I always worry when elites on both sides of an issue agree. And worry turns into terror when it's two complete opposites like the editorial page of the New York Times and the friggin Wall Street Journal's auto reporter both think we should increase taxes. I mean from the Times calls for tax increases are like restaurant reviews - they appear almost daily. But from the WSJ's guy in Detroit? What's going on?
Bruce Yandle, an economist who used to teach at Clemson, coined this awesome phrase, baptists and bootleggers, to describe the unusual, and unlikely political alliance that maintained blue laws (the prohibitions on alcohol sales on Sunday) in the South. Both groups were opposed to each other publicly, but on this one issue their interests converged. And the South kept Blue Laws in place.
We're seeing a classic example of this phenomenon right now with the gas tax. There is this growing consensus among elites that a gas tax is a nice behavioral modification device - sort of like this one. It's based on the seat-belt laws/cigarette tax argument and freaks me out because everything I read about it seems to suggest these folks know what's good for me.
This particular confluence of arrogance has brought together at least four groups I can see. The first one is obvious - environmentalists and coastal liberals who are not as dependent on automobiles as the rest of the country. Hard core folks like these just believe we should be driving Prius' or walking. The second are Neo-Cons who say Arabs in general are bad and by cutting our dependency we'll improve our national security concerns. However when I see simple statistical analysis from the U.S. Department of Energy like this that shows we are more dependent on Canada than Saudi Arabia for oil it makes me wonder why we want to destabilize Quebec.
Third are the boys from Detroit who would probably trade a gas tax for the elimination of CAFE standards for a gas tax in a second - especially if it involved a deal for government cash. Finally, fourth are politicians who are saying something like "Look at all the money that a gas tax would make!"
We know what Candidate Obama said about a gas tax holiday during the election, and it suggests that he is not an avid opponent of it.
It would be a good bone to throw to environmentalists, and if it were linked to the elimination of CAFE standards, Detroit would probably get behind it, but what would it mean? Well part of it would depend on the rate, and a huge part of it depends on the impact on behavior.
Cost during a recession? Not as much as you'd think with declining gas prices and decreasing use of cars, so it has short term appeal as well, especially if it's sold as a way to "pay for" the 2 trillion or so we are going to spend next year on fiscal stimulus............2 trillion............WOW.
My concerns are four fold. First, as Krauthammer argues, it should come as a revenue neutral proposal. I just don't believe that will come through the sausage making machine. I also really, really, really doubt that Neo-Cons understand the economics of tax increases.
Second, this pretty smart guy argued that we have to be aware of unintended consequences of government action. That always sits in the back of my mind when I hear people with Ivy League educations explaining to me how public policy x will only lead to outcome y that they have predicted. It never seems to work that way. This is a good example of that.
Third, any tax increase spreads price increases throughout an economy. Milk, eggs, and Wii's don't get delivered by mules - they get delivered using trucks and trucks use fuel. And some trucks don't use diesel........you get the idea.
Finally, fourth is it not the case that real estate market is in the dumps? How does punishing folks who have to drive a lot influence all the excess housing in suburban areas like FL and CA? How willing are both parties to screw the developers stuck with excess housing in Ex-burbs?