September 12, 2005

QUICK, WHILE $3 SEEMS LIKE A BARGAIN...:

Using Taxes to Keep Gasoline Prices High Makes Sense to Some (BOB DAVIS, 9/12/05, THE WALL STREET JOURNAL

With gasoline prices topping $3 a gallon and consumers searching for relief, what's the smartest thing the government could do? Make sure the prices stay at least that high, say some economists.

That answer may seem crazy. Higher pump prices reduce what consumers can buy elsewhere, undercut economic growth and force people to think twice before driving.

But the last is precisely the point. High prices could boost conservation and diminish the country's oil thirst. The last time that happened was from 1978 to 1981, when average gasoline prices rose about 90 cents to $2.86 a gallon in today's dollars, and gasoline consumption fell 11%, while imports slumped 28%. Tighter fuel-efficiency standards also played a role.

But those gains were ephemeral; when gasoline prices declined, consumption and imports soared. The same pattern is bound to occur today unless the government intervenes, through higher taxes, to assure that pump prices will continue to pinch. Taxes can change long-term behavior, as long as taxpayers believe the levies are here to stay. Pregnant women, for instance, sharply cut back on smoking after cigarette taxes rose steadily in the 1990s, according to a study by three New York City economists.

Higher prices have an immediate effect on consumption by prompting multicar families to use the most fuel-efficient car in their garage and encouraging city dwellers to commute by bus or train rather than car. The larger effect, though, comes from changing car-buying habits and encouraging the development of new-technology vehicles.


Given the European experience and our greater wealth, it seems probable that you'd have to raise the taxes much higher before it had an appreciable effect.

Posted by Orrin Judd at September 12, 2005 1:55 PM
Comments

and we'd up with the Jimmy Carter economy - sweet.

Posted by: KRS at September 12, 2005 2:25 PM

If Jimmy Carter had been leader enough to finish his malaise speech by announcing that he was cutting income taxes and replacing them with gasoline taxes he'd still be president. It was the acting helpless in the face of price hikes that killed him.

Posted by: oj at September 12, 2005 2:30 PM

It wasn't an act, oj.

Posted by: joe shropshire at September 12, 2005 2:33 PM

Wearing Garlic To Keep Away Vampires Makes Sense to Some

Posted by: Raoul Ortega at September 12, 2005 3:07 PM

That must be what a chestnut connecting with a brother's cranium sounds like. Good arm, Raoul.

Posted by: joe shropshire at September 12, 2005 3:14 PM

Raoul:

Have you ever seen a vampire attack someone wearing garlic?

Posted by: oj at September 12, 2005 3:38 PM

If we raised gas taxes, and instead of dumping the revenue into the general fund, we dedicated the money to subsidizing hybrid vehicles and biodiesel, then it would make sense.

Posted by: Michael Herdegen [TypeKey Profile Page] at September 12, 2005 3:50 PM

What, exactly, is the point of quoting "economists" here? Is it just that it is more persuasive than quoting "bloggers"?

Posted by: David Cohen at September 12, 2005 3:56 PM

Warning: Here there be dragons!

Leave gas prices alone and let the immutable law of supply & demand work its magic.

You kids only read about the Carter years. They were a lot worse than you could possibly imagine.

Posted by: erp [TypeKey Profile Page] at September 12, 2005 4:00 PM

erp:

Yes, that's the problem. Lower prices aren't good.

Posted by: oj at September 12, 2005 4:06 PM

David:

Quoting lunatics from the local asylum is more persuasive than quoting anyone on the Web, though there's likely considerable overlap.

Posted by: oj at September 12, 2005 4:07 PM

Michael:

Bureaucrats will always back the wrong horse, let the market figure out the best technology once artificially high gas prices make them more competitive.

Posted by: oj at September 12, 2005 4:10 PM

erp is very much on target. You have to have been there to appreciate real malaise, the thrill of going to the supermarket and picking out groceries with stacks of price stickers (no bar-codes in those days) showing the history of price increases during the last week.

As to the soak-the-driver mentality, try to remember that when you change one institution, others change in ways you did not forsee and may not like. The car culture is related to values of independence and individualism.

Posted by: Lou Gots at September 12, 2005 4:15 PM

Lou:

Yes, that's the atomization that needs to be reversed.

Posted by: oj at September 12, 2005 4:23 PM

So, OJ since public transportation is your idee fixe of the moment these days, can I expect to see you riding the Advance Transit bus system around Hanover and actually, you know, practicing what you preach?

Posted by: Governor Breck at September 12, 2005 4:32 PM

Even better, I walk the kids to school.

Posted by: oj at September 12, 2005 4:36 PM

I like Oj's response to Michael, but I think Michael's on the right track. Reading some of the responses here I presume the writers have no relatives serving in Iraq or Afghanistan and no chance their progeny ever will in the future.

Yesterday I saw a young man, college student, standing outside his SUV talking to some chicks with his engine idling away. No chance of his serving, and from what I know of his schools' alumni, many are among those protesting Bush's "blood for oil war." And it's not just the college kids who waste fuel.

If keeping the price of gasoline around $3.00 would be enough to reduce or eliminate the oil we import from the Gulf and Chavez in SA, then I'm all for it ... and in any case I am.

Posted by: Genecis at September 12, 2005 4:47 PM

It will have to be far more than $3 a gallon to curb driving. I filled up today in WI, and it was $2.89. The highest it got to around here was $3.05. I think it's on it's way down. $2.50?

Posted by: AllenS at September 12, 2005 5:06 PM

Presumably gas companies have enough sense to gouge while they can easily even if we don't have sense enough to tax.

Posted by: oj at September 12, 2005 5:19 PM

$3 a gallon and use the money to add 100,000 active duty army and marines.

Posted by: Robert Schwartz [TypeKey Profile Page] at September 12, 2005 5:39 PM

Cut the troops and use it all to lower income taxes.

Posted by: oj at September 12, 2005 5:42 PM

oj, no way are We, the People, giving up our cars. That's a given.

Cars may be bigger or smaller, run on distilled rubber tires, we don't really care about any of that, but no way will We, the People, use public transportation other than airlines.

However, when our kids were school age, we made sure we lived where they could walk or ride their bikes to the three schools they would be attending. Of course, that's because I didn't like the idea of them taking a bus driven by who knows what kind of lunatic drunk or druggie, not because I wanted to do away with my car.

You are, of course, welcome to make whatever travel plans you like, but don't mess with our cars.

Posted by: erp [TypeKey Profile Page] at September 12, 2005 5:48 PM

erp:

That's fine so long as that kind of determination lowers taxes for the rest of us.

Posted by: oj at September 12, 2005 6:00 PM

Lower taxes works for me.

Posted by: erp [TypeKey Profile Page] at September 12, 2005 6:49 PM

Genecis: How could $3.00 gasoline or $5.00 gasoline change anything about Afghanistan or Iraq? I'm not sure what you intended, but it sounds like the same old fantasy that we can control OBL and that some action we can take or not take will force him and AQ to stand down. Short of killing him and destroying AQ, there is no such action. 9/11 cost AQ about $500,000. There is no action we can take that will prevent an intact AQ from raising enough money for another 9/11 or another or another.

Posted by: David Cohen at September 12, 2005 7:21 PM

OJ: What's with the pacifism. Do you and perlstein have something you want to tell us. Soldiers is what Federal taxes are for. What should be cut is Medicade, Medicare, SSI, Department of Education and other unconstitutional intrusions.

Posted by: Robert Schwartz [TypeKey Profile Page] at September 12, 2005 8:50 PM

A standing army just keeps us from using nukes.

Posted by: oj at September 12, 2005 9:01 PM

Don't anyone be confused.

If we developed a way to completely fuel all the US transportation needs solely from European Comission directives, he would still want to tax us to a grinding halt.

It has nothing to do with oil, as David aptly points out, and everything to do with hostility towards individual freedom.

Posted by: Jeff Guinn at September 12, 2005 10:53 PM

Hey, Jeff, welcome back (unless having more time for blogging is bad news).

Posted by: David Cohen at September 12, 2005 10:58 PM

oj:

"The market" will give us econo-box death traps, which is why we need to push hybrids and biodiesel.
As you say, set the goals via gov't, and then let industry figure out how to get there.

BTW, we could lower demand for crude oil almost overnight, by doing away with the EPA's restrictions on diesel autos. Of course, that would kill a few more people annually, due to the high level of particulate emissions from diesel engines, but the trade-off may be worth it.

That's how Europe has responded to high fuel prices: By putting diesel engines in tiny cars. Works great, if high MPGs are your only criteria.

David Cohen:

The war in Iraq is 100% related to access to oil.

If we used coal instead of oil, there's no way that the U.S. would have gone to Iraq, either now or in '90, and for that matter we wouldn't have had to patrol the Persian Gulf during the Iran/Iraq war in the 80s.

The actual 9/11 mission may have been fairly cheap, but the fundamentally necessary organizational support for it was NOT.

Just as the U.S. Army has 10 soldiers in supporting roles for every 1 combat arms soldier, so too did al Qaeda have to recruit and train many, many people, in order to get enough of their very best for the mission; there were years of planning, numerous trips across the globe by many of their operatives, simple living expenses for hundreds over the years...

Now, one might credibly argue that $ 10 million, if that's what the total cost was, is also a fairly small amount, but ask any fund raiser for any purpose, and they'll tell you that it's 100 times more difficult to raise $ 10 million than it is $ 500,000.

Especially if we turned the oil multi-millionaires of Arabia into simple millionaires.

Posted by: Michael Herdegen [TypeKey Profile Page] at September 12, 2005 11:22 PM

Michael H:

No, CAFE gave us econobox deathtraps. The Market wants minivans.

Posted by: Mike Earl at September 13, 2005 12:52 AM

Mike Earl:

Yes, that's what Orrin wants, a back-door CAFE increase.

Instead of mandating it, he'll attempt to force the market to hit the mark by making gas expensive.

However, any thoughts that auto manufacturers will provide high-milage autos by making them out of milled aluminum and carbon fiber are fantasies.
We'll get what we've always gotten, exactly what we're willing to pay for: Tinfoil covered go-karts.

Remember, seat belts ended up being mandated because most people weren't willing to pay the equivalent of a few hundred dollars to add them, when they were optional.

Posted by: Michael Herdegen [TypeKey Profile Page] at September 13, 2005 1:15 AM

Let us issue a card to all gasoline users that determines if you want higher gas taxes or not. It could be used to let those who want higher gasoline taxes pay them , and those of us who don't, not to pay them. I bet a lot of liberals who want higher taxes would have a change of mind.

Posted by: at September 13, 2005 2:12 AM

Anon:

Funny what happens when you make people put their money where there mouth is.

Posted by: Jeff Guinn at September 13, 2005 6:50 AM

Anon:

The point is to raise them for people who don't want them.

Posted by: oj at September 13, 2005 6:53 AM

Michael:

No, a front door CAFE increase and higher gas taxes.

Posted by: oj at September 13, 2005 6:55 AM

Michael:

No it won't. People want bigger, safer cars so it will force them to switch to other materials. We'bve plenty of money to pay for them.

Posted by: oj at September 13, 2005 6:57 AM

Jeff:

Yes, freedom is a means, not an end.

Posted by: oj at September 13, 2005 6:58 AM

"A standing army just keeps us from using nukes."

Only muddy boots on the ground ever really do the job.

Posted by: Robert Schwartz [TypeKey Profile Page] at September 13, 2005 9:37 AM

Tell the Hiroshimans, Serbs, etc.

Posted by: oj at September 13, 2005 9:52 AM

Michael: Yes, the middle east is Africa with oil and Jews, so we pay attention. I'll even admit that getting to where we are has been path dependent. Nevertheless, here we are and higher gas taxes won't effect Iraq and Afghanistan at all. I don't accept that poverty breeds terrorism, but it also seems a stretch to argue that impoverishing a population makes it more tractable. Finally, whether AQ needs an infrastructure at this point, or can rely upon spontaneous support is an interesting question, but money is simply not going to be a problem. To pick a poor country out of a hat, Bangladesh spents almost $1 billion on its military every year. The Arabs are always going to be able to afford terrorism.

Posted by: David Cohen at September 13, 2005 11:25 AM

Jeff and David,
Shallow. Not an insult, just a comment on your thinking on this subject. "Let them eat cake" thinking.

Robert, make it $3.50 and increase the Armed Forces. Anything to decrease our support for our professed enemies in S.A. and the M.E. A sufficient tax would allow market forces to sort it all out. Otherwise we're selling the rope to our enemies, to paraphrase an old one.

Anon,
Dye the gas red along with your card.

Posted by: Genecis at September 13, 2005 12:17 PM

OJ:

The nice thing about freedom is it keeps those bent on subjugation at bay.

Per boots on the ground: Please note that there are plenty of such on the ground in Serbia as we speak.

Raising CAFE standards is exactly the same kind of economic planning that gave Communism its success.

The only reason they gave the appearance of working is that their advent happened to coincide with a huge increase in processing power available to the entire power train system.

That cow is most of the way milked.

Posted by: Jeff Guinn at September 13, 2005 3:16 PM

Jeff:

No it doesn't it gives evil its way.

CAFE is the opposite of planning--it forces free enterprise to find innovative solutions. The cow is bursting at the udders because we stopped innovating.

Posted by: oj at September 13, 2005 4:51 PM

oj:

People want bigger, safer cars so it will force them to switch to other materials. We've plenty of money to pay for them.

Sure, we've got plenty of money to do a lot of prudent or worthwhile things, but somehow we don't.

You won't find any supporting evidence in the history of American drivers for the contention that Americans are willing to voluntarily pay for more than adequate safety.

If they were, then Volvo would have GM's market share.

Posted by: Michael Herdegen [TypeKey Profile Page] at September 13, 2005 5:42 PM

David Cohen:

You may be right about al Qaeda always being able to find a source of funding, but I still believe that with less money to go around, it would impact al Qaeda as well.

After all, how many Bangladeshi generals are going to volunteer to have the military budget cut, so that a bunch of amateur fanatics can play with explosives ?

Posted by: Michael Herdegen [TypeKey Profile Page] at September 13, 2005 5:46 PM

Michael:

Yes, CAFTA and gas prices will force the industry to make lighter vehicles, but consumers will still demand they be big and safe. Everyone wins.

Posted by: oj at September 13, 2005 5:51 PM

Perhaps I was somehow unclear:

American consumers have NEVER, EVER, demanded that cars be big and safe, if it was going to cost an extra $ 10,000 - or even an extra $ 500.

Even without making cars lighter, there's no particular demand amongst American consumers for safety.
When looking over the fleet of vehicles owned and operated by the American middle class, vehicles primarily designed with safety in mind are a distinct minority - by consumer choice.

People with kids buy a minivan, and nearly everyone else buys the best-looking and most powerful car that they can afford.

Posted by: Michael Herdegen [TypeKey Profile Page] at September 14, 2005 1:17 AM

SUVs

Posted by: oj at September 14, 2005 7:21 AM

SUVs aren't about safety.

Minivans are safer than SUVs, often cheaper to buy, and get better fuel milage.

Posted by: Michael Herdegen [TypeKey Profile Page] at September 15, 2005 5:34 AM

But don't provide the psychological comfort--and aren't actually as safe when you hit an animal, the main fear around here.

Posted by: oj at September 15, 2005 8:17 AM
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