Thursday, December 25, 2008

Good for Chu

Caught this over at Planetizen:
"Somehow we have to figure out how to boost the price of gasoline to the levels in Europe," Steven Chu, the director of the Lawrence Berkeley National Laboratory, told the Wall Street Journal in September.
From the Wall Street Journal Article:
In a sign of one major internal difference, Mr. Chu has called for gradually ramping up gasoline taxes over 15 years to coax consumers into buying more-efficient cars and living in neighborhoods closer to work.
At least someone in the administration gets it. Apparently Obama does not, at least publicly.
But Mr. Obama has dismissed the idea of boosting the federal gasoline tax, a move energy experts say could be the single most effective step to promote alternative energies and temper demand. Mr. Obama said Sunday that a heightened gas tax would be a "mistake" because it would put "additional burdens on American families right now."


bikerider said...

My prediction for the New Year is that voters will realize Obama is not nearly as smart as they think he is. Maybe not any smarter than his predecessor.

One would think, with all the Smart economic advisors he has surrounded himself with, Obama would know that a higher gas tax only affects the bottom line of the oil industry -- not consumers.

BruceMcF said...

There's a serious confusion among legislators who have been trying to paper over the cracks in public finances created by the Conservative Movement ...

(1) if something is a worthwhile investment for the economy as a whole, government can do it on borrowed money, just like a business would.

(2) if a tax is needed so that the price shows the true cost of something, like a gas tax, there's no need to hold onto the revenue. It can be handed back in a lump sum social dividend. And then a gas tax isn't regressive anymore ... low income households pay a higher percentage of income on average for gas, but not a larger absolute amount.

Alex said...

I think everyone knows that raising gas taxes is smart policy. However, everyone also knows that raising gas taxes is also political suicide.

ChiefJoJo said...

Bikerider, I hope you were kidding (Bush)... as Alex alluded to in his comments, you have to do the political calculus (unfortunately), and talk of raising taxes now (during what could be the worst recession since in modern times) before he has been sworn in would be political suicide. I have long favored Mr. Chu's approach of a gradual gas tax increase of say 25 cents per year/gal up to some amount over a decade or more... you can't just jack the tax up $3 overnight... govt & the market has to have some time to react w/ efficient autos, more transit, walkable/bikable neighborhoods, and more urban housing, just to name a few. It took us ~60 years to build 'suburban nation' and it will take decades to fix those mistakes.

Dave Reid said...

ChiefJoJo is right. We can't too quickly (as much as I'd like to) adjust the gas tax because as we saw this summer it sure didn't help the economy. But when things start to get better then a increase makes sense and even the concept of pining the price of gas at like $4 a gallon by a floating tax make sense to me. But we have to get this economy moving first.

bikerider said...

ChiefJoJo: I am not kidding. Oil companies will always charge what the market will bear. So if the gas tax goes up by $0.25, that quarter will be reflected not at the pump, but in lower windfall profits for shareholders.

So, yes, raising gas tax is politically unpopular -- once you understand who Obama's real constituents are.

Anonymous said...

Raising gas taxes is a political hot potato.

What's needed is to reduce the amount on money spent on highways, to bring budgets into more balance.

njh said...

Reducing spending will probably cause the recession to worsen. For an individual it makes sense to reduce costs in light of reduced income. But for a closed system, reducing global spending (and only a government is big enough for this) just reduces the amount of money in circulation, which causes deflation, which causes people to spend less, which causes reduced income for the country. (I don't know exactly why deflation is bad, but Japan suffered a decade of it and apparently everyone agrees it was a bad thing)

I have to agree with bikerider here, we've seen that people's lives continue with gas at $4/gallon. Whilst the price is low it's going to recause the expansion of oil usage, with no benefit to the country (only for the companies).

I actually prefer a slightly different strategy: introduce a smoothly increasing fixed tax, plus a price floor such that fuel prices never decrease. This discourages short term spikes and gives the market a promise that they can plan against. Otherwise you see what we're seeing now - many companies who invested in sensible energy efficiency projects are now getting burnt with stranded costs whilst those who continue to be wasteful profit.

Regarding gas taxation being a political hot potato, perhaps America just needs to grow some cojones. Continuing to do the same thing and expecting a different outcome is insanity (according to Einstein).

ChiefJoJo said...

I should point out that Obama's comments were on Meet The Press (I watched it) in response to a direct question about raising the gas tax... no skilled politician is going to respond with a simple 'yes' and move on... what I think he will do is push for a cap & trade carbon bill that will serve a similar purpose as a gas tax, just indirectly, and more easily defensible, as the public opinion has turned on climate change & renewable energy. Most importantly, the word tax is nowhere to be found in "cap & trade."

Please don't throw Obama under the bus before he's been inaugurated. I think he knows the challenges and is prepared to deal with them, but if you show me an Obama Admin that raises taxes right away, I'll show you a strong chance at an ineffective Presidency... something we can't have if he's to have any chance of solving some of our big issues. A black man from Chicago doesn't beat a Clinton & the GOP spin machine without knowing what he's doing, politically speaking.

Anyway, i do feel that the best way to achieve what we want w/r/t sustainable transport, development & energy is with a tax on consumption of all fossil fuels over the long term--either thru the emission of carbon or use of the fuel itself. Mileage standards, complex funding formulas, and other methods are too onerous and too easily avoided with loopholes and politics... a tax is simple and predictable for the market to react to.

I just read "Hot, Flat & Crowded" by Thomas Friedman and he advocates congestion pricing for the major US downtowns (see London, and what NYC attempted) that would be used to fund mass transit projects. It might be years off from being feasible, but if NYC were to implement it successfully, it could catch on as another potential funding source for big city transit. I thought it was a really good idea.

John said...

Kill two birds with one stone. Change today's "flat tax" to a "floating tax" that rises when gas price falls, and falls when gas price rises. Design it so it is at today's level at about $3/gallon (or $85/barrel on crude). If the IRS can devise an income tax rate that rises with rising income, it should be easy to devise a fuel tax that falls with rising fuel price. This has two advantages.

1. More money for roads worn by added driving when price declines.

2. Encourage investment in "green" fuels by limiting price declines.

njh said...

Is congestion pricing going to work in the sprawly cities? Wouldn't this just drive the remaining companies out of town?

John, if you are holding the price constant (which is how I understand your proposal), then there won't be any increased usage when prices fall. Indeed, why would the oil company bother to sell for anything less than $3/gallon in your proposed scheme?

jon said...

We'd all like to see the gas tax raised drastically but I'd also rather keep someone like Obama as president, even if disappointed by his lack of change, than to anger the electorate on gas taxes and assure ourselves of Palin/Huckabee or some other neo-con whackjob in 2012 or even a swingback in congressional elections in 2010. and then you can kiss away transit, bike, rail or any urban issue. nothing would bring the conservative movement back to life faster than democrats raising the gas tax. remember this is the US... cheap gas and 'happy motoring' is seen as a birthright. if it is the gas tax that brings the GOP back to life, you know cheap gas will be front and center of their rejuvinated platform. cheap gas was even pretty prominent if i recall correctly 15 years ago with the neo-con 'contract with america'

my point is extreme caution needs to be exercised on this issue. this is the ultimate third rail.

personally i dont think congestion pricing would work outside nyc even in cities like chicago and san francisco.