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Let's speak about energy (and a gas tax) now

Important preliminary note: I am not speaking about introducing a gas tax on its own, nor about pushing it right now. It should only be a part of a comprehensive energy plan, whether Energize America or any other, and after the topic of energy has been raised in a major way. But I do think it does need to be part of such a plan and, in the current environment, I know that it's likely to be one of the most controversial aspects of said plan. So here are a few arguments as to why it makes sense as policy (see below), and why it can make sense as good politics:

  • It reintroduces taxes as a good thing
  • It helps capture the national security theme
  • It shows that the Dems have a spine by backing an apparently unpopular policy
  • It's part of preempting the national energy debate towards responsible policies

But that will work only if the concept is owned by the Party and it is willing to stand by it firmly and respond to any and all attacks. Of course attacks will come. Fighting back, going on the offense is what's needed, and a good energy policy (including the gas tax) is exactly what's needed.

First, a reminder of why it's good policy: the International Energy Agency has published its new "World Energy Outlook", its yearly analysis of the energy markets, and they are becoming shrill.

[From an article in the Financial Times - UK:]

Reliance on oil 'sets us on path to crisis'

The world is on a course that will lead it "from crisis to crisis" unless governments act immediately to save energy and invest in nuclear and biofuels, the International Energy Agency warned yesterday.

In an apocalyptic forecast, Claude Mandil, the agency's executive director, said that our current path "may mean skyrocketing prices or more frequent blackouts; can mean more supply disruptions, more meteorological catastrophes - or all these at the same time".

The IEA said the oilfields on which Europe and the US had come to depend to reduce their reliance on the Organisation of the Petroleum Exporting Countries would peak in the next five to seven years.

(...) The three countries on which the world will depend most for its future oil supply, Saudi Arabia, Iran and Iraq, are also among its most unstable.

Although the EIA focuses on alternative energy sources (nuclear and biofuels), there is an unescapable reality that we are going to need to reduce our consumption of oil pretty soon, and that this is most likely to happen through skyrocketing prices if we do not preempt the change.

A number of people have, not unreasonably, asked why we should increase gas prices at a time when they are already increasing and as it is a definitely regressive form of taxation. Some have also noted that gas consumption is not very sensitive to prices (as demonstrated in the past 3 years), and that gas taxes would need to be strikingly high to have any impact on demand.

The thing is, a gas tax needs to be a long haul effort, with small but repeated increases. Ideally, the tax should be increased in times of temporarily dropping oil prices, so as to be as painless as possible, and to avoid what we see now: lower gas prices led to the disappearance of the topic of energy policy in the past few months, as the Cassandras have been branded as wrong, and SUV sales increasing again.

Done smartly, over several years, a gas tax will simply switch revenues from oil producers to the US Treasury, as the energy plan (including the gas tax) - lowers the demand for oil (and thus leads to lower oil prices), but does not translate into subsequent price decreases that would stop the consumption trend.

[Translation from French] Tax proceeds on oil for rich consuming countries (the blue, bottom bars) and for oil producers (the dark, top bars) are shown in billions of 2000 dollars (i.e. corrected for inflation).

Until 2004, rich countries' governments made more money from oil than those of oil-producing countries. Taxes were increased steadily throughout the 80s, and especially when oil prices dropped, in 85, and essentially constant oil revenues went increasingly to the pocket of the consuming countries. But we dropped the ball in the mid-90s, and stopped our regular gas-tax increases (that's true in Europe as much as in the USA); gas prices stagnated (which means that they dropped in real terms), and not so coincidentally, SUVs and the general trend towards larger cars took off at that time. And now, with the recent oil price increases, not only do we spend much more money on oil, but a much bigger proportion goes to unstable and unfriendly countries in the Middle East and elsewhere - which makes our weapons and luxury goods manufacturers and our private bankers happy, but not many other people.

Over the long term, a gas tax allows to stabilise demand, and to capture revenues for us - revenue that can be used for two things:

  • Pay for the various parts of the energy plan that require funding, and/or
  • Pay for transfers to poor and middle-class households to help them cope with the increased gas prices

That can be done by tax breaks (the gas tax would thus be a tax transfer, not a tax hike) or by specifically targetted financial assistance mechanisms, to fulfill two goals:

  • Not penalize financially the poor, even if they drive
  • Incentivize all drivers, including the poorest ones, to use less gas

If they get a compensation equal to the cost for them, with their current vehicle and driving habit, of the gas tax increase, it will be neutral for them even if they continue to drive the same car. If they change their car or their driving habits, and use less oil, they will then actually directly benefit financially from the tax transfer - and society will benefit from their lower consumption.

By taxing a behavior we wish to discourage (burning oil) instead of taxing people's work or general consumption, you get a net collective good.

Again, I'll stress that a gas tax is good policy within a wider plan that touches upon more aspects of energy use and production, and which should include other changes in tax policy to cut subsidies from oil producers, but it should be a part of any plan to give the signal that gas consumption is something that should be reduced.

But I'd like to focus on some of the political aspects of the gas tax.

1) It reintroduces responsible tax policy

Taxes have been successfully demonized by Republicans, and too many Democrats still cower in fear at the idea of being called "tax-and-spenders". But tax-and-spend is the responsible thing to do. If you spend money, you have to get it from somewhere, and when you're the government, that's from taxes. So if you want any public spending, be it schools, courts or a strong military, you have to have taxes to pay for it. Republicans have proven beyond any doubt that they are unable to cut spending, and quite to the contrary, they have spent like drunken sailors. The trick is, they pretend that they have lowered taxes at the same time, a conman's trick made possible via debt, an instrument that allows them to transfer the burden of taxes to pay for that spending to your children, not to eliminate it.

Democrats, by taxing and spending, provide responsible government and, as they know that they have to justify taxes to citizens, are moderate in their spending habits. Republicans, who do not have to justify their spending habits to your kids, do not show any moderation in their spending.

So, if you want someone that favors moderate spending and fiscal responsibility, choose Democrats, who do not shrink from the common duty of raising the necessary taxes - but not more than needed, and not by shamefully transferring the bill to today's children. Democrats have the track record of spending moderation, because they are responsible and accept that such spending has to be paid for by your tax dollars.

No less than a fervent lean government organisation like Cato is essentially arguing the same.

Time to say it loudly, and make everybody, most Democrats included, stop thinking that tax-and-spend is an insult. It is the responsible thing to do.

2) It helps capture the national security theme

This boils down to, essentially to the argument that money paid for gas is better in the hands of the federal government of the USA than in those of the theocracy in Saudi Arabia.

The concepts of "energy independence" or "energy security" are now widely used by politicians. Hell, even George Bush talked about an "addiction to oil". The awareness that there is a need for a new energy policy is there.

What's in that policy is still up for grabs. If the Republicans take over this debate, the end result will be weaker environmental standards and more federal land and coastal areas open for drilling. Thus the debate must be preempted by Democrats. New concepts need to be brought up to control the debate towards moving off hydrocarbons (and towards new technologies pioneered by Americans), towards better cars (American made and fuel efficient), and towards more ease to choose alternative mode of transportation (safe, reliable and practical public transport) and power generation (carbon free and made in America).

The point that burning fuel and burning coal are bad things - and that there are alternatives - must be made relentlessly. Discouraging these behaviors is a question of national security - and they can be linked to the War in Iraq and to the drowning of New Orleans. Taxing them (again, within a larger plan) is the simplest way to make explicit that policy really intends to discourage undesired behavior and raise funding for the job-creating, life-saving, safety-enhancing alternatives.

Limiting fuel consumption is a matter of national security. Taxing such consumption - in increasing amounts over time - is a simple signal that this national security issue is taken seriously and that everyone is involved.

It's the patriotic thing to do.

3) It shows that the Dems have a spine by backing an apparently unpopular policy

Don't you think I know that Republicans are going to hammer us on this tax? Don't you think I know how unpopular taxes have become? Well, we still support this one because it's the right thing to do. It's necessary, it's right, it's done fairly, and it's good for America.

Republicans claim they are against taxes, but they increase spending, send the debt sky high, and give the money to they rich friends or blow it on wars based on lies. They are not cutting taxes, they are increasing them massively - for your children. So stop listening to their bark.

Own the tax. Say it's for the good of America. Expalin why it is done in a fair way (as a tax transfer). Stand firm. Claim your values. And play up the element of surprise (someone who freely admits to wanting to increase a tax? Wow. Newsworthy. Interesting. Unusual. What's the deal?)

Get attention. And earn respect.

Of course this will not be enough to stop the deluge of criticism and accusations against the evil tax. Then is the time to stand firm and repeat the arguments on and on, firmly. Fiscal responsibility. National security. Fairness. Supporting the jobs and technologies of tomorrow's America.

One of the things that have made DailyKos the success it is has been the insistence that Democrats should fight, should grow a spine, and should stand firm for their values instead of triangulating the Republican talking points.

This week has shown the success of this approach.

The first step was to fight back against the Republican slime machine. The second step now is to take the initiative.

Push the agenda. Force them to react. Dismiss their attacks as shrill and a refusal to work on national security and responsibility. Defend your policies as necessary and good for America, and state that the Republicans have nothing to offer but ignoring the problem and raping the environment. Remind everybody of the mess they've done until now of everything, and how little credibility they have. Repeat it calmly and do it many, many times. Do not deviate from your message.

Now that the Democrats have the majority in Congress, they can set the agenda to some extent. They can certainly capture the news cycles more easily. Time to do it with guts on responsibility, national security and future jobs all wrapped in one simple theme.

4) It's part of preempting the national energy debate towards responsible policies

As I've already alluded to above, the worst thing would be for Republicans to grab the topic of energy, wrap it in the flag and the theme of national security before the Democrats can impose their ideas, and then push their usual fare: undo environmental restrictions, subsidize energy companies (and now, big agribusiness), drill everywhere possible.

Once the idea that protecting the environment is associated with "not protecting the nation", only the worst can come out of it. And you do not need me to tell you how Republicans work these days. This WILL happen. You can see it starting here and there already. It hasn't caught up, but it will if there is no compelling alternative. Al Gore is doing a great job to point out that the environment can no longer be sacrificed like this - time to drive that point home.

The issue of energy will shape politics in the next two years. It's high time to jumpstart the debate.

Gas price rises are inevitable, and with Democrats now in the majority in Congress, the Republican slime machine will attempt to blame them for these rises if the Democrats don't have a coherent and audible discourse. Energy policy needs to be brought into the public debate in a proactive way before the next oil price spike hits, as it will. Create the frames that will allow to act when the crisis of the day makes it possible. Show the future, with new technologies, new jobs, new modes of transportation, and show that the country can pay for it in a responsible way, i.e. which discourages the behaviors at the heart of the problem.

Flag that oil is incredibly valuable to Americans, and that it needs to be treasured, and that this requires an effort by all.

Of course if one calls for that effort without laying the ground for it, then one will be punished for it. The Carter syndrome will hit, and Republicans will go on to say "see, all they can think of is to increase taxes or protect the bugs. They may have promised you otherwise, but they are the same irresponsible tax-and-spend treehugging Democrats". But that does not mean that a gas tax should be avoided at all costs. It only means that you need to talk about energy right now.

Editorial Notes: We've linked to many articles arguing for a carbon or gas tax. Jerome here argues for Democrats to adopt the issue, but there's no reason why Republicans or other conservative parties could not adopt it. Once upon a time, Republicans regarded themselves as the party of prudence, foresight and self-discipline. Wouldn't an energy tax fit this description? Perhaps the Republicans might want to consider such green policies, since the one high-profile Republican who adopted a greenish energy policy handily won re-election while most of his fellows went down to defeat (Schwarzenegger victory is Republicans' biggest success - UK Independent). -BA

What do you think? Leave a comment below.

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