Dobbs Does Gas
Posted by BrianA couple of quotes from the first two or three minutes of Lou Dobbs:
"Lawmakers appear to be powerless in the face of rising gas prices."
"But no one in the White House or the Congress seems to have any solutions as to what is an outright war on the middle class."
Lawmakers are "powerless" because we live in a fairly good representation of a free market, which means that government doesn't have significant influence over the price of products by design.
Furthermore, it is not up to the government to come up with a solution. Lou implies that consumers aren't smart enough to figure out what to do. As prices rise, consumption will decrease naturally.
How are easily explained market forces an assault on the middle class? Keep in mind that gas expenditures are approximately 3% of income as opposed to 5% in the early 1980's. If anything the "war on the middle class" is being won by the middle class.
The production of oil is a long term issue. Once an appropriate drilling location is identified, it takes about five to ten years to get oil flowing. When oil is selling cheaply and profits are low or non-existent oil companies have a hard time justifying massive expansion of production sites to their shareholders. Consequently, supply doesn't expand as rapidly, if it expands at all, five years down the road. When oil prices are high it's easy to justify expanding the production base, but again, the effects won't be felt (in terms of increased supply) for at least five years.
There is nothing the government can do to increase supply in the near term. The only side of the supply & demand equation they could manipulate in the near term is demand through draconian regulation of consumer activites. That measure is neither politically viable nor within the spirit of America being a land of free individuals.
In summary, what can the government actually do? Nothing. And we should expect as much.
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May 3rd, 2006 at 1:49 am
“…what can the government do? Nothing…”:
Just wondering what your thoughts are on Tom Friedman’s gas tax idea recently proposed in the NY Times, “we need a tax on gasoline at the pump that will keep prices around $4 a gallon (still roughly $1 less than most Europeans pay)…sooner and the more we take the price of gasoline up — and keep it there — the sooner we can bring it down forever.” Not sure how this meshes with your FairTax beliefs.
May 3rd, 2006 at 2:37 am
I’ll start out with you’re last comment. The FairTax will not eliminate excise taxes like the Federal gas tax.
That proposition would obviously fall under the demand side regulations. Good luck getting any legislator to publicly support it in the current environment.
I sincerely believe that there are valid fuel alternatives just waiting to be discovered. The catalyst that affects the change will be high fuel costs. A gas tax would have the positive effect of accelerating the innovative process for development of alternative fuels. There is a delicate balance, though, between accelerating those forces and out running them. High fuel costs for an extended period of time will be a drag on the economy and it’s impossible to forecast the pace of innovation.
The first requirement for eliciting my support would be to offset all new revenue from the gas tax with equivalent decreases in the income tax rates (or, hopefully, the FairTax rate). I would not support the new revenue being used for government funded research. Private investment is much more efficient at spurring innovation than cumbersome Federal grants.
One tricky aspect of this tax would be dealing with the constantly declining annual revenue. From year to year it would be hard to project future gas consumption as new fuels began to penetrate the market. The politicians in D.C. would love the opportunity to tinker with how they separate us from our money every year. Of course they already do that.
When discussing this particular idea with a wise friend of mind, he pointed out that this particular tax would disproportionately hurt people who live in rural areas of the country - including the powerful farm lobby. Maybe it’s no coincidence that the author (presumably) lives in New York and (again, presumably) doesn’t own a car.
I think the idea is an interesting one, but I am not sure if I would support it. But that doesn’t matter because I’m damn sure the average American would run the first politician who suggests it out of town.