In the last post, we noted that the political response of the US public to high gasoline prices is, how shall we say it, more severe than the political response to high healthcare costs. And therein poses a dilemma for progressives.
For many reasons, high prices for gasoline (and other fossil fuels) are generally a good thing. Burning fossil fuels is bad for the environment, and many of the ways of extracting petroleum are likewise damaging. Many petrochemical companies are notoriously bad actors. Maintaining access to cheap foreign oil also requires us to deal with some rather unsavory states, and get involved in military adventures that would otherwise be considered unwise. It's not exaggerating to say that cheap gas is paid for in blood, not just dollars.
However, high prices for gasoline is also a bad thing for several reason: First, it is a major retardant on the economy--its an ever-present tax, sucking the lifeblood out of our markets and sending it overseas, where it often pays for who-knows-what. Second, it has a particularly harsh impact on the poor, for whom transportation is a bigger percentage of the budget--and who are also impacted by higher prices for food and other necessities. And lastly, if you care about Barack Obama beating the GOP candidate, likely Mitt Romney in the election, it's not good news.
One of the interesting paradoxes of US politics is that presidents get blamed for high gas prices, even though (in the short term) there is precious little they can do about it directly. President Obama's poll numbers have dropped recently, though whether that is due to energy prices or some other reason is currently unknown. (In fairness, it must be noted that he attacked the GOP for high gas prices during the 2008 campaign). Price controls and other aggressive measures of that sort are pretty much off the table. Increasing domestic production takes years to have an effect. That hasn't stopped Newt Gingrich from promising $2.50/gal gas if elected, an idea which the White House has dismissed, though The Atlantic notes that it could be done by subsidizing the stuff to the tune of $190 billion.
While The Atlantic's proposal as given is bad--subsidizing gasoline strikes me as intelligent as subsidizing cigarettes--it wasn't meant to be taken seriously. (Or at least that's what I'm assuming, graciously giving the editors there the benefit of the doubt). But on the other hand...
Energy tax credit?
The main problem with The Atlantic's snarky suggestion is not that it involves a subsidy--but that the subsidy only goes to the purchase of gasoline. But what if $190B, or some other figure, were made available to instead subsidize energy or transportation? What if every taxpayer got a lump-sum tax credit to offset rising energy costs, one that wasn't tied to any particular form of energy?
With a gas subsidy, those who drive a Ford Expedition to work would get more money back than those who drive a Honda Civic, and the Civic driver would get more back than those who drive a Chevy Volt, ride a bike, or take the bus to work. It would directly reward the deleterious behavior. Such a subsidy would also fail on the equity front, as the poor are more likely to be those not driving. (Transit riders might benefit indirectly if a subsidy would assist the transit agency with its diesel purchases). And, Big Oil would be the primary beneficiaries of such a windfall.
With a broad energy credit, on the other hand, the negative impacts of high oil prices on the economy would be mostly offset, but the marginal cost of buying gas would not be offset. This would maintain the advantage of high oil prices--encouraging alternate forms of energy--but not drag down the economy. And it would be particularly beneficial to the poor, who would appreciate the credit more than most.
I must emphasize that this is a neutral credit--it isn't tied to alternate energy. Those who wish to keep a gas-guzzling lifestyle not be prevented from doing so. But nothing will be done in this proposal to decrease the marginal price of gas. I should als mention that this is envisioned as a short-term
credit--essentially a form of stimulus--not a long-term entitlement. It
could be structured as a separate line item, or simply as an increase
in the standard deduction or personal exemption.
In addition to a household credit, I'm also assuming in this scenario some sort of energy credit for businesses. I'll leave the details to others, as I'm insufficiently wonky in this area to put together a concrete proposal.
Is it doable?
Don't be ridiculous. The GOP isn't going to do anything that might be beneficial to Obama's re-election, at least not without exacting a policy price for it. (And they might even reject an offer of increased production, one sure to annoy liberals). But that doesn't mean the proposal isn't politically valuable. Obama has got tons of mileage out of the Jobs Act proposals last fall; even though little if any of his proposals have been implemented. And a general energy credit would allow the debate to be framed in a way consistent with progressive values: Long term, we have to kick the oil habit, we all know it. But rising oil prices are damaging our recovery, as our economy suffers withdrawal pains. A short-term energy credit, designed to offset the impact of high oil prices, will allow us to continue with an orderly transition to the economy of the future. The only ones who really benefit from oil subsidies are oil companies.
If the debate is whether Obama is doing enough to drive down gas prices, that's a debate the Democrats don't want to have. And while progressives might cheer were the President to tell the American public to eat their vegetables, that's probably not wise politics. But if the debate could be shifted from concerns over the price of gas to a broader conversation over energy, it would be to progressive's advantage--even if the actual policy proposals go nowhere.
Significant Digits For Tuesday, May 3, 2016
26 minutes ago