This diary was originally posted February 16, 2009, more than a year ago. Given the BP Oil Disaster and the suspension of off shore drilling, I felt it appropriate to repost this diary.
There is so much that could be done to address our ecological shortcomings. Hopefully this diary sheds some light on our potential courses of action.
a) Raise the gasoline tax and heavily incentivize activities such as car pooling and purchasing fuel efficient vehicles (50mpg+) to alter driving behavior
b) Eliminate the payroll tax ceiling and cut the rate in half for all those making less than the current ceiling of $107,000.
c) Divert the raised revenue to cover our infrastructure shortfalls and invest heavily in the green economy nationally. Details below
The decline in the price of gasoline from $4.17 to the current $1.965 amounted to a defacto tax cut worth hundreds of billions to American drivers across the nation. Those hundreds of billions were previously being sent overseas to nations like Saudi Arabia, Venezuela, and Russia. Those countries do not have our best interests at heart and were asserting themselves against us in bolder and bolder ways until the recent decline.
It's long past time to use this opportunity to strengthen ourselves; this calls for shared sacrifice from all of us.
A report in 2005 stated that $1.6 trillion over 5 years was required to bring our infrastructure up to code.
Today? The cost has risen to $2.2 trillion due to the neglect of the Bush Administration.
In short, we cannot wait until the economy is stronger before implementing a gasoline tax to stem rising prices and demand. Americans unfortunately have an all too short memory when it comes to cars and gasoline usage: Truck and SUV sales rising as gas prices drop
And yet, we cannot put even greater burden on the least of us who have lost their jobs, seen their mortgage payments rise, their credit card interest significantly increase, or the cost of their healthcare continue going through the roof.
So what alternative do we have?
Last year my husband (/rant/ not legally since gay couples aren't allowed to get married, but we've been together for almost 9 years, living together almost 8 years. he's my husband dammit /end rant) and I made more than $210k. We save and invest more than $4k a month between our retirement accounts and liquid savings and bought our first home almost a year ago.
In short, we can afford an increase in our taxes. So can every other family who is in the top 5% of all income earners in the nation.
Ask yourself why is it that Social Security ceases taxation at $106,800?
The current rate of taxation is 6.2% up to $106,800 for average Americans. If that rate were reduced to 3%, the real tax cut for the median American household making $50k would amount to $1600. For those making up to the current limit of $106,800 the tax reduction would be $3400.
That kind of savings would make a significant difference in the lives of Americans ($150-$280 month) and would go a long way to alleviating the pain so many are going through.
Conversely, instituting the Social Security Payroll tax at 6.2% for ALL individual income above $106,800 would cover the shortfall created by lowering taxes on the rest of the American public as well as create a surplus of $100 billion annually.
In effect, the payroll tax deduction would offset the increase in the gasoline tax for the 90% of working Americans subject to it.
It would also have the effect of reversing the perverse wealth redistribution taking place over the past several decades.
Why do this, some will argue? Won't the offset in payroll taxes do nothing to change individual's driving behavior?
It certainly will. If you're someone who is suffering through hard times and you receive a couple hundred dollars per month in tax relief, are you now going to buy a Hummer if you see the price of gasoline increased to $3-4 a gallon?
By implementing this tax, we not only reverse the wealth redistribution, we also change behavior. And that is the crux of this tax.
Change behavior of American drivers, reduce our dependence on oil (foreign and domestic), and beef up our national infrastructure.
That said, the following is the diary I wrote several months ago detailing what could be done with this windfall. But before posting that, please use the following links as clues to what others are saying on this crucial subject.
The Following Was Originally Posted November 23rd, 2008:
First a little history.
As you can see, the price of gasoline has fluctuated greatly over the past 30 years. By and large, however, the price of gasoline has remained dependent on world economic output and fuel efficiency.
In the 1970s, OPEC held the world hostage with two enormous increases in the price of oil. In response, western nations such as Germany, France, and the United States implemented higher fuel efficiency standards as well as increased funding for public transportation.
As evidenced in the graph above, there have only been two large and sustained dips in world oil consumption. The first occurred in the mid-to-late 1970s during the shocks of 1973 and 1979. The second sustained dip occurred during the 1980s.
The first dip, small as it was, coincided with economic recession due to artificially high oil prices. The second, larger, and more sustained dip, however, was due to the widespread adoption of higher fuel efficiency standards.
In other words, the political will existed at that time to enact stringent laws to reduce our dependence on foreign oil.
In the United States, the introduction of CAFE, or Corporate Average Fuel Economy, more than doubled our fuel efficiency almost overnight.
So what happened? Car companies, weak willed politicians in Washington and in State legislatures, and the American public were lulled into a sense of low-priced energy as a permanent state of being. Rather than use the opportunity of low prices to set even higher fuel efficiency standards and raise fuel taxes to keep consumption low and pay for public transportation, we instead saw the boom of Suburban sprawl, also known as the "Exurbs". Powered by cheap gasoline, Americans clamored for SUVs, Mini-vans, and other light-truck vehicles rather than the smaller and more fuel efficient cars sold in Europe and Japan.
And finally when the demand for oil outstripped the fuel efficiency standards put in place in the 1970s, the price of a gallon of gasoline began its long and steady climb upward again. When adding in the exploding economies of India and China, a combined 2 billion people modernizing at an astonishing rate, and the demand for oil has skyrocketed.
But what have we seen in terms of oil supply?
While demand has increased significantly, the world's oil production has stayed relatively the same or fallen. That can only mean higher prices under any circumstances.
So while you have the republicans such as Sarah Palin saying we have to drill our way out of this mess, the truth of the matter is that we can only provide 2-5% of world oil production. And that's if we destroyed every pristine environment in the nation in order to get at the oil.
And wouldn't you know it, that's just what the Bush Administration has been trying to do with opening up Offshore Drilling, trying to drill in ANWR, and now most recently going after the oil shale held in the rockies.
All of this misses the fundamental problem facing us. Dwindling supplies and exploding demand.
That said, the reason why oil prices have fallen so precipitously is because oil speculators believe the world economy will fall into recession, lessening demand significantly.
In light of this historical information, we need to take the steps now, while we have the attention of the american people, to raise the gasoline tax and put a floor on gasoline prices and consumption.
As stated before, currently the national gas tax is $0.48. Of that, roughly $0.18 goes to the federal government. With that tax, the federal government is able to raise roughly $25-$30 Billion annually, give or take a few billion.
With national gasoline prices at $1.929, an increase of the federal portion of the gas tax from $0.18 to $1.25 would increase the average price at the pump to $3 a gallon, a price still 27% lower than it was when prices hit $4.11 on average earlier this summer.
That would effectively increase tax revenues to the federal government up to $208 Billion. This would have multiple effects:
- When the base price of gasoline rises again to $3, national demand would reflect prices similar to that experienced this past year when miles driven fell at the steepest rate ever in March and May.
In other words, driving patterns did not change until national prices hit $4 per gallon this year. Until that point, people continued to drive, and in fact increased their driving.
- In 2001, the GAO estimated that building a high-speed railway system in the highly-trafficked Northeast Corridor, rivaling the TGV in France and the Bullet Trains in Japan, would cost upwards of $70 billion over 20 years.
20 years folks. That's $3.5 billion per year, which is a drop in the bucket compared to the increase in tax revenues.
Now you may ask, "What about the other states?"
The key here is to service the areas of the country that have the highest population density first, and then expand out. And as you can see, the highest population density of the nation is the Northeast corridor by far, and east of the Mississippi by far.
In that vein, John Kerry has proposed the High Speed Rail For America Act which would have the following effect if successful:
But even this is a drop in the bucket compared to what could be spent on a national system as it would allocate only $24 billion over 6 years, or $4 billion per year.
That's nothing compared to the investment France makes in the TGV, per capita.
Building a high speed rail system east of the Mississippi and along the western coastline of the United States, rivaling France and Japan, would cost $80 billion annually over the next 10 years.
The main reason other countries are so far ahead in HSR is simply because they are investing more. France spends 20 times as much per capita as the United States on rail. This breaks down to $67.66 per person in France versus $3.28 per person here. As this legislation works its way through Congress and as transportation issues become increasingly important over the next few years, here are the facts about high-speed rail.
Of course, we would have the advantage in being able to use the latest technologies to build an all new network without having to worry about legacy costs as the French do. We could also begin to take advantage of technologies such as MagLev to get a step beyond current high speed rail.
- We could fund significant investments in Solar, Wind, Geothermal, and other renewables.
In particular, look at technology advances we've seen for Wind.
ExRo's new design replaces a mechanical transmission with what amounts to an electronic one. That increases the range of wind speeds at which it can operate efficiently and makes it more responsive to sudden gusts and lulls. While at the highest wind speeds the blades will still need to be pitched to shed wind, the generator will allow the turbine to capture more of the energy in high-speed winds and gusts. As a result, the turbine could produce 50 percent more power on average over the course of a year, says Jonathan Ritchey, ExRo's chief technology officer. Indeed, in some locations, the power output could double, says Ed Nowicki, a professor of electrical engineering at the University of Calgary, who has consulted to ExRo.
Currently the strongest wind patterns in the United States are found in the corridor running from Montana/North Dakota down through Oklahoma and Texas. Add in the Great Lake states such as Ohio, Indiana, Wisconsin, Illinois, Michigan, and Minnesota, which also see strong winds, and this country could significantly increase its Wind power output.
State: South Dakota
Current Wind Power Generation: 186.76 MWatts
Potential Wind Power Generation: 117,200 MWatts
Current Wind Power Generation: 7.42 MWatts
Potential Wind Power Generation: 416 MWatts
Current Wind Power Generation: 689 MWatts
Potential Wind Power Generation: 82,700 MWatts
Current Wind Power Generation: 165.03 MWatts
Potential Wind Power Generation: 116,000 MWatts
Current Wind Power Generation: 73.38 MWatts
Potential Wind Power Generation: 99,100 MWatts
Current Wind Power Generation: 6297.35 MWatts
Potential Wind Power Generation: 136,100 MWatts
All information found at http://www.awea.org/...
Now with the current infrastructure in place, Wind supplies roughly 1.5% of our energy needs today. How much has been invested in Wind to date? $28 billion. From the 1980s to today, only $28 billion.
Imagine what could be done with an annual investment of $28 billion for the next 10 years?
But it doesn't end there.
Losses from our antiquated power grid have estimates at $80 billion a year. This is primarily due to losses incurred by power outages, data corruption, etc.
Costs by Sector The study estimates the total cost to the U.S. of power interruptions at about $80 billion per year. Of this, $57 billion (73 percent) is from losses in the commercial sector and $20 billion (25 percent) in the industrial sector. "The reason for the commercial sector’s high share of these cost is the large number of commercial sector customers, which includes small as well as large businesses, and the high cost per outage per customer," notes Hamachi-LaCommare. The industrial sector’s cost per outage per customer is significantly higher than those of the commercial customers, but there are only 1.6 million industrial customers, compared to 14.9 million commercial customers.
The authors estimate residential losses at $1.5 billion, or only about 2 percent of the total.
$80 billion annually. Let that sink in for a moment.
How much would it cost to modernize our national grid so that we could take our existing power generation capabilities, add the new power generation to it, as well as allow more efficient sales between states as well as individuals who generate excess power (think solar panels installed on your roof)?
High-voltage wires mounted on towers erected on narrow (200-foot) rights of way can quite easily move huge amounts of power, over thousands of miles, with very modest losses. Direct-current systems operating at about 600,000 volts are optimal for certain applications; alternating-current systems operating at close to a million volts are more suitable for many others. A single line operating at 765 kV AC can transmit almost 1 percent (4 GW) of the total average power generation of the entire United States, or 0.5 percent of the power that Americans collectively consume during the most power-hungry minute of the year.
According to one recent analysis, windmills located principally in the heartland could meet over 25 percent of current U.S. electricity requirements (or 20 percent of projected demand in 2030) if linked to population centers across the country by 19,000 miles of high-voltage grid. Such a grid would cost an estimated $60 billion to build. A somewhat larger, 21,000-mile grid designed to network all major sources of electricity, including wind, might look something like the one shown in the accompanying conceptual map, and would cost about $75 billion. That would add roughly 0.3 cents to the current 9-cent average retail price of electricity.
Here is the study:
And look how much goes wasted every year because we cannot shuttle energy efficiently to the areas of the country that need it.
But here's the kicker:
Electricity—not oil—is the heart of the U.S. energy economy. Power plants consume as much raw energy as oil delivers to all our cars, trucks, planes, homes, factories, offices, and chemical plants. Because big power plants operate very efficiently, they also deliver much more useful power than car engines and small furnaces. On their own, our passenger cars consume less than half as much raw energy as our power plants, and turn it into useful power at the wheels about half as efficiently. If we could plug our cars directly into the electric grid, and choose the best time and place to plug them, idle capacity in existing plants could power almost all the miles we drive. With a 10 percent boost in production, the grid could also take care of all the heating supplied by oil-fired home furnaces.
Electricity is also comparatively cheap. If we could deliver electricity straight to electric motors connected to our wheels, it would deliver miles at a price that most current car engines could match only on gasoline priced under a dollar a gallon. Delivered to our homes at off-peak prices, electrical heat would cost homeowners a lot less than $4-a-gallon heating oil. Electricity is cheap because the gigantic furnaces and boilers that spin million-horsepower turbines and generators run almost entirely on fuels that cost much less than oil. As a result, we spend roughly half as much on electricity—about $350 billion a year—as we’re currently spending on $100-a-barrel oil, and electrically powered systems do more, faster and better, than oil-fired alternatives.
So let's see what we've learned:
- Increase the federal gasoline tax from $0.18 to $1.25. Raise up to $208 billion in additional revenue.
- Subtract $80 billion annually for the next 10 years developing national high speed rail that would rival the French and Japanese.
- Subtract $15 billion annually for the next 10 years building a 21st century power grid (figure you'll have cost overruns).
- Subtract $45 billion annually (5x the amount invested in 2007) for the next 10 years building out our Wind power generation capabilities.
That still leaves $68 billion annually to develop and deploy Solar in the perpetually sunny states of California, Nevada, New Mexico, Utah, Arizona, Texas, Louisiana, Georgia, Mississippi, Alabama, and Florida. Not to mention aiding in the development of bio-diesel (not corn ethanol, please by god), fully plug-in electric cars, and fixing our bridges, tunnels, and roads.
This is a future that we can realize folks. What is the alternative? Leave the gas tax the way it is today, the world economy recovers, and gas prices rise back to where they were. Instead of raising $200 billion annually to spend here at home, we'll be sending that potential tax revenue overseas.
I hope to god that the Obama administration sees this and implements the increase in the gas tax soon. While the national mood is ready for it and while people still have memories of $4 gasoline in their minds, it must be done. Because I can tell you that once people have adjusted to cheaper gasoline, it'll be too late.
We don't have much time to act. Thanks for reading.