Gas Tax

Recently, the New York Times editorial board encouraged Congress and the Obama Administration to increase the federal gas tax.  Their reasoning is, of course, that the more we pay at the pump the less we consume.  Which is traditional economic theory.

There is some good policy reasons behind this idea.  Oil, whether we are at peak oil or not, probably is a finite resource.  And clearly, as we witnessed during the summer of 2008, global consumption has vastly increased, causing prices here in the US to soar suddenly and with consequences to consumer's pocketbooks.  On the global security front, relying on international sources for oil obviously dictates our foreign policy in ways which probably cause diplomats to cringe.  We are held hostage to our consumption.

Decreasing that dependence as well as conserving a resource that no matter what, we will continue to use, is good public policy.

However, here we are teetering on a depression the breadth and depth is probably unknown to us.  The fact gas prices have declined is a good thing for most Americans, freeing up dollars to spend on food, clothing, education (and yes, a flat screen TV).  For those of us who heat with fuel oil, certainly the decline in oil prices is helping (I can actually feel comfortable turning on the heat!).

The reality is that our whole economy is wrapped up with oil.  Not just for cars driving in cities, but fertilizers for farming, resins for plastics, and jet fuel, to name a few.  While the proponents of an increased gas tax appear to only be leveling their tax at gasoline, whole economies will suffer having to pay more for gas.  For instance, not everyone lives in a city.  Rather, farmers and ranchers, from who we get our food, have to use lots of gasoline.  Increases in prices could severely hurt them.  Or what about the families that are trying to keep kids off the streets by participating in after school or Saturday programs, where a parent is required to shuttle their children across town?  

The one-size fits all policies attempting to solve environmental issues only backfires, causing resentment for taxing or regulation based solutions.

Rather, we need to look at our oil consumption issues much more holistically and broadly.  For instance, Wes Jackson and Wendell Berry have written about totally revising our farming policy.  

Their ideas are an example of how we need to seek solutions that have a much longer and larger view.  That are incentive based and help people live quality lives, not struggle trying to figure out how they can get by or around government policies.  Encouraging perennial crops in order to use less fertilizer and stabilize the soil (a natural resource if there ever was one) seems simple but will take lots of effort to overcome a century of farm policies intended to grow crops by pummeling the land.  But their suggestions are long sighted and can help reduce our dependence on oil.

Before we decide to attempt standard economic theory to change people's behavior, we really do need to understand all the consequences.  

In the meantime, walking is a good thing!

Since writing this, President-elect Barack Obama announced the appointment of Cass Sunstein as an advisor.  Sunstein, who taught at University of Chicago School of Law and is now at Harvard (also married to Obama's foreign policy advisor, Samantha Powers) is a proponent of behavioral economics, which, among other things, encourages, for lack of a better word, nudges, inducements, to get people to "behave" differently.  I suspect he would not support an increase in the gas tax.