The world frets over oil usage, shortages, wild price fluctuations, global warming--many recommended solutions involve integrating China into the world oil groups, setting world-wide policy, using tax breaks, and other typical governmental bureaucratic solutions. They won't work. We go round and round and no real progress has been made; ever.
Any tough and major problem needs to be broken down into it's individual elements, a determination made as to which are the most important, and then working on individual solutions in ways that provide sustainable and lasting effects. Obviously one of the key sub-problems on this subject is U.S. automobile gasoline consumption. So let's work on it, and break it down even further. Here are the relevant objectives and constraints.
Objective #1: create a natural desire on the part of the U.S. driving public to want high fuel economy cars.
Objective #2: create a plannable horizon for various fuel efficiency and alternative energy investments.
Constraint #1: Using tax breaks to aid investment returns is bad policy; it is generally too slow and has the Congress making industrial decisions in response to lobbying pressure.
Constraint #2: Simply legislating higher fuel efficiency standards, while a good idea on its own, is completely insufficient if the consuming public isn't demanding fuel efficient cars; no car company can tell its consumers what to purchase.
Constraint #3: raising gasoline taxes sufficiently to affect the U.S. consumer's gasoline purchasing decisions and simultaneously providing a sufficient ceiling to entice alternative energy investments w/o tax breaks has been viewed as political destruction.
Constraint #4: the world is, and consumers are, likely to see continuing oil/gasoline major price fluctuations which significantly impacts low/middle income people's budgets
So let's do something our government isn't particularly good at, and think long term. Here's a solution that, in today's environment, could gain support.
Point #1: raise the gasoline tax in one piece of long-term legislation as follows:
*2009 10 cents
*2010 another 10 cents
*2011 another 20 cents
*2012 another 25 cents
*2013 another 25 cents
*and so on at 25 cents/year until it reaches $2.00
Point #2: send all these taxes directly into U.S. infrastructure building via a newly formed disbursement agency. Given the predictability of the cash stream, bonds could be issued to accelerate short term funds.
Point #3: to dampen price fluctuations; when the price of gasoline at the pump reached certain price thresh-holds for a given quarter, the tax would be reduced in the subsequent quarter in an amount sufficient to drive the price downward toward that same thresh-hold. That thresh-hold would be increased on a yearly basis by a CPI-like adjustment--for example;
*2009 $4.00
*2010 $4.12
*2011 $4.25
Here's an illustration. If in the third quarter of 2010 the average gasoline price at the pump was $4.27 (15 cents over the thresh-hold), for the 4th quarter the tax (which at that time would be 20 cents) would be reduced by 15 cents.
This accomplishes all our national objectives. Consumers know that higher gasoline prices are coming via this infrastructure tax and can make their long term decisions accordingly; alternative energy investors can plan on a minimum level of fuel costs and make their decisions accordingly; automotive companies know that the price of gasoline will be continuously higher over a planning period and adjust their strategies to high efficiency cars; and infrastructure and jobs-creation objectives are enhanced. This also gives the U.S. some moral standing with respect to other countries' fuel consumption practices and policies. Note, this would be even better applied on an oil consumption basis--i however have used gasoline in this example as the numbers are more familiar to the general public.
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