Gas Prices – and what ever happened to the gas guzzler tax?

Americans have been complaining about gas prices lately; recent polls have shown that high gas prices are their number one economic concern. Of course, high gas prices are driven by high oil prices, which are in turn driven by supply, demand, and a healthy premium to account for terrorism, hurricanes, and other delights. Demand has grown faster than supply lately, shrinking surplus capacity to a minimum. Many point outside our shores to emerging economies as the source of this growth. But no one likes to look inward, right?

Since the late 80’s, fuel economy in American consumer vehicles has decreased, while vehicle weight and performance have increased (the EIA has the details). Since American vehicles consume 20% of the world’s oil, our driving habits have a huge effect on oil prices. Since everyone seemed to want an SUV until recently, the increased demand eventually impacted gas prices. Another way to look at this: if average fuel economy got back to what we achieved in 1987, we would consume 2 million less barrels of oil per day, driving oil prices down significantly, and cutting our import requirements by 20%.

The federal government instituted a tax on inefficient vehicles – the “gas guzzler” tax – back in 1978. So why hasn’t it had any effect on the demand for inefficient vehicles? The gas guzzler tax doesn’t apply to trucks of any kind, so it doesn’t apply to SUVs and trucks even though they account for 54% of all US vehicle sales today! If you buy a Lamborghini, expect to pay up to $8000 in gas guzzler taxes; if you buy an 8000 pound Excursion, laugh at the other guy on your way out!

Extending the gas guzzler tax to apply equally across all vehicles would seem a logical start to encouraging conservation and decreasing oil dependency. Then again, I’m not aware of any lobbyists who get a paycheck for that, while I expect the auto industry has its forces lining up against this already…

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Fixing Social Security

Two words: Social Security. Together they’ve come to represent a massive defined-benefit pension system in which all working Americans must participate. The system worked well for decades, when life expectancies were lower and a smaller percentage of the population was in retirement. Now, even though a full 12.4% of most workers’ gross salary is devoted to Social Security, the system may run bankrupt before young Americans today retire. Some Republicans are proposing to privatize the system, while Democrats are fiercely fighting change. Why not start with a simpler question: why does Social Security even exist?

Social Security was originally intended as a way to guarantee that the elderly would not fall into poverty after leaving the work force. It has now become the primary, and in many cases, only savings program in which most Americans participate. But why force Americans to save? This is perhaps the most socialist part of the American economy, wherein every working American must set aside one-eighth of their pay for retirement. Rather than forcing Americans to save, why not return Social Security to its original purpose of providing benefits to the impoverished elderly?

By reducing the scope of Social Security benefits so that they cover only the elderly poor, the program will again provide a safety net for the elderly, and not a forced savings program. The resulting program shrinkage can be used to both cut taxes and make the program solvent over the long term.

In practice, this kind of change could be implemented through significant means-testing of Social Security benefits. The change could phased in so that it affects only young workers, while preserving benefits for those who have paid higher rates for decades. By modifying Social Security from a savings program into a safety net, we can both cut taxes and provide for the less fortunate among the elderly. Who doesn’t want that?

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Post 9/11 – Are we any safer?

Yes, we are safer in that our sense of vigilance in the US has been heightened, both within the government and within the population as a whole. But in terms of broader American policy since 9/11, has it made us any safer?

We’ve successfully conquered unfriendly regimes in both Afghanistan and Iraq. Numerous unfriendly regimes remain, however, and the population of almost every Muslim nation (and many non-Muslim nations) became vehemently anti-American after the Iraq war. If the US were to conquer Iran and Syria, effectively controlling the entire Middle East, we might gain security against these enemy states. Ah, but enemy states did not attack on 9/11 – stateless terrorists attacked on 9/11. These sorts of terrorists would have thousands of hiding places remaining, and we can never conquer and hold all of them.

Better intelligence and policework have led to the capture of more terrorists than our invasions; it’s time to redirect investment in that direction. At the end of the day, the US will have to come to terms with the world’s 1.5 billion Muslims. We’re spending 10 billion per month and losing a couple of soldiers per day to control one small nation of 25 million – this strategy cannot work on a wider scale. It’s time to invest in intelligence gathering, domestic security, and arms control. These are the realistic anti-terror strategies for the long run.

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On Illegal Immigration

Well, what do you want? Do you want cheap labor, or do you want sound borders? Illegal immigration has been an economic boon to the US, providing between 10 and 20 million workers that have moderated the costs of construction, housekeeping, daycare, food service, and agriculture even while oil and other commodity prices are pushing inflation up.

Illegal immigrants have increased the US workforce by 5-10% in recent years, and have been a key factor in recent economic growth. The price: some displacement of poor American workers, growing Latin-American influence on US culture, and insecure borders. Economists are having a hard time measuring American job loss to illegals, chiefly since growth has provided other opportunities (they also find it difficult to measure any net loss in tax collections or state benefits). And while the Mexican border may be insecure, the Canadian border is the only border previously used by anti-American terrorists.

The only price paid so far, then, is the increasing Latinization of American culture.

Politicians on the social right are pandering to some Americans’ xenophobic fear of cultural dilution with the onslaught of immigrants. If you view cultural diversity as a threat, then for you the fear and costs are real. While the border should be secure both on principle and so that the US can create a rational immigration policy, the benefits of illegal immigration have so far outweighed the costs. And guess what: that’s exactly why it’s been allowed to go on for so long.

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On True Costs – and airline security

First, welcome to my blog. I hope to take my incessant ramblings on politics, economics, and societal issues and crystallize some of those thoughts into coherent entries here; if my entries aren’t well written, I hope that they are at least thought provoking!

So, what is the concept of “True Cost”? If we had the power to know the true cost and benefit of each action we intend to take, surely decision-making would become a trivial process. In reality, people cannot predict the future, and they often disagree agree on the cost or benefit of a particular outcome. Still, this form of analysis has its place in policy-making, as it enables us to rationally approach topics that too often are debated in purely emotional terms.

Take, for example, the current security measures implemented in the airline industry. While fears of terrorism are well-founded, given events of recent history, at what point will the cost of extra security, delays, and trashed cosmetics outweigh the perceived benefit of increased security? No real terrorist has ever been caught by airport screeners (which is not to say it will never happen); but is this really the most effective way to effect airline safety?

More broadly, more Americans died from slips and falls (according to the CDC) during 2001 than from terrorism. Should we then live in fear of ladders and slick floors? Thinking individuals can work to balance security and risk in airline security – but they can do so only by weighing the cost and benefits, and not by reacting irrationally in the face of a new threat.

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