Wall Street Weekly | 05/22/2009 10:53 am
Markets and Obama Face Reality Check, by Liz Peek
Why slapping a gas tax may be a better option than regulating the auto industry …
Bears, Bulls, Chickens and Pigs: wOw’s Wall Street Weekly with Liz Peek (Week of 5/18)
Editor’s Note: Liz Peek is a financial columnist and the author of wOw’s SHEconomics.
Happy Memorial Day! As you throw the three kids, the dog, the suitcases and picnic basket into the station wagon to go see Mom, savor the moment. All too soon your beloved and spacious gas hog will be redesigned to accommodate President Obama’s new fuel-efficiency requirements, a program that the Financial Times calls "deeply flawed" and I call stupid. In New York we now have some fuel-efficient taxi cabs that are literally so small that my son, who is well over six feet tall, doesn’t fit. When four of us travel together, we sometimes have to take two taxis; how does that save gasoline?
I am all for clean air. I am also desperate to see the U.S. cut back on imported oil. I am not for the government micromanaging the auto industry and dictating the kinds of cars GM and Chrysler will make or legislating fuel efficiency. The government does not run anything well, and heaven knows our automakers have enough problems without spending fortunes gearing up to meet harsh new requirements. The more the government ladles on new poll-pleasing rules and standards, the longer the U.S. car business will require taxpayer funding. Guaranteed.
| All too soon your beloved and spacious gas hog will be redesigned to accommodate President Obama's new fuel-efficiency requirements ... |
If the Obama administration wants to encourage conservation, slap a tax on gasoline: that simple measure will bring about a market-driven response. A gas tax has been at the heart of Europeans’ love affair with small cars for decades. A higher gas tax will also encourage people to drive fewer miles — something not at all affected by fiddling with fuel standards. If gasoline costs more, as it did last year, Americans will use public transportation, or carpool, or adopt other measures to use less. And, they will require more fuel-efficient cars from Detroit.
Here’s the problem. The Obama administration doesn’t want to singe its popularity by calling for higher taxes on anybody but the wealthy. Asking all drivers to pay a gas tax would be controversial, though anyone with an analytical bone in their body will see that the fuel measures will inevitably cost everyone. Also, Team Obama knows full well that taxes are going to have to increase, and they want to push through as much of their agenda as possible before facing that dreadful day.
Why will taxes rise? As I pointed out last week, the U.S.’s financial picture is not a pretty one. I mentioned the horrific possibility of a credit downgrade for the U.S. Those watching the markets yesterday saw the United Kingdom come face to face with that possibility, as Standard & Poor’s put the debt of that great nation on "negative watch," meaning it could lose its triple-A rating within a couple of years if its prospects don’t improve. The reason? The net public debt of Great Britain is expected to reach 100% of income and remain at that level. As readers will recall, I mentioned several weeks ago that our debt is forecast by the nonpartisan Congressional Budget Office to climb steadily, reaching 82% of GDP by 2019. Fed Chair Ben Bernanke must have felt a chill down his spine.























111 Reader Comments (so far…) Sign In or Register to comment
This is such typical American attitude of wanting it all… plentiful and cheap gasoline and free cocktails in coach and winning pro teams.
They also want clean air, less global warming, and less dependence on foreign oil. Can’t have it all. Had the previous administration gone to bat for tighter fuel efficiency standards, we’d all be in better shape today, especially the auto industry.
(F. Harrop had a good column about this)
I am looking forward to the day that only us rich people can drive.
I think poor people should ride public transportation, bicycles or plastic chairs bolted to lawn-mower chassis.
I think raising federal gas taxes a five dollars per gallon should do it.
Because all those poor people won’t be on the road at the same time as me during my solo commute in my Chevy Suburban, I could build a new house farther away from the city and all those little solar cars and those pesky pedaling poor.
Oh yeah, Let’s raise cigarette taxes a few dollars a pack too.
Poor people who smoke while bicycling look very tacky.
Victoria: Liz Peek of the Republican kind?
Attack the opinion, not the person giving the opinion. Give us your take on why high gas taxes will benefit us all. I understand emissions and global warming and polluted air, but let’s not create a desperate situation where people are burning their furniture to keep warm, where people can’t afford to get to their jobs, where Americans become so frustrated, they are willing to pull their government down.
This another pot shot at Obama’s war being waged against the greed of Wall Street. Did he step on your toes Liz?…refuse bonuses to your buddies? I am always skeptical when rich folks start being magnanimous (no write off) and looking out for poor folks..what’s in it for the rich folks?…cause they sure aren’t interested til the stuff hits the fan…By the way some of Bernie’s victims could be examples of rich folks who probably NOW would feel differently about your 5 examples than say YOU!
To avoid wide fluctuations in taxes with the volatile crude commodity, it might be better to raise the price of fuel to a certain level, and then index it for inflation. But, the issue may be moot in the not too distant future. When electric plug-in and hybrid vehicles flood the market, taxes will have to be calculated another way in order to raise sufficient revenues to fund road and bridge maintenance. Presumably, these lighter, alternative vehicles will exact less damage to the roadways, but you’ll still have the diesel-run semi-trucks.
The only way raising CAFE standards years ago would’ve helped the auto industry would’ve been if the government stepped in to assist the Detroit automakers with the transition. That’s been the prime problem right there, just as it has been with our ravaged manufacturing base: we simply have not been playing on a level field with other countries.
Other nations not only have helped their automotive industries for years, but have been paying slave-labor wages to run both their auto and manufacturing industries. That’s why I applaud Obama’s plan to tax American companies that want to move operations overseas. The companies whine that’s unfair, they’ll be hit with both domestic and foreign taxes. But we can no longer afford to reward U.S. companies for moving jobs overseas.
I heard liberal Eleanor Clift say that the new American Dream is a small apartment near public transportation. The conservative on the program couldn’t stop laughing. What was Eleanor thinking?
These smaller cars, designed by the government overseers, (like car czar Rattner, who has no automotive background and is building his own "green" 15,000sq ft. mansion) are death traps, and projections already exists of how many thousands more will die because of them - the government doesn’t care.
http://online.wsj.com/article/SB124294901851445311.html
And for those who are critical thinkers - it isn’t too hard to figure out that even though the cars are small they will cost more - and therefore people will buy fewer of them - hanging on to older clunkers - creating EVEN MORE air pollution. Unintended consequences.
Just like other government boondoggles like low flush toilets, and the new poisionous mercury lightbulbs - the government will make a mess of the car business too. There are definite reasons that the government always fails in business.
1) It is a monoploy and is like a referee joining one of the teams and changing rules mid-game. Ask the car dealers who are having their businesses given to their competitors - it’s shocking, and terrifying.
2) Decision politicians makes are political - not economic or with the best interests of the consumer in mind.
And more bad news…..Democrats are making massive changes to drilling regulations and will be charging oil companies much more for drilling rights….and the consumer will be hurt AGAIN.
phyllis: Cars and trucks…
And what about the trucks? I understand that electricity doesn’t work for them because of all the strength and power they need. So the trucks with the black smoke coming out the stack get a pass. Not to mention when the cost of fuel goes up they add it to their cost of doing business and anything they carry goes up in price. So the consumer gets taxed over and over again — people on the lowest economic rung at the same rate as those at the top.
Cars have steadily been getting better in emissions and mileage — eight cylinders are a luxury I can’t afford. Standards have to get stricter, but not overnight.