Semi-Daily Journal Archive

The Blogspot archive of the weblog of J. Bradford DeLong, Professor of Economics and Chair of the PEIS major at U.C. Berkeley, a Research Associate of the National Bureau of Economic Research, and former Deputy Assistant Secretary of the U.S. Treasury.

Sunday, October 08, 2006

Raise the Gasoline Tax?

Daniel Gross writes about suddenly-ungagged Republican economists and the gasoline tax:

Raise the Gasoline Tax? Funny, It Doesn't Sound Republican - New York Times: FOR nearly two decades, Alan Greenspan owned the biggest megaphone... dispensed advice on matters economic -- interest rates, budget and tax policies, entitlements, the stock market, the best kind of mortgage -- people listened. As a rule, Mr. Greenspan... adhered closely to Republican orthodoxy on taxes: the lower the better. Mr. Greenspan was hardly a proponent of raising taxes on energy to encourage conservation, a policy prescription generally associated with the politicians and economists of the left.

Until now. In late September... a question was posed as to whether he'D like to see an increase in the federal gasoline tax, which has stood at 18.4 cents a gallon since 1993. "Yes, I would," Mr. Greenspan responded.... "That's the way to get consumption down. It's a national security issue."

Mr. Greenspan isn't the only Republican-aligned economist to have discovered, or rediscovered, a fondness for higher energy taxes since leaving government service. N. Gregory Mankiw... favored a higher gas tax before going to Washington, and has been banging the drum loudly for it since he left. On his blog, Mr. Mankiw has formed the Pigou Club, named for Arthur C. Pigou, the British economist.... The roster of what Mr. Mankiw calls "economists and pundits with the good sense to have publicly advocated higher Pigovian taxes, such as gasoline taxes or carbon taxes," includes... Paul Krugman... Al Gore... Gary S. Becker....

Andrew A. Samwick, [former] chief economist on the Council of Economic Advisers... is a member in good standing. So is Martin S. Feldstein.... The government, Mr. Feldstein said, should essentially ration gas by distributing tradable gas rights that entitle people to use gasoline....

What gives? Clearly, consensus among economists... that the nation would be better off, geopolitically and economically, if Americans used less gasoline. "Given the role that imported oil plays today, you can't continue to be a responsible economist and not talk about ways to reduce that dependence," Mr. Samwick said. "If you are concerned about the external consequences of imported oil, then you should raise the cost of it."... [A] growing unity among economists across the political spectrum on the deleterious effects of global warming. "The U.S. has reasonable arguments for not signing the Kyoto treaty, but we need to propose some other measure that will help reduce emissions," said Kenneth Rogoff....

But as much as Republican-leaning economists like Messrs. Greenspan, Mankiw and Samwick may think that it's a good idea, the Republican politicians who control the levers of power in Washington think that it's an awfully bad one.... The last increase in the federal gas tax was enacted as part of the so-called deficit reduction act of 1993, a package of spending cuts and tax hikes that didn't receive a single Republican vote in Congress. And because President Bush and his top political advisers are known to be adamantly opposed to any increase in the gas tax, economic advisers haven't pushed it much. "We didn't have policy discussions about raising the gas tax," Mr. Samwick recalls of his time in the White House.

THIS highlights a professional hazard faced by academic economists who serve in presidential administrations. They must act as team players who value the overall success of the administration -- even if they don't agree with all of its policies. As a result, economists must often stow some of their policy ideas in an intellectual coat check at the White House gates, where they can be reclaimed upon return to private life...

Treasury Secretary Paul O'Neill and EPA head Christine Todd Whitman were for an increase in the gas tax back at the start of 2001, when they thought they were in charge of global warming policy. They could have used some backup then--and Bush could have used some reminding in 2002, 2003, 2004 and 2005 that O'Neill and Todd Whitman were right. And I have never understood why George W. Bush and his Texas, Oklahoma, and Louisiana friends aren't in favor of a tax on imported oil, which is a huge money maker for their interests.

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