Charles Krauthammer does not drive himself, which is understandable due to his physical condition. He also lives inside the cloistered beltway, for which he can also be forgiven, given that he works for Fox News in the Washington. Moreover, he supported Walter Mondale against Ronald Reagan – and while we may forgive that – I hesitate to cede the notion that this man is fully brilliant. He is a recovering liberal. Many of us never had that liberal phase, and yet we are called the rubes who live in fly over territory.
And the truly brilliant David Horowitz, for example, is also a recovering liberal. His recovery is complete – far more so than Dr. Krauthammer’s – who’s disease is not in remission it would appear.
Living in his world, and given his background in the corrupt leftist world of academe, Dr. K can also be forgiven for not understanding anything about energy prices and a rancher’s reality in Montana, a landscape contractor’s reality in North Carolina, or a soccer mom’s in Ohio. Thus what is unforgivable – in the political policy sense – is his insistence on commenting on energy and energy taxes when it’s rather clear he possesses little practical understanding of the subject.
In his latest attempt to push a gas tax, published in many publications, the good doctor is simply wrong – on almost every count. Let’s debate the main points:
KRAUTHAMMER: For 32 years I’ve been advocating a major tax on petroleum. I’ve got as much chance this time around as did Don Quixote with windmills.
WRIGHT: This is a good thing, because 3o years ago you supported Walter Mondale over Ronald Reagan, and we know how that worked out.
KRAUTHAMMER: The only time you can even think of proposing a gas tax increase is when oil prices are at rock bottom. When I last suggested the idea six years ago, oil was selling at $40 a barrel. It eventually rose back to $110. It’s now about $48.
WRIGHT: You are right Doctor K that the prices has spiked up and down dramatically in just the last six years, more than any other consumer item. But by your own logic, such a tax must be rescinded the very moment it spikes back up. Do you seriously expect us to believe that this will happen? Has it ever?
KRAUTHAMMER: The hike should not be 10 cents but $1. And the proceeds should not be spent by, or even entrusted to, the government. They should be immediately and entirely returned to the consumer by means of a cut in the Social Security tax.
WRIGHT: Okay, let me get this straight. With a straight face you are proposing revenue to Washington will actually be used for the purpose upon which it was sold in the first place? You mean like the ‘social security lock box?’ Sir, history insults your premise once again.
KRAUTHAMMER: The average American buys about 12 gallons of gas a week.
WRIGHT: STOP right there. The “average American?” Who is that? This average is just a mathematical fiction somewhere between the gas bought by those living the Seinfeld lifestyle in the big cities and the rancher in Montana, the fleet operator in Texas or the traveling soccer mom in Ohio. I submit this is where those in academe make their mistakes. They deal in fictions while proposing policies that impact realities. It almost never works. This won’t. Now please, proceed.
KRAUTHAMMER: Washington would be soaking him for $12 in extra taxes. Washington should, therefore, simultaneously reduce everyone’s Federal Insurance Contributions Act tax by $12 a week. Thus, the average driver is left harmless. He receives a $12-per-week FICA bonus that he can spend on gasoline if he wants – or anything else. If he chooses to drive less, it puts money in his pocket. The unemployed would have the $12 added to their unemployment insurance; the elderly, added to their Social Security check.
WRIGHT: Well first we destroyed the notion of the ‘average driver’ earlier – but this “chooses not to drive” comment is another contrivance of your academic proclivities. Does the rancher choose to fuel his equipment and trucks? How about the delivery fleet owner? I guess the soccer mom does choose to use more gas, but probably because she has obligations to her children and others. I know that this is a pittance for those of you who scoot around Washington and Manhattan in limousines – fueled by some poor schlubs and not yourself – but this dollar increase would cripple many businesses and wreck many household budgets.
Moreover, when energy spiked in the period between 2005 and 2007, people in the real world stopped paying their mortgages, and thus the first domino in the housing mortgage derivative bubble was toppled…and we know how that all worked out. Energy prices matter!
KRAUTHAMMER: The point of the $1 gas tax increase is not to feed the maw of a government raking in $3 trillion a year. The point is exclusively to alter incentives – to reduce the disincentive for work (the Social Security tax) and to increase the disincentive to consume gasoline.
WRIGHT: I’m sure this model works in the faculty lounge. Jonathan Gruber’s models worked in the faculty lounge at MIT also. It failed reality however. When people stop consuming gasoline, it means they stop traveling, stop doing business, stop staying in hotels and eating in restaurants. In other words, it cripples the entire economy. Please sir, connect some dots.
KRAUTHAMMER: A $1 gas tax increase would constrain oil consumption in two ways. In the short run, by curbing driving. In the long run, by altering car-buying habits. A high gas tax encourages demand for more fuel-efficient vehicles. Constrained U.S. consumption – combined with already huge increases in U.S. production – would continue to apply enormous downward pressure on oil prices.
WRIGHT: This is the kind of analysis one would expect from Steven Chu, Obama’s first Energy Secretary – who didn’t even own or drive a car! Everything you mentioned above as a positive result actually destroys jobs and perverts the auto market. Such bureaucratic meddling is, next to the union contracts, the main reason for having to bail these companies out in the first place.
KRAUTHAMMER: A tax is the best way to improve fuel efficiency. Today we do it through rigid regulations, the so-called Corporate Average Fuel Economy standards imposed on carmakers. They are forced to manufacture acres of unsellable cars in order to meet an arbitrary, bureaucratic “fleet” gas-consumption average.
WRIGHT: The current standards are arbitrary and destructive – but sir, a tax – some arbitrary figure that some academic or bureaucrat comes up with – is not the best way to improve anything. It is totalitarian on its face and history indicates it almost never accomplishes what these precious models insist it will. And for the record, there is nothing as rigid and regulatory as a tax increase! Your theory fails your own test on that point.
KRAUTHAMMER: And finally, lower consumption reduces pollution and greenhouse gases. The reduction of traditional pollutants, though relatively minor, is an undeniable gain. And even for global warming skeptics, there’s no reason not to welcome a benign measure that induces prudential reductions in carbon dioxide emissions.
WRIGHT: A benign measure? Tell that to a long haul trucker. A commercial fisherman. It is only benign in the Manhattan media studio or the faculty lounge. Oh, are you enjoying this last wave of global warming? I’m not.
KRAUTHAMMER: The unexpected and unpredicted collapse of oil prices gives us a unique opportunity to maintain our good luck through a simple, revenue-neutral measure to help prevent the perennial price spikes that follow the fool’s paradise of ultracheap oil.
WRIGHT: The unpredictable nature of the oil price is really an argument against your idea and not in favor of it. It is vain and naive to assume that your one dollar figure – or any other figure – is some magic bullet of stabilization for the markets. In the meantime, what is predictable is the catastrophic devastation on the economies of real people living outside the Washington to Manhattan political/media/crony corridor that would result. Thanks, but no thanks, sir.