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Krauthammer: Raise Gas Taxes, Suppress Demand

Charles Krauthammer

Charles Krauthammer argues in the Washington Post that the U.S. government should “establish a new floor for gasoline” by “fully taxing any drop in price below a certain benchmark.”

He claims that “the price point is $4.”

At $3 a gallon, Americans just grin and bear it, suck it up and, while complaining profusely, keep driving like crazy. At $4, it is a world transformed. Americans become rational creatures. Mass transit ridership is at a 50-year high. Driving is down 4 percent. (Any U.S. decline is something close to a miracle.) Hybrids and compacts are flying off the lots. SUV sales are in free fall. …

At $4 a gallon, the fleet composition is changing spontaneously and overnight, not over the 13 years mandated by Congress. (Even Stalin had the modesty to restrict himself to five-year plans.) Just Tuesday, GM announced that it would shutter four SUV and truck plants, add a third shift to its compact and midsize sedan plants in Ohio and Michigan, and green-light for 2010 the Chevy Volt, an electric hybrid.

Whether or not the “price point” is actually $4, it’s true the price of gas is causing individuals and organizations to change their attitudes and behaviors.

But then Krauthammer makes the logical leap to “establishing a new floor for gasoline” at $4 per gallon.

You want more fuel-efficient cars? Don’t regulate. Don’t mandate. Don’t scold. Don’t appeal to the better angels of our nature. Do one thing: Hike the cost of gas until you find the price point.

Announce a schedule of gas tax hikes of 50 cents every six months for the next two years. And put a tax floor under $4 gasoline, so that as high gas prices transform the U.S. auto fleet, change driving habits and thus hugely reduce U.S. demand — and bring down world crude oil prices

In other words, any time the price of gasoline (as determined by the free market) falls below $4 per gallon, the government steps in and taxes you the difference.

Krauthammer clearly states his purpose in all of this, which is to “suppress demand” and “keep the savings (from any subsequent world price drop) at home in the U.S. Treasury rather than going abroad.” He wants to establish a price control to force Americans out of their cars, which will result in less money going into the pockets of oil-rich foreign powers.

Question to Krauthammer: How is any of this the government’s business?

The free market is already handling the situation. Americans are driving less and using mass transit more. Companies are moving away from SUVs and trucks and towards hybrids and compacts. If gas prices keep going up, the free market (the aggregate of individual choices) will respond in kind. But if gas falls back to $3 per gallon, the government has no business stepping in with a 33% tax.

Plus, the American people have not asked the bureaucrats in Washington to mandate pain at the pump. Government works for us, the citizens. Not the other way around.