Gas prices are higher, and that's a good thing:

Judge Posner has a typically provocative view of the recent spike in gas prices. He even suggests that if the price doesn't stay high, gas should be taxed more to keep it high.

From the broad national standpoint, we should welcome high gasoline prices because it is in the national interest to reduce our consumption of gasoline, and high prices will do that, dramatically so in the long run when more substitution is possible. The burning of gasoline in vehicles creates pollution and emits carbon dioxide that contributes significantly to global warming; and curtailing driving in order to reduce the consumption of gasoline would alleviate traffic congestion. Furthermore, a large part of the world's oil supply comes from nations such as Venezuela, Nigeria, Iraq, Iran, Saudi Arabia, and Russia that are actually or potentially unstable, hostile to the United States, or both, and it would be prudent to reduce our dependence on such suppliers. And in fact output has fallen recently in the first four nations in the list, which has contributed to the price spike.

But the best way to keep gasoline prices high may be through heavy taxes, which might actually reduce the cost of oil and hence the incomes of the oil-exporting nations (which is in the U.S. national interest to the extent that those nations are indeed hostile, as Iran notably is). If, by increasing the price of gasoline, taxes reduce consumption, the price of oil will decline because the average cost of oil increases with the quantity produced. Just as an increase in demand will cause higher-cost oil to be produced--oil that would not have been economical to produce when the market price was lower--so a reduction in demand will cause that higher-cost oil to be withdrawn from the market and so the average price of oil will fall. In effect, income of the producing nations will be transferred to the consuming nations in the form of gasoline taxes imposed by those nations.

Judge Posner acknowledges in a follow-up post that high gas prices maintained through more taxation will disproportionately hurt people of moderate income. But, he suggests, that problem could be dealt with by phasing in the taxes and by making gas taxes revenue-neutral through tax relief targeted to those consumers.

Judge Posner's analysis highlights an irony in the current political atmosphere. On the one hand, the Bush administration has suffered relatively little in public opinion for a number of problems over which it has substantial control: indefinite detentions of American citizens without charge or trial, the abuse of prisoners, warrantless domestic surveillance, and the extraordinary growth in the federal deficit, to name a few. On the other hand, the Bush administration has suffered grievously in public opinion for rising gas prices, a trend it cannot and — if Judge Posner is right — should not reverse.

I am not really sure how elastic the demand for gas is. I think that gas would need to cost about $6/gallon before it started to change my behavior. I also think that it would take quite a bit of time for people to make the types of changes they would need to in responce to a surge in gas prices. To reduce gas consumption most people would need to buy a more gas efficient car, move closer to where they work, etc. I guess that some would switch to public transit, but that just isn't an option for large numbers of Americans.

I do completely agree with Posner's analysis, but I think that it would take quite a while and quite a hike in gas taxes before it would reduce the market price for oil.

Also: I really did laugh at all of the people who said that gas taxes should be removed in the post Katrina gas price spike. The supply and demand caused it to go up in price, not the cost of producing the gas.
5.11.2006 9:13pm
Yet another reminder that the vast majority of Americans simply don't know a thing about economics. It will take a long time before we correct that problem, but a quick and easy fix would be requiring Senators to have some basic economic training. Maybe then we wouldn't have Senator's like Schumer, who has a monkey's understanding of economics.
5.11.2006 9:19pm
Jim Miller (mail) (www):
It's funny how wealthy urbanites like Judge Posner favor higher gas prices -- which just happen to hit poorer people who live in rural areas hardest. They never favor higher taxes on the kerosene used in the jets that fly them to Europe, or the heating oil for their second homes.

I've argued at my web site that higher gas prices are the best solution for just one problem -- getting poorer people off the roads. I won't go into the whole argument here, but I think it is easy to see that, if the problem is payments to Middle East tyrants, then you should tax all petroleum imports from those area, not just one refined product. Similarly, if CO2 is the problem, a general carbon tax is a better solution, and so on.
5.11.2006 9:46pm
Frank Drackmann (mail):
Higher gas taxes? Yeah right, look at the gnashing of Teeth from $3/gallon gas just based on legitimate supply and demand issues. Even in Germany with $6/gallon gas they still drive 120mph and leave the motor running during hour long traffic jams. Personally, I think we should have $1.25/gallon gas like in Iran.
5.11.2006 9:48pm
Well, of course the elites believe that high gas prices are good for any number of reasons, just like the elites believe in globalization and free trade. The problematic thing about democracy is that you also have to accomodate the views of the non-elites, who sometimes even have a point.

Yet another reminder that the vast majority of Americans simply don't know a thing about economics.

Well, that's a pretty lucky break for the Republicans, yes. It's rather ironic that people voted for the party that preaches free-market economics, and now complain to that same party when the price of gas gets high.

Strangely, I hear many Republicans say, "We should stop pandering on the issue of gas prices and just explain to people that this is how the market works." What they don't get - although the elected Republicans surely understand it - is that if you start drawing a connection between free-market economics and results that voters don't like, you are not going to persuade them to like those results, you are going to persuade them to look for a different ideology!
5.11.2006 9:54pm
Marcus1 (mail) (www):
The Dubai ports deal was the other thing where Bush was hurt for a very marginal reason. I thought that was kind of ironic, after such a long-extended imperviousness to all his much more questionable decisions.

>Also: I really did laugh at all of the people who said that gas taxes should be removed in the post Katrina gas price spike. The supply and demand caused it to go up in price, not the cost of producing the gas.<

Really it was the perfect time to raise gas taxes, to skim off the ridiculous profits being made off of the reduced supply. Such a raise wouldn't even have had much impact on the price, since, as you say, the rise in price had nothing to do with cost.

As someone who just bought a Prius, though, I disagree that the price has to go up several dollars to have an impact. Aren't giant SUV sales down? And hybrid sales up? I actually think people respond to increased gas prices more than is even rational (I did), simply because of "pain at the pump." Gas may still not be such a high percentage of income, but people are pretty sensitive to the increase in prices.
5.11.2006 9:54pm
Of course, it's unfair to expect Bush to single-handedly lower the price of gas, but it's worth considering a couple data points.

"Iraq could be making a tremendous difference," said Dalton Garis, an economist at the Petroleum Institute in Abu Dhabi. Instead, its shortfall is "a significant contributing factor to the high price of oil," he said.

And this classic:

Q Is one of the problems with this, and the entire energy field, American lifestyles? Does the President believe that, given the amount of energy Americans consume per capita, how much it exceeds any other citizen in any other country in the world, does the President believe we need to correct our lifestyles to address the energy problem?

MR. FLEISCHER: That's a big no. The President believes that it's an American way of life, and that it should be the goal of policy makers to protect the American way of life.

Does this mean that gas prices would be magically lower, if Bush had urged people to conserve back in 2001? Doubtful. But for some reason, it just doesn't break my heart to see him getting unfairly blamed.
5.11.2006 10:05pm
Rational Actor (mail):
Unfortunately, the best time to have raised taxes on oil/gasoline would have been when the market prices were extremely low, and before people got accustomed to 30-40 mile commutes; from an income shock perspective, now is probably not the right time, as people are having to adjust their budgets/lifestyles to compensate for the recent spike. Nothing like timing....
Having said that, given the proportion of government spending devoted to the military, and the proportion of military resources devoted to protecting the oil supply chain, there is a fair degree of logic to increasing the price of imported, if not all, petroleum products. Yes, I admit it, I do live in an urban area and commute via mass transit although if my employer provided parking for bicycles, that would be my preferred mode of transit.
Jim, you are probably right that a gas tax would most significantly impact lower income people, particularly those in rural areas. However, some of us urbanites believe that there should be higher taxes on inefficient uses of resources, such as corporate jets and the trips from NY to LA for lunch before a return on the 4:00 flight.
On another note, I think we should start insisting that our elected officials deal with the same quality-of-life crap that normal Americans have to deal with, such as (i) paying for their own gas, (ii) participating in the standard healtcare systems, (iii) flying commercial instead of corporate... Just a thought
5.11.2006 10:19pm
Jacob (mail):
Obviously not going to win me many friends here, but I've always really liked the idea of the type of high gas tax Posner suggests. Unfortunately, our country committed to urban sprawl/exurbs/the sunbelt long ago, and at the encouragement of the government. So I can understand the reluctance to impose such a tax on gasoline, when part of the reasons people left cities in droves was the government that now wants to tax them for it. Paying for the sins of the past is always expensive.

Of course, I'd rather the government stop its effective subsidization of the petroleum industry first, and then see if it even still needs a tax to get people to stop buying antique vehicles. And if it gets some people to actually move back to civilization, all the better.
5.11.2006 10:20pm
Hey Now! This is alibertarioan blog.
5.11.2006 10:23pm
You would think that $3.00 a gallon gasoline would prompt Americans to look to more drilling and exploration at home, new refineries at home, more nuclear power plants at home, more wind power at home, etc.

I suppose there are some democrats on here. Please tell me, why is your party so adamant that the US remain dependent on Middle East oil imports?
5.11.2006 10:48pm
I have long thought that those in favor of user fees should adopt the ultimate user fee when it comes to gasoline. The cost of the war in Iraq (before that, of stationing troops in Saudi Arabia to protect it and the other Gulf States from an Iraqi invasion) should be apportioned to each gallon of gasoline from the region.

We should have a true picture of what our oil dependence is costing us. Perhaps that will help spur research and investment in alternative fuel sources or more energy efficient technologies.
5.11.2006 10:50pm
Tom952 (mail):
How come I never hear a proposal to tax really big SUV's?
5.11.2006 10:53pm
John Johns (mail):
Last I heard the high priced oil is in the US and the low priced oil is in the Middle East. Extraction costs of around $10.00 vs $3.00 a barrel. Please help me understand how reducing demand for the high priced stuff will harm the Middle East. It seems our dependence on foreign oil will increase.

Johnny Johns
5.11.2006 11:18pm
mrkmyr (mail):
I propose a tax on big SUV's! Actually, I propose this: for every mile/per gallon over the weighted average gas mileage of all vehicles, a new car will be taxed $200. For every mile under this average, a new car would receive a $200 credit. No need for CAFTA or increased taxes to make it work. No need to reevaluate the state of technology.

I am a Democrat. High oil costs are good in the long run, but there are better ways to go about it than an unplanned spike in oil prices: there are a lot of fixed costs associated with using oil; taxes are better than price spikes, because then the money stays in the US; etc. The real reason Democrats blame Bush is that they are politically opportunistic. Not as bad a Bush, but opportunistic.

Jacob and Rational Actor:
I agree with you. It does seem a bit unfair to lure people into the suburbs and then get'um with the tax increase. But there are other considerations: the suburbs have generally benefitied from a dramatic increase in housing prices; even increased fuel costs are low compared to home prices; and those suburban folks can by hybrids, too.

Jim Miller and Steve:
Men of the people! Down with the elites! You can fashion a revenue neutral tax that would give a credit to lower income people. Such a tax would be clearly be beneficial to the urban poor (of which there are many more): many don't drive now; it would increase use of public transportation, bringing down costs; and they would receive a credit for not doing anything.

Your personal feelings are not important. It is the consumers on the margin that are important to changes in consumption. However, you are correct; I agree change would take time. It would be a long term project. Something our government does not seem very good at. Well, right not they're not good at much of anything.

We should purchase car insurance on a per mile basis. This is called, "Pay As You Drive" insurance. That way we decrease the fixed cost of owning a car while increasing the marginal cost. This would increase car ownership, increase insurance coverage, but decrease car use, oil consumption, congestion and accidents. Search it.
5.11.2006 11:39pm
Redman the problem is not that we just haven't looked hard enough. We have very good geological data for what kinds of energy reserves there are in this country and where they are. The simple truth is hat we don't have the oil, and no amount of domestic development will make it magically spring forth from the ground.

As a matter of policy a percent here and there that we might be able to shift to domestic production doesn't matter one whit. Now the US uses a metric butt load of energy so being able to capture even a small percentage of that is very lucrative. Just don't delude yourself into thinking that it is an energy independence question, it is a money issue pure and simple.
5.11.2006 11:59pm
Raising the cost of gas via taxation at the pump is unlikely to reduce our dependence on foreign oil--regardless of whether or not the result is to reduce our consumption. The problem is that not all crude oil is of equal quality or equally easy to extract. The United States is one of the marginal producers in the world: we have some of the most costly, most difficult to refine crude oil. Therefore, if demand slackens enough such that aggregate world oil production declines, it will be the US fields that will be mothballed.

If that's energy independence we might as well give up trying.
5.12.2006 12:08am
Kevin L. Connors (mail) (www):
Dale Carpenter: "...and the extraordinary growth in the federal deficit."

Actually Dale, as a percentage of GDP, the federal deficit has been shrinking since 2004, when it was still lower than '83-'86, '91 and '92. For Fy '07, it should be below the 40 year average of 2.3%. Few economists find deficits below 3% particularly alarming.
5.12.2006 12:17am
How much of the US oil demand is actually attributable to non-commercial automotive uses? Are there figures on this?
5.12.2006 12:24am
Alan Meese (mail):
I'm not sure I get the "irony." Yes, the President has control over warrantless surveillance (based on probable cause) of residents suspected of communicating with foreign terrorists. He also has control over the 1000s of warrantless arrests various Federal Agencies make each year, and thousands of warrantless border searches based on something less than probable cause. People don't blame him for any because they (properly in my view) agree with all three. If they disagreed, they would "blame" him.
5.12.2006 12:57am
Patrick (mail):
The later commenters like Johnny Johns and PAllen have understood the issues - better, unusually, than Judge Posner!

They are quite right that artificially reducing demand will only discourage exploitation of expensive American and Canadian oil, leaving us a) worse off economically since oil is, whilst decreasing, still very important, b) worse off socially as has been noted and c) worse off strategically because our long-term oil future will be stagnant reliance on, er, mullahcrazies.

All that could be counteracted by a) 'petrol' vouchers for the poor and spending all the increased revenue on native exploitation. Um, fat chance.

Or, do nothing, let rising demand raise prices over a sustained period, which, excerbated by rising political instability in hte home of cheap oil, will trigger investment in non-ME exploitation, which will eventually bring prices back down again, even as rising prices will have also sustained the long-term trend of ever-increasing energy use efficiency. That will leave us with a) a healthy economy, b) better equity since energy as a whole will be cheaper and getting cheaper yet as it should be, and c) long-term strategic security that would introduce the possibilty of, eg, sanctions against SA and Iran.

It is amazing that the author of 'economic analysis of law', a really brilliant book, could think that such a state intervention would be ultimately beneficial.
5.12.2006 1:13am
Andy Freeman (mail):
I think that people who prefer a different lifestyle should subsidize mine.

Given many of the sentiments expressed above, there isn't a principled objection to my proposal - we're just arguing over whose lifestyle should be subsidized.
5.12.2006 1:30am
It seems to me Posner lumped a bunch of different objectives together with "incentives" that support some and offend others.

If the goal is to reduce US consumption of gasoline, then a solution is to keep the price of gasoline consistently high. A way to do that is to put a variable gasoline tax into effect that keeps the national average price, or, to put a high tax on each barrel of oil that would indirectly increase the price of gasoline.

If the goal is to reduce US dependence on foreign oil, then a solution is to put a high import fee on foreign oil and an export fee on US export oil.

If the goal is to reduce US dependence on oil based gasoline, then put a high tax on gasoline to the extent it is produced from petroleum oil, as opposed say coal liquefaction or tar sands.
5.12.2006 2:13am
Dick King:
RJT, how dare you insult monkeys like that. Monkeys understand economics about as well as the average human, and therefore considerably better than a Senator :-) .

5.12.2006 3:41am
SAS (mail):
While I tend to abhor taxes, this is a sound argument and I agree with it. While idealistically it is hard for me to support a tax, I recognize the utility of using them to curb the negative externalities associated with oil. I believe a tax that scaled gasoline to the number of cars registered within 50 miles would be the most intelligent way to structure this. It would mean heavier taxes for heavier populated places and lower taxes for less populated places, which generally corresponds to the prevalence of easier to acquire substitutes to driving.

I think that would be the fairest tax. A 'fair' tax? I lost my libertarianism with this post, I think. :(

I've been reading too much of Lessig, lately. I blame him.
5.12.2006 4:01am
"If the goal is to reduce US dependence on foreign oil, then a solution is to put a high import fee on foreign oil and an export fee on US export oil. "

You may recall that it is unconstitutional to tax exports.

But that aside, there are reasons this won't work either: go in to a store begin counting how many things are foreign made.

One consequence of such a tax would be to drive more goods into overseas production. Now I don't think it would be fair to claim that your tariff wouldn't somewhat achieve its purpose, but the degree to which it does so will be limited by details such as the cost of shipping. It seems a reasonable possibility that your tariff would be more effective at weakening domestic manufacturing--which seems perhaps to actually be at variance with the core principle of your proposal.

I've always been suspicious of using market forces to acheive policy aims. I don't think doing so makes understanding secondary effects easier and unintentional consequences any rarer. I actually consider it to be a rather dishonest approach to law--a compulsion felt by any rational person but one which is essentially disclaimed as not being compulsory. Perhaps worse than that though is that it becomes more difficult to understand the effect of the law because what was once an objective measure (prices) has been distorted--creating something more akin to the famous "economic calculation problem in the socialist commonwealth"
5.12.2006 4:51am
The River Temoc (mail):
On the other hand, the Bush administration has suffered grievously in public opinion for rising gas prices, a trend it cannot and — if Judge Posner is right —should not reverse.

I do agree that high gas prices are a major reason for the decline in Bush's popularity. I further agree that the president is not "commander-in-chief of the economy." But that said, Bush has consistently pooh-poohed the idea of conservation and developing new energy sources. While the private sector can take the lead in developing new energy sources (there was a good article in the Economist recently about how Vinod Kholsa, a venture capitalist, is interested in biomass energy), it is something that requires leadership in DC, just like the Manhattan Proejct or the Apollo program. And just why are we not taking another look at nuclear energy? As the recent mining disasters in West Virginia and Australia remind us, coal mining is much more dangerous than nuclear energy.

At the risk of venturing into Michael Moorish conspiracy theory territory, perhaps Mr Bush's days as an oilman are preventing him from thinking outside of the proverbial box.
5.12.2006 4:53am
Frank Drackmann (mail):
I think behavior that causes AIDS is bad. Impose a tax on all those expensive drug cocktails so medical researchers can focus on something really important, like colon cancer. And whats with the cocktails anyway? thats how these people got sick,doing unnatural acts with their inhibitions down, AA meetings are free last time I checked.
5.12.2006 7:41am
John Johns (mail):
Once again into the fray. Suppose we allowed the feds to tax gasoline sufficient to raise the price to $6.00/gallon (the equivalent of $150/barrel for oil)? The boon to public transportation and bike trails would be stunning. Every city would be linked with light rail and all would be nice.


The alternative fuels are now much more competitive. Each convert to burning McDonalds leftover french fry grease is a filthy, rotten unilateralist without the decency to support the common good.

And then the feds realize that conservation reduces their income by killing the cash cow. How to respond? Let me see...hmmm Daddgummm! All competing fuels should be taxed to (wait for it!) "level the playing field for the children".


Johnny Johns
5.12.2006 9:00am
Raw_Data (mail):
Btw, Posner's view is by no means novel or unusual. It's been around for decades. Taking control of sudden, unpredictable price spikes from oil producing nations has been in our obvious security interests for a long time.
5.12.2006 10:48am
Perry (mail):
Kevin Connors:

I still have never understood why the size of the federal government (via the defecit) should be pegged to the GDP of the country. I hear that comparison made often in order to tell people "No, this tax shifting to our next generations is actually OK!", which actually sounds more to me like burying your head in the sand than facing up to a real problem.
5.12.2006 12:04pm
Houston Lawyer:
Another proposal designed to hurt poor people. What a surprise. I like the idea of economically starving the oil producing dictatorships, but I can't approve of this method. How about a proposal to increase the supply of oil in order to reduce the price. Most of the continental shelf in the US is off limits to drilling. So we already have a policy in place designed to increase the price of oil.

We could also seriously decrease auto-based pollutants by strictly enforcing emission standards on cars. This, unfortunately, would also hurt the poor, who are usually the people who are driving the worst smog emitting cars.
5.12.2006 12:05pm
It's a pity no-one in a position of power anticipated the problem enough to take proactive steps.

Let me first note I buy into the Peak Oil (aka Hubbert Peak) theory. That implies this is a long term problem with the GLOBAL economic market, due to intrinsic and unsurmountable limitations on natural geo-petroleum. While the US is one of the largest oil consumers, China and other nations are growing fast and quite capable of taking up any output slack that taxation-induced diminshed US demand gives us.

We thus now need a crash program for developing alternatives for oil's key uses. Those include: plastic-based product feedstock, farm fertilizer production, and power source and energy storage for the national transportation infrastructure. Plastics are the biggest headache, but the most solvable; unconvential sources should be adequate to match plastic production demand with no more than about a factor of two increase in price. Fertilizer production, while critical, is even smaller — but increase use and costs must be included with any proposed increase in bioproduced fuel alternatives. And of course, transportation infrastructure is the problem that everyone can see, with multiple approaches to be considered.

The tax might be useful for funding a project to address these issues (especially given the worrisome nature of the national debt). However, everyone should bear in mind: US conservation efforts will have minimal to no effect on the long-term upward trend in petrofuel prices.

And on an irrelevant note... many people mocked the Limits to Growth, interpreting the book's concept of exponential reserve index as a prediction that various resources such as oil, gold, copper, and zinc would "run out" by year such-and-such. They furthermore interpreted the prediction from the "known reserves" values, ignoring that the book expressly acknowleged that reserves might be larger than known by some factor, and noted that a factor of five increase would add relatively few years to the expected resource limit. Anyone checked the trend on copper and zinc prices lately?
5.12.2006 12:53pm
Chris Lansdown (mail) (www):
Europe has been living with taxed-to-the-skies gas prices for quite some time now. IIRC, gasoline is often around $6/gal in europe, due to taxes.

How much innovation have we seen come out of europe as a result?
5.12.2006 3:39pm
Posner is an idiot; its a well known fact that we, as Americans, have a right to cheap gasoline and the right to drive automobiles.

Jeez, if these high gas prices stick around, white people might have to move out of the suburbs and back into the cities and live amongst--gasp!--black people!!!!! Or maybe I'll have to buy a Prius; yeah right, Prius's are for pussies, and I sir, am a tough, strong man!

I say we solve this problem with bombs or drills, and I don't really care which one we choose. Biodiversity loss, climate change? Michael Crichton said it was all bullshit, and I believe him. As for option b, we'd really be doing them a favor; they could all say they were martyrs, and they could enjoy raping all of the virgins they'd like in paradise.

The bottom line is this: I don't care what has to be done, but I want cheap gas. My SUV is fuckin' sweet, and I'm not giving it up, and I'm not moving out of the 'burbs into urban shithole U.S.A. Do not underestimate white suburban America, we are the most powerful group in the country, and there will be hell to pay if this problem isn't solved!!!
5.12.2006 3:56pm
David M. Nieporent (www):
To reduce gas consumption most people would need to buy a more gas efficient car, move closer to where they work, etc. I guess that some would switch to public transit, but that just isn't an option for large numbers of Americans.
The first two of those aren't realistic in the short run, but the third is for many people, and for others, there are still many options. We can carpool. We can simply plan our use of cars more efficiently -- make fewer trips to the grocery store, for instance. We can avoid vacations which involve lots of driving. We can not give our kids their own car when they turn 16 -- while much adult driving (commuting, shopping) is not discretionary, much teen driving is. We can drive the more efficient of the two (or three) family cars as much as possible -- take the sedan on the long trip, and leave the SUV in the garage.

But that said, Bush has consistently pooh-poohed the idea of conservation and developing new energy sources.
The former yes, and unjustifiably so. But when did he "pooh pooh" the latter? I'd say that he "pooh poohed" the idea of the federal goverment "developing new energy sources" -- except that isn't really true, is it? He has talked it up in a couple of SOTUs now.

Isn't it pretty obvious that if the issue is merely economic, then the government doesn't need to do anything? As the supply of oil drops relative to the demand, prices will rise and people will naturally adjust. The idea that the government is more clear-sighted than the market is just silly. The only justification for a gas tax is a national-security-related, non-economic one: to keep money out of the hands of various dictators around the world (especially but not exclusively the Middle Eastern ones).
5.12.2006 4:01pm
cfw (mail):
"You may recall that it is unconstitutional to tax exports."

Where is this? In the Commerce Clause?

If the Feds can prohibit certain types of exports (e.g., military tech to China), why can they not tax?
5.12.2006 4:11pm
Yes, put a huge tax on gas. That should help with a lot of things. Like raise the price of anything that is trucked to its destination. Which is about everything. Which should raise manufacturing costs. Which should raise my cost of filling my gas tank, but anything else I need to buy. Thanks Judge! Keep us updated on any other good ideas!
5.12.2006 4:17pm
cfw (mail):
The Constitution (Art. 9, Sec. 1) commands that "no tax or duty shall be laid on articles exported from any State."

Looks like the Feds would need to use something other than a tax to curtail oil exporets - say, a quota system.
5.12.2006 4:20pm
"Europe has been living with taxed-to-the-skies gas prices for quite some time now. IIRC, gasoline is often around $6/gal in europe, due to taxes.

How much innovation have we seen come out of europe as a result?"

Germany leads the world in wind energy production, and France leads the world in nuclear power, but that's beside the point. The cars that Europeans drive tend to be smaller and more fuel-efficient, and their cities have far less urban sprawl than American cities. Whether this is due to their general acceptance of the fact that human-induced climate change is occuring, or to high gas prices, I'm not sure.

The point is that we don't need (right now) new futuristic technologies, although they will help greatly in the future and we should develop them now. It doesn't take a rocket scientist to figure out that driving unnecessarily large and fuel inefficient vehicles is stupid. It's also pretty clear that urban sprawl is a bad thing overall, even though it may benefit some individuals. We have stop approaching this problem like children, and take an adult look at the problem.

"There's no such thing as a free lunch." "You can't have your cake and eat it too." These are statements that hold true in much of life, and our current energy crisis is no different. Its amazing to me that people who needlessly waste resources are later surprised when the well runs dry, so to speak. We need to change our way of life to a more efficient one; the sacrifices aren't very big at all, considering their rewards. Replace your incadescent bulbs with flourescent ones. Drive a more fuel-effiecent car. Live closer to your place of employment, or take public transportation, or carpool, etc. These are hardly sacrafices, but if everyone did them, we'd go a long way towards making our lifestlyes more sustainable.

When will we start ridiculing people who drive an empty Hummer H2 to the mall? I hope very soon.
5.12.2006 4:21pm
Chris Lansdown (mail) (www):
"Germany leads the world in wind energy production, and France leads the world in nuclear power, but that's beside the point."

Entirely so, since gasoline produces essentially none of our electricity, or the electricity of any other industrialized nation, and never has.

So, what big technological innovations have come out of Europe as a result of their very high gasoline prices?
5.12.2006 5:03pm
Kevin L. Connors (mail) (www):

I still have never understood why the size of the federal government (via the defecit) should be pegged to the GDP of the country.

If you consider the model of a typical household or business, there is only so much debt load that it is prudent to carry for any given level of income. There's also only so much that can be "blown" on luxuries.

It is similar, albeit more complex, with government. The size of government, which is a function of taxes, deficit, and (although far less so in the era of quicksilver capital) inflationary monetary policies. is a drain on the productive private sector. This is where the Laffer Curve, which was mentioned on another thread recently, comes in; there's only so much burden the private sector can endure, before the drag on the economy actually causes a drop in revenue for the government.

In old-style Keynesian thinking, the only problem with deficit spending was the eventual need to service the debt, as with a business or household. And governments could freely "spike" the economy through deficit spending, limited only by inflation caused by a scarce market for labor.

Current economic theory says deficit spending is at least as bad as taxes, and likely worse. This is because money the government borrows comes straight out of the capital markets, where it could be put to more productive use. As well, current theory rejects the employment-inflation connection. Indeed, by my mid-'70s Econ 101 text (Samuelson,and I believe most colleges are still using him), at 4.7% unemployment, we should be in an inflationary spiral.
5.12.2006 5:27pm
pallen:5.12.2006 3:51am

You may recall that it is unconstitutional to tax exports.

Yeah, so. The subject is economics. Taxing imports probably violates GATT and other trade treaties subject to the WTO.

One consequence of such a tax would be to drive more goods into overseas production.

Yeah, so. There are always consequences, and unexpected consequences, to government action. Imposing taxes and tariffs and regulations are not exempt from that.

Now I don't think it would be fair to claim that your tariff wouldn't somewhat achieve its purpose,

Oh thank you. I can't tell you how much better that makes me feel and how wonderful you are for having said it.

but the degree to which it does so will be limited by details such as the cost of shipping.


I've always been suspicious of using market forces to acheive policy aims.

I think it is fair to say that not doing anything is relying on market forces to achieve policy aims, because we are relying on the market to respond to the increases in prices of crude resulting from foreign government action and depletion of crude reservoirs. You seem not to understand that the market always works, even if it turns out to be the black market.
5.12.2006 5:43pm