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"We need stable regimes in . . . [the Mid-East] who will be partners and friends of ours, because the fact of the matter is we do rely on imported oil to fuel our economy and to fuel our nation."
[2006] Under Communism, Soviet farmers fed bread to their livestock. Normally, they’d have used grain, but thanks to subsidies, bread was actually cheaper than the grain it was made from. So Soviet mills wasted time and energy turning grain into bread that would then be used as livestock feed. [link] Any economist or Libertarian (they’re actually not the same thing) can explain how subsidies deform economic decisions and lead to waste.
In the US, we use the general federal budget to subsidize gasoline. Because we use gasoline, we have to send more troops to the Mideast. The Pentagon spends billions on a policy designed to maintain stability in the oil trade. If we didn’t use that oil, we wouldn’t need to be in Iraq, and we wouldn’t have gotten jacked on 9-11. If we didn’t use that oil, the despised Iranian regime would not have the funds to prop itself up and arm Hezbollah. We wouldn’t have to buddy up to dictators in Saudi Arabia and Egypt. Our use of gasoline has cost us billions of dollars and thousands of lives. The people who use the gasoline should be the ones to pay for these losses. As long as we subsidize gasoline with military force, as long as gas is cheap for the driver but costly for the nation, people will overuse it. The costs increase because they’re hidden. The overall economy suffers from overuse of a costly commodity.
So let’s put a heavy tax on oil. In the US, we consume 7 billion barrels of oil per year. Let’s find the cost of our use of oil and divide that cost up among the 7 billion barrels we use. Then we tax each barrel that much to pay for our troubles in the Middle East, etc. Let’s say that our dependence on oil is costing us $100 billion per year. The Iraq war is costing us about that [link], and that doesn’t even account for all the other grief in the Mideast that oil causes. So if we’re going to raise $100 billion per year on 7 billion barrels, that’s $14 per barrel. You get 20 gallons per barrel, so that works out to about 70 cents per gallon. Since the tax will reduce consumption, and thus revenue, let’s round the tax up to an even dollar. That way if consumption drops to 5 billion barrels per year, we’ll still make our $100 billion.
Of course, charging an extra $1 per gallon for gas is going to increase people’s expenses. We can compensate by giving everyone a tax credit of about $300 per person. That will give the people a $100 billion tax break, and the result will be revenue-neutral. A per-person tax credit would disproportionately help the working poor.
What would happen? People would find more economical ways to use gasoline. They'd buy less gas because, for the first time, they'd be paying the fuel’s full cost instead of getting a subsidy. Alternative fuels, such as ethanol or biodiesel, would become more attractive. These alternatives also come with the advantage of not entangling us in geopolitical hotspots, which is reflected in their relatively lower price (i.e., no tax). Libertarians say that federal subsidies shouldn't try to identify which alternative to oil is the winner because that's the market's job. Even so, it's easy to identify the loser: oil. Thanks to the tax, oil consumption would drop, the price of oil would drop, the dictatorships and terrorists of the Mideast would get less money and support, and the Texas oil men who’ve made so much money off us recently would give a little back to the nation.
—JoT
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Insects appropriating blossoms for their own purposes. |
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March 2009 Pay per mile to replace pay per gallon? January 2007 US per-capita gas use is down |
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