McCain, Gas and Taxes
"...McCain said his proposal to suspend the (federal) gas tax for three months this summer may need to be extended longer if high gas prices continue...."
Associated Press, July 18, 2008
Senator Hillary Clinton also supports suspending the 18.4 cents per gallon tax, which funds the US Highway Trust Fund that pays for building and repairing roads and bridges. Senator Barrack Obama does not advocate suspending the tax.
All taxes are unpopular, and the Republican Party has benefited enormously from cutting taxes and promising to cut more. The trouble is that when tax revenues are insufficient to cover the federal budget (as in every year since 2001), the Treasury borrows the difference by issuing treasury bills and bonds, most of which are nowadays bought by foreign governments, especially China. This situation has given China (the former Red China, its name before it started funding the US deficit) a malign leverage over US policy in Asia. Although President Bush blames big government spending for the deficit, not a penny has been spent by the federal government since he became president without his signature.
Republicans keep saying that reducing income tax rates encourages people to work and invest more. If so, what is the effect of cutting (or suspending) gasoline taxes? Encouraging people to drive more! But the more gasoline is sold and used, the higher world oil prices rise and the more gasoline will cost! So, part of the retail price reduction due to the suspension of the federal gas tax will eventually be offset by a rise in the price of the gasoline itself.
If the federal government reduces spending on road construction and repair due to lower gas-tax revenues, our infrastructure will deteriorate. In the case of bridges, reducing maintenance and repair can result in catastrophic collapses, as occurred in Minnesota a few months ago.
McCain also favors increasing the supply of domestic oil by drilling offshore, but not in the Alaska National Wildlife Refuge (ANWR). I say lets drill for oil both offshore and in ANWR (1). Critics (including many Democrats) note that any oil from these locations will not be available for about seven years; true, but if we do not drill in these places, in seven years we will be even dependent upon foreign oil than we are now!
Americans are responding to the dramatic increase in gas prices by driving less and switching to smaller cars, just as classical economic theory would predict. Fine, but we also must plan for a future less dependent on oil, especially imported oil. The best hope is electric cars, and the batteries we will need for them are now in development. If a method of transmitting electric power without wires can be developed in the future, the electric car will quickly replace the internal combustion engine and the demand for oil will plummet. Since electro-magnetic radiation needs no medium for transmission (which is why we don't need wires from the sun to deliver solar power), the idea seems possible.
As the world becomes more industrialized, demand for petroleum rises, and so does the price of oil, until some future technology will replace the burning of fossil fuels. This is a worldwide mega-trend, and no nation can stop it. However, part of the increase in oil prices is due to the "soft" US dollar, which has been sinking in value relative to the euro and other currencies. Our Federal Reserve Board could strengthen the dollar in international markets by increasing interest rates, but the Fed is loathe to do that now, since that would hurt the stock and real estate markets, both already in big trouble. A stronger dollar would also make American exports more expensive, which would boost unemployment.
It would be nice if even one of our two major parties or several minor parties (Green, Libertarian,, etc.) would come up with an energy policy that could deliver results in the long run, but don't count on it.
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(1) See "Frozen Assets", the March 29, 2005, Glazerbeam posting.
Associated Press, July 18, 2008
Senator Hillary Clinton also supports suspending the 18.4 cents per gallon tax, which funds the US Highway Trust Fund that pays for building and repairing roads and bridges. Senator Barrack Obama does not advocate suspending the tax.
All taxes are unpopular, and the Republican Party has benefited enormously from cutting taxes and promising to cut more. The trouble is that when tax revenues are insufficient to cover the federal budget (as in every year since 2001), the Treasury borrows the difference by issuing treasury bills and bonds, most of which are nowadays bought by foreign governments, especially China. This situation has given China (the former Red China, its name before it started funding the US deficit) a malign leverage over US policy in Asia. Although President Bush blames big government spending for the deficit, not a penny has been spent by the federal government since he became president without his signature.
Republicans keep saying that reducing income tax rates encourages people to work and invest more. If so, what is the effect of cutting (or suspending) gasoline taxes? Encouraging people to drive more! But the more gasoline is sold and used, the higher world oil prices rise and the more gasoline will cost! So, part of the retail price reduction due to the suspension of the federal gas tax will eventually be offset by a rise in the price of the gasoline itself.
If the federal government reduces spending on road construction and repair due to lower gas-tax revenues, our infrastructure will deteriorate. In the case of bridges, reducing maintenance and repair can result in catastrophic collapses, as occurred in Minnesota a few months ago.
McCain also favors increasing the supply of domestic oil by drilling offshore, but not in the Alaska National Wildlife Refuge (ANWR). I say lets drill for oil both offshore and in ANWR (1). Critics (including many Democrats) note that any oil from these locations will not be available for about seven years; true, but if we do not drill in these places, in seven years we will be even dependent upon foreign oil than we are now!
Americans are responding to the dramatic increase in gas prices by driving less and switching to smaller cars, just as classical economic theory would predict. Fine, but we also must plan for a future less dependent on oil, especially imported oil. The best hope is electric cars, and the batteries we will need for them are now in development. If a method of transmitting electric power without wires can be developed in the future, the electric car will quickly replace the internal combustion engine and the demand for oil will plummet. Since electro-magnetic radiation needs no medium for transmission (which is why we don't need wires from the sun to deliver solar power), the idea seems possible.
As the world becomes more industrialized, demand for petroleum rises, and so does the price of oil, until some future technology will replace the burning of fossil fuels. This is a worldwide mega-trend, and no nation can stop it. However, part of the increase in oil prices is due to the "soft" US dollar, which has been sinking in value relative to the euro and other currencies. Our Federal Reserve Board could strengthen the dollar in international markets by increasing interest rates, but the Fed is loathe to do that now, since that would hurt the stock and real estate markets, both already in big trouble. A stronger dollar would also make American exports more expensive, which would boost unemployment.
It would be nice if even one of our two major parties or several minor parties (Green, Libertarian,, etc.) would come up with an energy policy that could deliver results in the long run, but don't count on it.
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(1) See "Frozen Assets", the March 29, 2005, Glazerbeam posting.
posted by Gerald S Glazer at 8:42 AM
1 Comments:
Excellent.
Yes, McCain's idea is stupid; but so is Obama's. Obama suggests that we will get more energy by raising taxes on oil companies. He is against drilling anywhere as well as against nuclear power and doing anything to increase energy supplies except if it is an energy source that currently is inadequate to meet our enengy needs like solar and wind.
Also, of course McCain is now strongly for drilling offshore and for increasing nuclear power generation as well as investing in alternatives.
When one looks at the total picture of what both candidates have proposed for energy, Obama's plan is far more stupid than McCain's.
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