling them "leftist" as if that would make them automatically wrong. It seem to me that calling a person a "liberal" or "leftist" is used to signify that you diasagree with a person but have no rational or logical response to their point of view or perspective.

Posted by: jonerik at May 1, 2005 6:28 PM

Hey, we're making progress.

1. The Clayton Act has not been repealed. It was mostly aimed at protecting labor unions from the antitrust laws. (One of the amusing things about the antitrust laws is how quickly we'll ignore them for politically powerful constituencies.

2. As you note, the interlocking directors you claim were between the oil companies and their banks. Not a Clayton Act violation. Also, I'm less than impressed by a citation to a book from the 70s.

3. "Concentrated" or even oligopolistic is not the same as monopooly. As the oil companies are able to get Justice Department approval to merge, the industry is, by definition, not too concentrated under the antitrust laws.

4. Yes, I meant OPEC, but you don't seem to understand the significance. First, if you look at the numbers I posted, less than half of our imports come from OPEC countries. As we are not an OPEC country, either, only about one-third of our oil comes from OPEC.

5. But that doesn't matter much because there is one world market -- and thus one world price -- for oil. OPEC, which does control much of the world's reserves aims to set the market price. They do so by restricting output, which is the only way to effect the price. Traditionally, they do this by everyone but SA cheating, and SA making up the difference.

[I've got more to say, but for now I've got to go play Oddworld with my son.]

Posted by: David Cohen at May 1, 2005 6:58 PM

Did I miss somethiong? Weren't you talking about going after gas companies to lower prices?

Posted by: oj at May 1, 2005 6:58 PM

I was not talking about going after gas companies to lower prices and I'm afraid my friend has selected a few talking points to try to change the subject which as I recall is gas taxes.

I really don't understand what Mr. Cohen's argument is if he any or whether he is just trying to show how smart he is. I'll give him credit for knowing that the Clayton Antitrust Act was not repealed in total but he is wrong that it was adopted just to protect labor unions. I'll also give him credit for knowing that the law that did exist did not prohibit the types of interlocks between banks and petroleum corporations that have long existed and still exist.

Apparently, Mr. Cohen's point is that there is a "one world market" which to me is contradicted by the statement that there is "one world price": to me that says price fix and and imperfect market.

Whatever his point I think it fair to conlude that governments like the US can be players too and can influence the market for good. If the price goes up, that is all to the better as long as the resources are not misallocated. Which is my point about taxing the various monopolistic concerns. There ius no misallcation of resources by pricing up the cost of petroleum products to encourage conservation and accomplish a number of other public goods.

Posted by: jonerik at May 1, 2005 9:01 PM

Well, I was going for brilliant edging into omniscience, but I can live with smart. One of the nice ironies of economics is that a competitive market (identical products at identical prices) looks exactly like a rigged market (identical products at identical prices). You're wrong about the Clayton Act, too, but anyone whose interested can just go read it.

6. One of the common mistakes about monopolies is that they can set any price they want. In fact, they will end up at a price that is set for them as firmly as the competitive price, which is a revenue maximizing price. But that implies that there can only be one effective monopolist per product. If the domestic oil oligopoly is able to extract monoopoly rents from oil, then necessarily it would be the case that OPEC is leaving money on the table. OPEC is not leaving money on the table.

7. The old bring stability to the market line is used by every cartel. It is always wrong. The idea that OPEC has raised prices in order to promote conservation is a new one on me, but is nuts.

8. CAFE standards are always counter-productive. Increasing automobile gas mileage necessarily decreases the cost of every mile driven. That is, each mile driven uses less gas. Less gas, lower cost. Lower cost, more driving. CAFE standards never reduces the amount of oil used, because people just drive more. In practice, because of the elasticity of demand, they end up using more gas than before because more trips make economic sense.

9. In fact, the popularity of light trucks demonstrates who useless CAFE standards are. Given the choice, people are opting for a higher cost for each mile driven. If it is forced lower, they will drive and drive and drive. (The one caveat is if people perceive SUVs as markedly safer than high mileage cars. In that case, if forced to drive high mileage, low weight, unsafe cars, they will perceive the cost per mile including the risk of accident and injury as higher and might drive less. The reduction in gas usage in that case will not be because of gas prices or CAFE forced economizing, but because the government is putting us at risk.)

10. You say that you "would hope that being practical would trump ideological opposition in the end" but you haven't given any practical reason for whatever it is you want to do, which frankly is no more clear to me than to OJ.

11. Yes, saying that something is "leftist" is a way of saying that it is wrong. I hope I'm not breaking any news here, but the left is wrong about everything.

12. What's my point? I'm not sure I know any more, but it is probably one of the following: the price of gas is already higher than the competitive market price because of existing gas taxes and OPEC; there is no "proper" price other than the market price and no basis for saying that the market price is too low or too high; artificially and materially raising the price of gas is politically untenable; if it were possible, it would be a bad idea because the whole point of the pricing mechanism is to allow the non-coercive allocation of resources to their highest value use and fooling around with that mechanism always causes a deadweight loss to society. I probably have other points, like that I like driving and don't want to pay more for gas.

But my most important point is this: You are an autonomous human being. You are in control of your life. There are no large, uncontrolled, supernational conspiracies holding you back. Take control of your life and go live it.

Posted by: David Cohen at May 1, 2005 9:45 PM

Oh, and this is the best possible time to be alive, until tomorrow.

Posted by: David Cohen at May 1, 2005 9:47 PM

5. "Nice ironies of economics?" What use is a discipline that cannot differentiate between theory and reality? And where was I "wrong" about the Clayton Act other than in your opinion? Saying so doesn't make it so.

6. OPEC is not leaving ay money on the table? Is that so? Than nobody is making any money from petroleum other than the OPEC nations? You make no sense whatsoever. And the domestic oil companies are not extracting large profits, even monopoly profits just squeaking by? How is that we have any oil tycoons at all then, like the Mellons/Scaifes and the Williams Pipeline owners and the other tycoons who fund right wing propaganda tanks. Just ordinary returns of business I suppose. Get real.

7. Who said anything about promoting price stability? But hasn't OPEC ben more oe less effective? I remember Milton Friedman preicting the collapse of OPEC im the 1970's. Hasn't happened.

My point was not that OPEC intended to promote conservation but that as a matter of fact that happened as a result of the price of petroleum going too high. Conservation happened in the 1970's and 1980's and would have continued into the 1990's if the auto industry had not exploited the loopholes in CAFE standards that allowed gas guzzlers to take advantage of the low fuel prices made available by the rest of us conserving gas.

8. You raise an interesting point about CAFE standards and driving habits but there is a fallacy in your argument. The fact that my cost per mile driving is lower doesn't mean that I will drive more to consume the savings. I may use the savings as a consumer in other ways. There is no evidence that the difference will be made up by me.
Where the savings have been absorbed as a nation I submit is in "free riders" I call them conspicuously consuming gas guzzlers to take advantage of lower gas prices made possible by conservation by the rest of us.

9. This is the refutation of your point about the popularity of light trucks. One of the reasons for the popularity was the exemption from CAFE standards which allowed people an option for the old high horse power engines with fast pick up, torque and speed. If these trucks had been forced to comply with the standards they would have to omit these design features and they would not have been popular. The speedometer on my old 1987 Nova (one ofthe best cars I ever owned) only went up to 90 mph. Is there any need to have a car that can go 120 or 150 mph other than to burn oil ineffciently and give the owner an illusion of power?

Anyway CAFE standards alone will not ultimately bring about conservation. Conservation results from everybody conserving.

10-11. This entire thread has been about gas taxes in Norway where apparently it is practical to impose very high gas prices. I realize that for some people like yourself that is being a leftist which is by definition wrong because you disagree with it even it works.

12. What evidence do you have that the price of petroleum or gas is too high? The fact you don't like paying for it personally? In Norway, they pay over $6 /gallon. Maybe that is the market price. Nobody knows, not even you. Raising the price of gas is politically untenable but only because "brilliant omniscient" guys like you don't want that to happen.That is a political question not an economic one. Over time, I think people will get used to the idea of paying higher prices because it going to happen whether we like it or not and not because of government taxes. I don't like paying such prices any more than you but I do dislike the profits flowing to underserving monopolists (or cartelists) have convinced the public it is bad to tax them or to pay anything for their free gifts.

13. Thank you for reminding me that I am an autonomous human being and that I am in control of my life. It is a pretty thought. And I hope I have given you something to think about too.

Posted by: jonerik at May 2, 2005 12:56 AM

1. If the price of oil drops to $30/bbl over the next few weeks does jonerik go back into his hole? I used to hear his arguments from liberals during the late 70's. By the mid-80's, when oil prices collapsed, they had moved on to the nuclear freeze.

2. We could obviously start to change the foreign policy equation by annexing Canada, that would decrease our imports by 15%. If Bill O'Reilly is correct the last Mexican will leave that country and swim the Rio Grande next week. Another 12% will be available. Tally-ho and on to Venezuala.

3. A stiff gasoline tax is desirable from the view point of tax policy. Since you all claim that there is no elasticity in the demand for gasoline, you should support it also. The tax would be a much more stable source of revenue than the income tax, and much cheaper to collect.

The question of what taxes are used to fund the government is quite separate from the question of how much money the government spends. Increasing the gas tax and instituting a VAT would be excellent methods for changing the funding base of the federal government from the income tax which is highly leveraged to the economy and stock prices to a less volitale consumption base. Doing this does not imply that the government should spend more money, just that it should use different and cheaper ways of raising it.

An increased gasoline tax would have side effects. At the margin, miles driven would decrease. Since the demand for smaller cars would increase, the value of the existing stock of automotive beheomeths would decline. In turn that would lead to problems for banks and finance companies. One of the first uses for gas tax revenue would have to be to buy out SUV leases and park the buggies in the desert.

4. CAFE is and was a bad idea. It is a sales tax on new cars that raises their prices and slows the turnover of the existing fleet. That in turn decreases efficency and increases pollution. We should want people to ditch the old gas guzzling smoke spewing beaters and buy new fuel efficent clean cars. A gas tax encourages that behavior. So would a tax on cars based on their weight. How about 10 cents a pound with the first 2500 lbs (the curb weight of a Mini) free. $70 a year for my Accord, $350 for OJ's suburban.

Serious thought should be given to encouraging fleet turnover. Stricter inspection laws would be one method. Another would be to buy out old large vehicles at some type of scheduled rate based on depreciation formula. Say 30%/yr for the first two years, 20% for the next two, and so on. Park the things in the desert until they can be scrapped.

Posted by: Robert Schwartz at May 2, 2005 2:28 AM
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