So why even think about it? Because the virtues of a gas tax remain what they have always been. A tax that suppresses U.S. gas consumption can have a major effect on reducing world oil prices. And the benefits of low world oil prices are obvious: They put tremendous pressure on OPEC, as evidenced by its disarray during the current collapse; they deal serious economic damage to energy-exporting geopolitical adversaries such as Russia, Venezuela, and Iran; and they reduce the enormous U.S. imbalance of oil trade which last year alone diverted a quarter of $1 trillion abroad. Furthermore, a reduction in U.S. demand alters the balance of power between producer and consumer, making us less dependent on oil exporters. It begins weaning us off foreign oil, and, if combined with nuclear power and renewed U.S. oil and gas drilling, puts us on the road to energy independence.
High gas prices, whether achieved by market forces or by government imposition, encourage fuel economy. In the short term, they simply reduce the amount of driving. In the longer term, they lead to the increased (voluntary) shift to more fuel-efficient cars. They render redundant and unnecessary the absurd CAFE standards--the ever-changing Corporate Average Fuel Economy regulations that mandate the fuel efficiency of various car and truck fleets--which introduce terrible distortions into the market. As the consumer market adjusts itself to more fuel-efficient autos, the green car culture of the future that environmentalists are attempting to impose by decree begins to shape itself unmandated. This shift has the collateral environmental effect of reducing pollution and CO2 emissions, an important benefit for those who believe in man-made global warming and a painless bonus for agnostics (like me) who nonetheless believe that the endless pumping of CO2 into the atmosphere cannot be a good thing.
Now, within the body of the piece itself, Krauthammer makes the case that his idea is purely theoretical. That's because he knows that no politician would ever support it because its support would mean the death knell of their political career. Americans simply won't stand for a politician making their gas bill higher.
Still, a gas tax is an excellent tool in trying to make this country less dependent on foreign oil. All taxes provide incentive or lack thereof. If there was a higher tax on gasoline, consumers would use less of it. Car manufacturers would be more motivated to make cars that run on alternative. An increased gas tax is an excellent way to make our country more energy independent.
Yet, right now is the worst time for such an idea. First, Krauthammer is among many Conservative pundits that has spent the better part of the last year blasting Obama for suggesting a tax increase on the wealthiest Americans. Like most Conservatives, Krauthammer points out how foolish it is to raise taxes in the middle of a recession. Well, a tax increase is a tax increase. It's hard to measure what impact such an increase would have on our economy, but it goes without saying, that the impact will be contractionary. During a recession, the last thing anyone should do is raise taxes on anything. As such, this is a totally counter productive idea at the time. Right now, the main priority for everyone is navigating this economy out of the recession. Noble goals like energy independence must take a lower priority now. We have no room for energy independence if the current price is weakening our economy even further.
Furthermore, oil and subsequently gas are both selling at a relatively low price right now. Unless this tax is extremely punitive, its effect will be marginal. Gas is about $1.65 a gallon. Adding another 20 or 25 cents will do little to change our behavior given its current price. What it will do is put less money into the pockets of struggling Americans that could certainly use those 20 cents per gallon in other ways. One of the few bright spots in this recession is that gasoline prices have plummetted. This at least provides Americans with relief when they fill up their tank. If they don't have relief there either, American's budgets will become even tighter and all this will do is prolong the recession even more unnecessarily.
A punitive tax of say a Dollar or more would be devastating. Can you imagine if Americans had to pay $3 a gallon and more for gasoline right now. No one would have any money for anything. Such a tax would all but guarantee that this recession turns into a depression. That's why a gasoline tax is a good idea at the worst time right now. It should be revisited when this economy recovers but not before.