On a day in which North Carolina and Indiana go to the polling booths, consider the following an intellectual interlude before the main act performs this evening.
Photo: Wikimedia Commons
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The myth of a "Gas Tax Holiday" has been comprehensively debunked by virtually anyone who understands the oil economy.
Even IF a bill to implement this ridiculous notion was approved, despite no support in Washington and a Bush veto, there are no controls in place to ensure that prices would drop at all.
The price of oil, and therefore gas, is regulated by the oil companies and the free market. If Washington were to cap gas prices, the oil companies would simply reduce supplies of gas to the pumps in order to avoid losing money as the price of oil rises. Perhaps you could use your $30 savings to buy a book on economics for light reading while you queue.
The answer? Though it may seem counter-intuitive, RAISING gas taxes would save you more.
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What? Why? How?... Read below:
America needs to reduce its dependence on foreign oil or it will face economic meltdown as OPEC nations increasingly trade oil in non-US-Dollar currencies. Countries that have propped up the US economy such as China and Saudi Arabia already have massive US Dollar liabilities that devalue by the day.
Image: Wikimedia Commons
Economics 101:
In order to counter the imbalance between imports and exports (the trade deficit), the Federal Reserve prints more money. The government, through the treasury, borrows that money from the Fed against taxes. The more that is borrowed, the more taxes that need to be raised to pay the interest. Also, the more money that’s printed, the lower the value of the Dollar relative to foreign currencies.
The government has been able to continue to borrow from the Fed largely because consumers continue to borrow from banks. Roughly 1/5th of the money in the US economy is borrowed. More money means more inflation.
Washington would have us believe that the rate of inflation has been around 3% for the past 5 years. Look around you. Do you pay only 9 cents/gallon more in gas than this time last year? Is your monthly household energy bill really only $2.50 more than last year?
In order to keep the money being printed, the treasury set interest rates to be artificially low, to attract borrowing. But, to stop rampant inflation it has to raise them again. As we know from the housing crisis, consumers are getting screwed. Raising interest rates, slows down the economy, eventually making it shrink rather than grow which is what a recession is.
So, why does raising the gas tax help?
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1) Raising gas taxes would accelerate the trend towards buying more fuel efficient cars:
o The average fuel consumption of an SUV is around 12 miles to the gallon.
o The average fuel consumption of a modern and efficient car is over 30 miles to the gallon
o Driving a more fuel efficient car (it doesn’t have to be a Prius) would HALVE your gas bill.
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2) Demand for more better cars would put pressure on vehicle manufacturers to use technologies developed in the 21st century.
o Time stop buying into the shiny new 1950’s designed 2008 model con. It might have a cool new shape, but it’s the same old stuff underneath.
o Many gas guzzlers use huge, inefficient engines developed 50 years ago. Why? Because it saves them having to develop new ones and they have hoodwinked consumers into believing that V8 is Great and V12 is Swell.
o Not only do they consume gas like its going out of fashion, they are notoriously underpowered. The bigger the engine, the more energy is wasted just making the engine work.
o Vehicles could easily be made lighter, but lazy manufacturers get away with bad design. Lighter vehicles means a better power to weight ratio, so you need a smaller engine and less gas to power a better performing car.
o If America made better cars, it would have the opportunity to export vehicles to the rest of the world, creating jobs, reducing the deficit and boosting the economy.
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3) More short term gas tax revenue means higher investment in transportation infrastructure.
o Increasing gas taxes provides the money and funds the jobs to improve public transport.
o The revenue would also be used to fund research and development for 21st century transportation.
o Electric and alternative fuel vehicles would reduce dependence on foreign oil and create a new industry powered by American know-how and built by American jobs.
o The sooner we change from oil burners, the sooner we avoid paying the gas tax.
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4) Lower gas consumption means less demand for oil and hence less dependence on foreign oil.
o The price of a barrel of oil has risen fourfold in the past 5 years from $27/barrel in 2003 to around $120/barrel today.
o The higher the price of oil, the more the economy is affected by it as it becomes a larger portion of expenditure.
o If oil is traded in Euros, Yen, Rubles, America loses its ability to tie the economy to the rise in oil prices.
o Iran, the world’s fourth largest oil producer, stopped accepting US dollars for oil in December 2007. It’s also the second largest producer in OPEC and has considerable influence.
o Hillary’s threats to Iran and OPEC only server to hasten the move by OPEC away from the dollar. (Go Hillary! Putting herself before her country, again).
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5) The falling dollar
o The US Dollar has dropped by almost 40% in value since 2003. This means that American exports are almost twice as expensive in real terms.
o The more the dollar falls, the less OPEC makes in real terms, the more likely they are to switch trading currencies.
o To get the US economy back on track, there needs to be investment in producing products and services that are demanded abroad. To jump start it, much of that money will come from taxes. As exports grow, there will be more corporate revenue and hence need for less consumer taxes.
OPEC Countries Image: Wikimedia Commons
Conclusion:
The gas tax is far more complex than how many dollars it costs you today to fill your tank. It ties into the nation’s entire economy. Reducing dependence on foreign oil and judicious use of taxes to boost American exports through increased investment in modern jobs should be the primary objective of future economic policy and will save you real money in the long run.
P.S.
I have deliberately avoided the "Green" argument lest I be flamed as a crazed far-left liberal nut. Protecting the environment is a noble goal. However even if you don’t ‘buy in’ to Global Warming, there are trillions of dollars of reasons why intelligent efficiency will save you and the country money.