Topic: Politics
Presidential Candidates Need to Understand How to Solve America’s Oil Addiction Last week, John McCain released his economic plan to get the American economy going again. Amongst the ideas is a proposal to suspend the gasoline tax until Labor Day. This will effectively lower the price of gasoline at the pumps, thereby increasing demand for gasoline.by Adam Rink
(Libertarian)
Monday, April 21, 2008
Last week, John McCain released his economic plan to get the American economy going again. Amongst the ideas is a proposal to suspend the gasoline tax until Labor Day. This will effectively lower the price of gasoline at the pumps, thereby increasing demand for gasoline. As more gas is consumed more money is given to unstable nations and our trade deficit increases. A higher trade deficit lowers the value of the dollar and increases inflation. More pollution is also released into the air as resultant of more fuel consumption. McCain did not mention suspending construction work for interstates and highways, which is what the gasoline tax funds. Therefore, reducing the gasoline tax would increase the budget deficit by $10 billion. For a candidate that is running on a platform of stopping global warming, reducing government deficits, securing energy independence and stopping terrorism, this seems like the worst thing he could do.
Maybe the Democrats have a better solution. In a debate on ABC between Clinton and Obama, Clinton blamed a lot of individuals and groups for the rise in oil prices. This included the Bush administration, oil traders and big oil companies. She called for investigations and windfall profit taxes on oil companies. She also wanted to spend more money on alternative energy projects. Obama called for the same kinds of actions but at least put it in prospective that 1.7 billion people between China and India are going to start driving soon, so there is nothing we can really do about keeping oil cheap.
A windfall tax would only hurt the US. As soon as Congress increases taxes on oil companies they will send their offices overseas. Who cares about such a small population like the US when you have 1.7 billion new customers overseas? Plus, this will lead to more job loss in the US. Investigating traders and oil companies is also going to cost money. Unfortunately, the outcome of all these investigations, fines, and taxes will do little to reduce the price of gasoline. As George Stephanopoulos pointed out during the debate, the rest of the world is paying $6 a gallon and we are paying $3.50.
On Obama's web site, he states he wants to invest $150 billion in clean energy fuel technology, some of that to auto companies. The problem with this plan is taxpayer money is pumped into companies that might not be able to meet the demands placed on them because they lack the technology or disagree with the ideology. For instance, in the late 90s American and Japanese car companies were working on electric car projects. While the companies scrapped the project, GM went on to build SUVs, where Toyota and Honda developed hybrid vehicles. Startup companies like Venture Vehicles and Tesla Motors are also coming out with today's electric bikes and cars. This poor business foresight by the big American car companies will get a bail out in the form of investment by the government under Obama's plan. The consumer should dictate what kinds of cars are produced and not the government. With $4 gasoline, the consumer will push the car companies into better fuel efficient cars. This is why gasoline is at its lowest demand since 2005.
Obama's plan is to reduce oil consumption by 35 percent by 2030. Clinton wants to increase fuel mileage to 55 MPG by 2030 according to her web site. The year 2030 is a long ways off considering how fast China and India are growing, and how unstable the Middle East is becoming. Hopefully, prices will force more conservation long before then.
Even, Ron Paul, in an interview with Neil Cavuto, stated that he favors a permanent elimination of the gas tax. Paul did point out that a weak dollar is leading to this oil inflation. The dollar has dropped 28% against the Euro in the last 5 years. Inflation has also caused the dollar to weaken, as $100 today is worth about $85 of 2003 money. Therefore, if the dollar was as strong as it was in the year 2003 without any inflation, oil would be around $60 a barrel instead of $100. The dollar strength is not talked about by other candidates when addressing concerns to oil.
A gasoline excise tax is a fair tax. If a person puts gas in a car, they are using roads to drive on. An income tax on the other hand, which will be used to cover any deficits created by the lack of the gasoline tax, takes money from people to pay for things they may not use. It would be smarter if the candidates raised the gasoline tax and use the extra income to fund bio-fuel research and investing in other fuel efficiency projects. This would raise the price of gasoline and result in more conservation and more consumer demand for fuel efficient vehicles. Unfortunately, none of the candidates list how they will pay for their expensive programs. The only thing Hillary and Obama list is a cap and trade program where the government sells permits allowing pollution. This would indirectly raise the price of electricity which will force conservation; therefore, depending how it is implemented, it might help. A simpler approach would be a higher tax on electricity produced from coal and oil. America is very wasteful when it comes to electricity and gasoline, higher prices will take the waste out of the system and allow us to become more energy independent faster than we would with any mandates or government programs.
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2008 Adam Rink, all rights reserved.
Published: Monday, April 21, 2008
Last modified: Monday, April 21, 2008
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adam, are you serious? this idea is maybe centrist or high left at best. to have the government digging into a crash that needs to happen is pure folly. they need to stay out, and let the "bad things" happen.
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2008 Adam Rink, all rights reserved.