Dude, Where’s My Gas Tax?

Charles Krauthammer starts off with a great premise from his Friday column:

Is there anything more depressing than yet another promise of energy independence in yet another State of the Union address? By my count, 24 of the 34 State of the Union addresses since the oil embargo of 1973 have proposed solutions to our energy problem.

The result? In 1973 we imported 34.8 percent of our oil. Today we import 60.3 percent.

Most everything else in his essay is worth reading. The bit about ethanol, in particular, is useful because we’re not getting the full picture. There are unintended consequences, as the cost to feed livestock increases (not necessarily a bad unintended consequence for vegans). More farmland must go to grow corn. And few in power will acknowledge how government protections irrationally impact decisions regarding ethanol since sugarcane can be used to make ethanol at a significantly more efficient, effective cost in dollars and energy expended. But we must prop up our sugar industry from foreign trade. As Mr. Krauthammer says, we’re not really serious about tackling the issue of oil dependence as much as we’re interested in making the politically correct choices that appear responsible.

As good as it is, I’m still left with questions from Mr. Krauthammer’s essay. Particularly, from this:

First, tax gas. The president ostentatiously rolled out his 20-in-10 plan: reducing gasoline consumption by 20 percent in 10 years. This with Rube Goldberg regulation — fuel-efficiency standards, artificially mandated levels of “renewable and alternative fuels in 2017” and various bribes (er, incentives) for government-favored technologies — of the kind we have been trying for three decades.

Good grief. I can give you 20-in-2: Tax gas to $4 a gallon. With oil prices having fallen to $55 a barrel, now is the time. The effect of a gas-tax hike will be seen in less than two years, and you don’t even have to go back to the 1970s and the subsequent radical reduction in consumption to see how. Just look at last summer. Gas prices spike to $3 — with the premium going to Vladimir Putin, Hugo Chávez and assorted sheiks rather than the U.S. Treasury — and, presto, SUV sales plunge, the Prius is cool and car ads once again begin featuring miles-per-gallon ratings.

No regulator, no fuel-efficiency standards, no presidential exhortations, no grand experiments with switch grass. Raise the price, and people change their habits. It’s the essence of capitalism.

I’d quibble that the essence of price increases mandated by the government is not capitalism, but that’s not really my point. I haven’t refueled my car in several weeks¹, so I can’t really say what the current average is. Also, I’m too lazy to look it up on The Internets. I’m just going to assume $2.50, since it’s an easy number to work with. My assumption means that, to reach Mr. Krauthammer’s suggestion, the government must increase the current gas tax by $1.50 per gallon. Done. And then?

Where does the money go? When the actual, untaxed price of oil fluctuates higher the next time some crisis arises, will the government adjust the extra tax down to keep the price stable at $4? The goal is to reduce consumption, not bankrupt the economy, I assume. So what do we do when capitalism interferes with the essence of capitalism? I don’t trust politicians to be noble with that extra $1.50 per gallon, if nothing else. (Don’t tell me that $1.50 per gallon would go to “energy independence” programs or whatever. Two words: Social Security.)

I agree that this would have at least the effect that Mr. Krauthammer and other supporters suggest. But I’m skeptical. There will be unintended economic consequences, as well as waste by politicians. I don’t like artificially unleashing these demons to make us do what we “should” do.

¹ Public transit is great, except when it leaves me stranded in the cold for an hour, as it did Friday morning.