Why a gas tax is good for you
You've written about the risk of recession due to energy prices. How do you answer those who say our economy is safer today than in the 1970s because we're more efficient and less oil intensive?
We are more efficient. But it doesn't really get it right. The Japanese economy was much more efficient in 1973 than the U.S. economy, and yet the impact on the Japanese economy was much larger than the impact on the U.S. economy. Intensity doesn't tell you about impact.
But the quarter after the hurricanes, we still had economic growth. Even that price spike did not appear to dampen the economy.
The [Federal Reserve] did not raise interest rates. They accommodated, and that's important. Because they believe inflation is under control, they've done nothing to rein in the rise of prices. Because we've had deregulation and globalization—it's very hard now for companies to raise prices because of competitors—the central bankers didn't have to do anything. They could relax. Now they watch it closely. But they haven't done anything.
I have some concerns. When do we finally see the end of this period of seeing the benefits of globalization and deregulation? We keep having these risks. One was that Delta Airlines would close. Well, if Delta Airlines closes, then air fares are going to double. And then you begin to start an inflationary cycle. [Or] if the Chinese suddenly raise prices because of the high cost of shipping, you could have a problem. At that point, oil does matter.
President Bush is going to stop adding crude oil to the Strategic Petroleum Reserve—what impact will that have?
Since we don't have any refining capacity now, none. The tanks are full. This is like offering somebody who just had a seven-course fancy meal a prime-rib dinner. It doesn't do any good.
How about the waivers of environmental regulations he proposes?
We could knock a dollar a gallon off the retail price of gasoline if we did a couple of things on environmental rules. My environmental friends look at me and say, "Phil, why are you saying this?"
I propose a trade-off. Bush has called for construction of new refineries. It takes years to build a refinery. It takes one year to build an ethanol plant. Let's move toward ethanol more rapidly. We'll suffer the cost of higher pollution this year, and then next year, we're going to insist that people use more ethanol. . . . Insist all gasoline has to have 10 percent ethanol.
You frequently advocate a gasoline tax, while acknowledging it's a political nonstarter. What good would it do?
First—global warming. We're burning too much. I think everybody but George Bush and Dick Cheney understands the problem. You have to find a way to force people to use less. Second, were we to adopt a gasoline tax of say $2 or $3 a gallon, offset by a reduction in Social Security [payroll taxes] and some other things to minimize the effects [on working Americans], our consumption would be significantly lower. World oil prices would be significantly lower. And the income that's flowing to [Iranian President] Mahmoud Ahmadinejad, [Russian President] Vladimir Putin, [Venezuelan President] Hugo Chavez, and a lot of the other people we don't like would be drastically reduced. Right now, we're paying twice—first for the oil that flows into the hands of our enemies, and then we pay the cost of fighting a war in Iraq. It's important for the nation as a whole to do something like this.
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