| ECONOMIC LIFE Hike in gas tax offers a tankful of benefits By Charles Stein, Globe Columnist, 6/13/2004 People can be awfully creative when the potential rewards are great enough. The energy industry is a case in point. In ''The Prize," his history of the oil business, Daniel Yergin recounts a long list of technological breakthroughs that were achieved when there was money to be made. Once it was clear oil was valuable, inventors figured out how to extract it from the ground. When distant markets opened up, entrepreneurs came up with pipelines and tanker ships to transport it. Soon after cars made their debut, clever chemists discovered new ways to extract more gasoline from crude oil. The lesson is clear: If the financial incentives are there, business can do amazing things. Which is one reason I would like to see a big hike in the gasoline tax. With higher gasoline prices -- say 50 cents per gallon higher -- Detroit would have a powerful reason to concentrate its creative energy building cars with better gas mileage. Raising gasoline taxes and reducing fuel consumption would produce a variety of benefits. Before he became President Bush's chief economic adviser, Gregory Mankiw, then a Harvard professor, listed some of them: ''Less traffic congestion, safer roads, and reduced risk of global warming." But Mankiw left out the most important benefit: reducing our dependence on imported oil. The US economy is vulnerable to political turmoil and supply shocks from unstable oil producers such as Venezuela, Nigeria, Iraq, and Saudi Arabia. A disaster in any one of those places could create a temporary disaster here. It could also trigger the next war. Higher gas taxes wouldn't completely insulate us from danger, but by cutting down on oil use they would go some way toward reducing the risk. A 50-cent gas tax would raise roughly $50 billion a year. Some of that money could be rebated to lower-income drivers who would be hurt most by higher prices. The rest could be divided between deficit reduction and energy research, both worthy goals. There is another way to achieve better gas mileage: the regulatory approach. At the federal level, the government has tried to push Detroit to build more fuel-efficient vehicles with its Corporate Average Fuel Economy Standards. In response, car makers have expended great amounts of energy lobbying against stricter standards and opening up loopholes in the law big enough to drive a fleet of SUVs through. California is the most ardent proponent of regulation at the state level. The California Air Resources Board this week is expected to propose a plan that would require major reductions in the level of greenhouse gases that can be emitted by new cars. The proposal is aimed at cleaner air, not more fuel efficiency, but the auto companies are already labeling the plan a back-door attempt to boost mileage standards. A big political fight is all but guaranteed. ''There is always a way around a rule. There is no way around a higher price," said Mark Zandi, chief economist at Economy.com, a Pennsylvania forecasting firm. That is the beauty of higher gasoline prices. Once they were in place, the marketplace, both producers and consumers, could figure out how to respond. Some people would stick with their mammoth SUVS. And that would be fine. They would just have to pay for the privilege. Others would prefer more fuel-efficient vehicles. Given some lead time, car companies should be able to produce such cars, without big sacrifices in safety or comfort. When there is money to be made, great things are possible. The politics of gas taxes are another matter. Henry Lee, an energy specialist at Harvard's Kennedy School of Government, worked on a project in the first Bush administration that advocated a one-cent hike in the gas tax to pay for improvements in the national parks. ''It died in a nanosecond," Lee recalled. Today, as we say good-bye to the ultimate opponent of taxation, Ronald Reagan, prospects for a big hike in any tax seem more remote than ever. But consider: In 1982 and 1983 Reagan endorsed higher taxes on business, personal income, and payrolls because it was the right thing to do. Is it possible our next president will be equally bold? Charles Stein is a Globe columnist. He can be reached at stein@globe.com. This story ran on page E1 of the Boston Globe on 6/13/2004.
|
|
|