| Last week, White House spokeswoman Dana Perino did something remarkable. She committed the unthinkable occupational sin of actually speaking the truth when she informed the White House Press corps that gasoline prices were "entirely too high, but I think it would be disingenuous and unfortunate for American consumers for them to be led to believe that there is a short-term fix."
And yet, that is exactly what Senators John McCain and Hillary Clinton are attempting to do with their proposals for a gasoline federal excise tax holiday. In a bid to ease the pain of dramatically higher prices at the pump, each of them propose temporarilly suspending the 18.4 cents per gallon federal gas tax for the duration of the summer travel season, a gesture that will amount to an extra half tank to full tank per driver (depending on size of automobile) during the course of the summer. In a nutshell, this will be as much short term help to the average American driver as the federal "stimulus" tax rebate check of $600 will be to the average person facing foreclosure on their house. Who says the politicians are out of touch with the needs of everyday Americans?!
In truth, a tax holiday on gas would be a horrible idea - "designed not to get the consumer through the summer," as Barrack Obama said, "but designed to get the candidates through the election." John McCain proposes the tax holiday without any means to offset the costs; in short, another tax cut to heap upon the federal debt. At least he is being ideologically pure of heart, since tax cuts of any kind are favorably received by his party. Hillary Clinton proposes a compensatory windfall profits tax upon Big Oil, a measure that she knows has zero probability of being passed during the remainder of the Bush presidency. But even the suggestion that she would hold Big Oil's feet to the flaming black gold gusher (if they would only submit to her will) is a calculated move to make her seem concerned about the consumer and tough on the corporations at the same time. It is a pander, wrapped in a gimmick, and delivered in an empty promise.
A quick review of basic economics would be in order here. When demand for a product increases, the price of that product goes up and supplies go down. If we eliminate the excise tax on gas, the demand will go up, the prices will adjust further upward, and reserves will be depleted more rapidly, increasing the scarcity of the commodity and further accelerating the upward climb in price. Our short term saving will be very fleeting indeed. Without the gasoline tax, and at the present rate of gas hikes -- 14 cents in the last two weeks -- the gas tax holiday will be over in little more than two weeks. Our suspension of the gas tax will hasten the price increases already "in the pipeline," so to speak, since the oil companies will know the minute after the tax is lifted that we have the capacity to pay 18 cents more per gallon of gas (since we have been), and they will quickly move to mop up our meager savings.
What does the gas excise tax do for us right now? Well, it helps to finance the building and maintenance of our roads and bridges. This is a basic national security item that necessitates increased spending, not the removal of a crucial revenue source. Of course, such basic spending will be done even if we do not have the money to spend -- we will simply charge the balance to our national credit card , kindly issued to us with a very alluring introductory APR by the Bank of China, Bank of Saud, and Bank of Russia, to name but a few of our foreign benefactors.
The crazy thing is that instead of cutting gasoline taxes, we should have been doing the exact opposite in order to avoid the energy crisis we now face. Gas taxes could have been levied to pay for R&D into clean alternative energies such as solar and wind, to help smooth out the transition costs, jump start the industries, lessen our energy dependence on foreign sources, realize renewable economies-of-scale, produce home-grown green economies, and eventual become a world exporter of clean renewable energy. Rather than do that, we bought into the rhetoric of the oil companies executives and their representatives in government, who told us that imposing a 50 cent per gallon gas tax would irrevocably cripple the U.S. economy. That was the doomsday scenario they predicted back when gas was $1.00 per gallon. Those were the days.
Today the oil companies are doing their best to make their prophecy self-fulfilling. Eventually the cost of gas at the pump will be so onerous, than the additional imposition of an excise tax may very well break the back of consumers. We are not there yet, but we are allowing ourselves to be herded in that direction by snake oil salesmen that will sell you one more day of blissfully ignorant reveling at the cost of a lifetime of indentured servitude. Tom Friedman succinctly summed up the disconnect in a recent New York Times column title Dumb as We Wanna Be:
We have no energy strategy. If you are going to use tax policy to shape energy strategy then you want to raise taxes on the things you want to discourage -- gasoline consumption and gas-guzzling cars -- and you want to lower taxes on the things you want to encourage -- new renewable energy technologies. We are doing just the opposite.
Astoundingly, we are extending tax credits and subsidies to oil companies like Exxon-Mobil (posting $40 billion dollars of profit last year), while cutting excise taxes for basic national infrastructure, and allowing solar and wind energy credits to expire this December. It's not that we have no energy strategy; it's that our energy strategy is completely backwards. Maybe we should outlaw solar, and make coal-burning compulsory? I would not be surprised if this were part of the Cheney five-year plan discussed behind closed doors in secret meetings with energy company executives at the beginning of the Bush administration.
The unpleasant fact to be kept in mind today is that high prices at the pump spur the development of alternative energy by making investment in the new technologies economically attractive. Artificially lowering the price of gas only delays the inevitable switch to a clean energy economy, and one way or another, this switch will have to occur in a world with a finite amount of oil and gas, and an exponentially growing population looking for their share of it. The longer we delay in making this transition, the more desperate we will be the circumstances of our next energy crisis, and the more painful the transition will be. And for future energy independence, it will be imperative for the U.S. to be one of the leading producers of clean energy; not just the leading consumer.
Although Dana Perino accidentally hit upon a fundamental truth when warning the American public to not place their faith in short term fixes, that is all that her boss has to offer. His answer to escalating gas prices: we need to build more refineries, drill in ANWR, and of course, make the Bush tax cuts permanent. I won't even touch the last suggestion, but let's look at the first two more carefully. While it is true that high prices at the pump may be the result of a production bottleneck at the refinery, that is simply not the case in the present situation, nor was it the case during the oil embargo of the 1970s. Today the problem is simple: ever-rising demand for a product that is becoming increasingly harder and more expensive to find, combined with the precipitously reduced buying power of the U.S. dollar, is causing oil to shoot up to $120 per barrel, with no ceiling in sight.
Whereas in the past, the U.S. could use its geopolitical might and wealth to secure all the oil it needed, this is no longer true given the reality of the emerging industrial powers of China and India -- together comprising 2.5 billion people -- and their newly acquired thirst for oil. In the case of China, this Asian nation has the wealth and power to secure access to oil that we formerly assumed was ours for the taking. This is why Bush is so eager to open up ANWR to oil exploration, so that we may have exclusive access to domestic oil reserves, like Russia currently enjoys. But the dirty little secret is that even by the oil industry's most optimistic estimates, the oil reserves beneath ANWR would at best supply this country's petroleum needs for one year only. On the scale of OPEC and non-OPEC producing nations, this amount of domestic reserve is insignificant and doesn't come close to addressing our current, let alone future energy needs. Then what do we do, invade Mexico? Afraid not.
Mexico, the second-biggest exporter to the United States, seems increasingly helpless to find new supplies to offset the collapse of its largest oil field, Cantarell. A combination of falling production and rising domestic consumption could wipe out Mexico's exports within five years. -- Jad Mouawad
There is hope however, but only if we follow a rational long term energy policy -- one without gas tax holidays. We are approaching a point where green energy is nearing economic parity with petrochemical energy production. Along with rising prices for oil, gas, and even coal; intelligent tax incentives have encouraged entrepreneurial start-up companies to develop more efficient solar panels, solar-thermal plants, quieter windmills, better batteries, and safe and efficient hydrogen fuel cells. These incentives have also encouraged dirty industries to clean up their emissions, utility companies to replace growing percentages of their energy generation with clean sources, and the home consumers to become net contributors to our energy grid by installing solar panels that not only cut their utility bills but also increase the value of their homes. The additional benefit of the later is that when our energy production is decentralized, our energy grid is more stable, less prone to black-outs and brown-outs, and in the worst case scenario, less prone to attack.
When clean renewable energy production reaches economic parity with gas, oil, and, coal; and the mass production of solar panels and wind turbines lowers the unit cost significantly due to economies of scale, then tax incentives will no longer be necessary. But if these incentives are prematurely allowed to expire now, when we need them the most; or if the oil companies are given yet another tax break by suspending the excise tax at the pumps; then the transition to clean energy stops dead in its tracks, and is set back by years.
This political "gimmick" of a gas tax holiday for the summer would be a disaster. It will not noticeably ease the pain of the consumer, but it will strengthen the addiction to the fuel that will kill us if we don't kick the habit. It will stall our progress towards energy independence, increase pollution, hasten the depletion of already dwindling oil supplies, increase gas prices in short order, heighten the likelihood of future wars for oil, delay crucial investments in our infrastructure, leave tens of thousands unemployed in the industries related both to building our infrastructure and developing tomorrow's clean energy technology, increase our foreign indebtedness, and leave us vulnerable to foreign powers both economically and militarily. All this in the name of politically expedient pander. |
