Republicans and Gas Taxes

Daniel Gross writes about the "emerging" consensus of economists in favor of higher gas taxes. I thought the graphic above was quite telling, about the U.S. in relation to other western countries.

The word "emerging" is in quotes, referencing a theme of the article, which is that it is much easier for people who have worked inside a Presidential administration to advocate for politically unpopular ideas when they are on the outside. That's true but only to a point. It's not that Greg Mankiw ever said anything other than what he now says about the gas tax while on the inside. It's that the President sets the framework for all policy outcomes--not the CEA--even on economic issues. CEA, like every other part of the administration, works to generate the best outcomes within that framework. And if the President is not interested in a gas tax, then it becomes a very short conversation.

Gross quotes me, from a telephonoe conversation last week, as follows:

What gives? Clearly, there is an emerging consensus among economists — right and left — that the nation would be better off, geopolitically and economically, if Americans used less gasoline. “Given the role that imported oil plays today, you can’t continue to be a responsible economist and not talk about ways to reduce that dependence,” Mr. Samwick said. “If you are concerned about the external consequences of imported oil, then you should raise the cost of it.” And free-market economists view a higher gas tax as a more elegant solution than, for example, raising auto efficiency standards.

So it's not that the consensus is emerging because it is new--it is emerging because there is more of an audience for it.

Another issue that is relevant here is that I would propose that the additional gas tax be done in a revenue-neutral way: returning the proceeds in aggregate in the form of progressive cuts to the income tax. Then fix the long-term deficit by raising the whole schedule (again, progressively) of income tax rates. One problem that the President would have if he advocated higher gas taxes without fixing the long-term deficit problem is that he would be accused of paying for his income tax cuts with higher gas taxes. Not a place he wants to be.