March 25, 2012

IT'S NOT A MATTER OF WHERE WE'RE HEADED, JUST THE PACE:

Obama Is Humbled by the Market (JIM MCTAGUE, 3/24/12, Barron's)

The irony here is that higher pump prices gradually phased in over, say, 10 years, as opposed to rapidly increased in a few months, might benefit the economy immensely, solving a host of problems from pollution to traffic congestion. Economists from both political parties for years have been urging presidents to adopt a federal gasoline tax significantly higher than the current 18.4 cents a gallon to reduce wasteful consumption. However, presidents including Obama have refused to touch the suggestion with a 10-foot pole because it's considered political suicide to ask voters to accept higher fuel levies.

Harvard University economist Greg Mankiw, currently an advisor to GOP presidential hopeful Mitt Romney, has long been an advocate of a $1-per-gallon gas-tax hike phased in over 10 years (Romney won't countenance the tax). Absent the tax, politicians resort to crazy, Obama-like schemes to achieve the same end of reducing our dependence on foreign oil supplies.

MANKIW PRESCIENTLY STATED during a 2006 interview conducted by CNBC's Larry Kudlow that the alternative to a simple gas tax is "an energy policy that looks like it was created in the Kremlin."

"An alternative in Washington to gas taxes," he said, "is very heavy-handed regulation that's extraordinarily intrusive and not particularly effective. Things like CAFE standards"--the fuel-efficiency rules that auto manufacturers are required to follow--"and biofuel mandates are tremendously regulatory. The gas tax is really the least invasive way of getting toward our energy goals."

In an Oct. 20, 2006, op-ed piece in The Wall Street Journal, Mankiw said higher gasoline taxes would be the least invasive way to reduce pollution and highway congestion. The tax would encourage manufacturers to make fuel-efficient cars and eliminate the need for bureaucratic mandates. Mankiw estimated in his 2006 article that tax revenue would amount to $100 billion a year, which could be used to lower the deficit.

It needs to be much higher that a $1 increase.
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Posted by at March 25, 2012 8:49 AM
  
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