Sunday, May 23, 2010

Snake oil tax

In his recent NYT column, Thomas Friedman writes:
[After 9/11] I suggested a $1-a-gallon "Patriot Tax" on gasoline that could have simultaneously reduced our deficit, funded basic science research, diminished our dependence on oil imported from the very countries whose citizens carried out 9/11, strengthen the dollar, stimulated energy efficiency and renewable power and slowed climate change.
Wow; that's amazing. A single policy could do all that? Well, to be sure, it could do some of the things on the list. It could reduce trade deficit (though not by any significant amount); it could increase research funding; it could lead to developing more renewable energy sources; and it would definitely slow climate change. But some of the things on the list are on the list because... who knows why, exactly. A gasoline tax would not diminish our dependence on foreign oil, at least not in the short run. Paying more for gas would decrease our consumption of it, which would make us buy less oil--but there's no reason why it should make us buy less foreign oil relative to ours. The tax would also not stimulate energy efficiency (again, at least not in the short run): the very reason why gas is cheaper than other energy sources right now is because it is more energy efficient.

And then there's the issue of strengthening the dollar. This one left me sort of dumbfounded. How exactly would a gas tax accomplish this feat? What's the proposed economic mechanism behind it? And while we're at it, what else would the tax do, cure cancer? Oh wait; we already know it could. It's number two on Friedman's list.

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