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Thread: Friedman: Oil Prices, Gas Tax, Energy Policy

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    Friedman: Oil Prices, Gas Tax, Energy Policy

    [URL="http://www.nytimes.com/2007/11/14/opinion/14friedman.html?ex=1352696400&en=17e1da2a6639135c&ei=5088&partner=rssnyt&emc=rss"]http://www.nytimes.com/2007/11/14/opinion/14friedman.html?ex=1352696400&en=17e1da2a6639135c&ei=5088&partner=rssnyt&emc=rss[/URL]

    [B]November 14, 2007
    Op-Ed Columnist
    Coulda, Woulda, Shoulda [/B]

    By THOMAS L. FRIEDMAN
    Two dates — two numbers. Read them and weep for what could have, and should have, been. On Sept. 11, 2001, the OPEC basket oil price was $25.50 a barrel. On Nov. 13, 2007, the OPEC basket price was around $90 a barrel.

    In the wake of 9/11, some of us pleaded for a “patriot tax” on gasoline of $1 or more a gallon to diminish the transfers of wealth we were making to the very countries who were indirectly financing the ideologies of intolerance that were killing Americans and in order to spur innovation in energy efficiency by U.S. manufacturers.

    But no, George Bush and Dick Cheney had a better idea. And the Democrats went along for the ride. They were all going to let the market work and not let our government shape that market — like OPEC does.

    You’d think that one person, just one, running for Congress or the Senate would take a flier and say: “Oh, what the heck. I’m going to lose anyway. Why not tell the truth? I’ll support a gasoline tax.”

    Not one. Everyone just runs away from the “T-word” and watches our wealth run away to Russia, Venezuela and Iran.

    [U]I can’t believe that someone could not win the following debate:[/U]

    [B]REPUBLICAN CANDIDATE: “My Democratic opponent, true to form, wants to raise your taxes. Yes, now he wants to raise your taxes at the gasoline pump by $1 a gallon. Another tax-and-spend liberal who wants to get into your pocket.”

    DEMOCRATIC CANDIDATE: “Yes, my opponent is right. I do favor a gasoline tax phased in over 12 months. But let’s get one thing straight: My opponent and I are both for a tax. I just prefer that my taxes go to the U.S. Treasury, and he’s ready to see his go to the Russian, Venezuelan, Saudi and Iranian treasuries. His tax finances people who hate us. Mine would offset some of our payroll taxes, pay down our deficit, strengthen our dollar, stimulate energy efficiency and shore up Social Security. It’s called win-win-win-win-win for America. My opponent’s strategy is sit back, let the market work and watch America lose-lose-lose-lose-lose.” If you can’t win that debate, you don’t belong in politics.[/B]

    “Think about it,” says Phil Verleger, an energy economist. “We could have replaced the current payroll tax with a gasoline tax. Middle-class consumers would have seen increased take-home pay of between six and nine percent, even though they would have had to pay more at the pump. A stronger foundation for future economic growth would have been laid by keeping more oil revenue home, and we might not now be facing a recession.”

    As a higher gas tax discouraged oil consumption, [B]the Harvard University economist and former Bush adviser N. Gregory Mankiw[/B] has argued: “the price of oil would fall in world markets. As a result, the price of gas to [U.S.] consumers would rise by less than the increase in the tax. Some of the tax would in effect be paid by Saudi Arabia and Venezuela.”

    But U.S. consumers would have known that, with a higher gasoline tax locked in for good, pump prices would never be going back to the old days, adds Mr. Verleger, so they would have a much stronger incentive to switch to more fuel-efficient vehicles and Detroit would have had to make more hybrids to survive. This would have put Detroit five years ahead of where it is now. “It’s called the America wins program,” said Mr. Verleger, “instead of the petro-states win program.”

    We simply cannot go on being as dumb as we wanna be. [B]If you hate the war in Iraq[/B], then you want a gasoline tax so you can argue that we can pull out of there without remaining dependent on an even more unstable region. [B]If you want to see us negotiate with Iran, not bomb it,[/B] you want a gasoline tax that will give us some real leverage by helping to reduce the income of the ayatollahs.

    [B]If you’re a conservative [/B]and you believed that the Iraq war was necessary to drive reform in the Middle East, but the war has failed to do that and we need “Plan B” for the same objective, you want a gasoline tax that will reduce the flow of wealth to petrolist leaders who will never change if all they have to do is drill well holes rather than educate and empower their people.

    [B]If you want to see America thrive[/B] by becoming the most energy productive economy in the world — a title that now belongs to Japan, which doesn’t have a drop of oil in its soil — you want a gasoline tax, which will only spur U.S. innovation in energy efficiency.

    President Bush squandered a historic opportunity to put America on a radically different energy course after 9/11. But considering how few Democrats or Republicans are ready to tell the people the truth on this issue, maybe we have the president we deserve. I refuse to believe that, but I’m starting to doubt myself.

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    [QUOTE=bigalbarracuda;2209740]“Think about it,” says Phil Verleger, an energy economist. “We could have replaced the current payroll tax with a gasoline tax. Middle-class consumers would have seen increased take-home pay of between six and nine percent, even though they would have had to pay more at the pump. [/QUOTE]

    With all due respect, if you think the Federal Govt. is going to Levy a $1.00/Gallon Additional Gasoline Tax, and use it to remove or "pay off" another existing Tax, you (or in this case Mr. Friedman) have no idea how modern Govt. works when it comes to taxes.

    There is no chance in hell, in other words.

    Oh, I certainly believe the Govt. might instal a big-ol' new Tax on Gasoline. Thats sounds right up their ally actually.

    I just doubt they'd do anything at all to reduce other taxes, as this article seems to claim. In that case, the supposed Republican Candidate in the example would be 100% correct, as it would be yet another Taxation Revenue stream, with no reduction in burden to the average tax payer, which in the case of gasoline, would hit the middle-class by far the hardest. Matter of fact, my rather quick spreadsheet estimate for me personally came up to an additional $1,170 above and beyond what I already pay for Gasoline each year. No thanks.

    The article is a great example of how theory sounds great, but is just crushed to a pulp by the reality....of reality.

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    Politics and policy much like market prices are not static. Innovation based on tax policy can lead to billions of wasted dollars when that policy changes.

    I really don't understand the Democrats handwringing because of high oil prices. They want to stop us from using fossil fuels the market might actually accomplish that if they don't screw with it. Look at the insane subsidies the Dems have supported for US produced bio fuels which are raising the price of food, destroying arable land and using ridiculous amounts of a much more important commodity, clean water. Government revenue and government fixing prices is not the answer to energy independence or the deficit. Revenue just like policy isn't static either.

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    [QUOTE=Warfish;2209774]With all due respect, if you think the Federal Govt. is going to Levy a $1.00/Gallon Additional Gasoline Tax, and use it to remove or "pay off" another existing Tax, you (or in this case Mr. Friedman) have no idea how modern Govt. works when it comes to taxes.

    There is no chance in hell, in other words.

    Oh, I certainly believe the Govt. might instal a big-ol' new Tax on Gasoline. Thats sounds right up their ally actually.

    I just doubt they'd do anything at all to reduce other taxes, as this article seems to claim. In that case, the supposed Republican Candidate in the example would be 100% correct, as it would be yet another Taxation Revenue stream, with no reduction in burden to the average tax payer, which in the case of gasoline, would hit the middle-class by far the hardest. Matter of fact, my rather quick spreadsheet estimate for me personally came up to an additional $1,170 above and beyond what I already pay for Gasoline each year. No thanks.

    The article is a great example of how theory sounds great, but is just crushed to a pulp by the reality....of reality.[/QUOTE]


    The operative term here Warfish is "Could Have," emphasis on [B]could[/B]. No where did Friedman claim that it 100% would happen, he is simply quoting an economist who is making a point, hence the title of the piece "Coulda, Woulda, Shoulda."

    [B]The point:[/B] If we taxed gasoline consumption then it would be smart policy to relax the payroll tax... so that employers could raise wages to match the increase in their workers' transportation costs.

    Therefore your argument basically amounts to "this doesn't make sense because gov't wouldn't do anything that logical." To which I say, fair enough.

    But should this plan, this "theory" as you term it, go into effect wouldn't it be feasible for your wages to go up $1,170 or more based upon a roll back of payroll taxes? Between all the variables of money saved by the employer , possible wage increase, type of vehicle driven, and driving habits in general I'd have to say that I'd be shocked if they didn't. This would NOT hurt the middle class if done right.

    Either way aren't Friedman's conclusions correct about sparking innovation, providing incentives and making the U.S. energy situation more stable considering that we won't be funnelling money into OPEC? Instead of saying "Nah this would never happen" maybe you should be thinking "How could this happen?" Because maybe it should.

    P.S. You like how I incorporated the title into that last line? Haha :D

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    [QUOTE=Winstonbiggs;2209793]Politics and policy much like market prices are not static. Innovation based on tax policy can lead to billions of wasted dollars when that policy changes.

    I really don't understand the Democrats handwringing because of high oil prices. They want to stop us from using fossil fuels the market might actually accomplish that if they don't screw with it. Look at the insane subsidies the Dems have supported for US produced bio fuels which are raising the price of food, destroying arable land and using ridiculous amounts of a much more important commodity, clean water. Government revenue and government fixing prices is not the answer to energy independence or the deficit. Revenue just like policy isn't static either.[/QUOTE]

    Interesting points WB.

    I don't think innovation in this instance would be based on tax policy. The whole idea behind this proposed gas tax would be to make it long lasting... to which point new technologies will become the new energy infrastructure making it impossible to go back to our financial support of the OPEC nations. I guess we'll just have to disagree there.

    As far as your next point goes, a little nudge in the direction of energy independence given the status of world events and where we get our energy from right now might not be a bad thing. The market is getting us there as we can plainly see but I see no problem with sparking it, especially while rolling back something as middle-class heavy as payroll taxes.

    As to your point regarding biofuels I think that it is more appropriate and 100 percent correct concerning ethanol. Ethanol is just something that politicians support and fund because of the Iowa Caucus. Other types of biofuel have nothing to do with arable land or water supplies. A good example would be Amyris synthetic biofuels, which unlike ethanol cut CO2 emissions by 85 percent, can be transported using existing pipelines, and can be engineered to work in conventional engines. Google it if you don't believe me.

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    How about we just end all subsidies? Big oil gets tons of subsidies. Take away those, and alternative energy is a lot more competitive. A tax which will never go away is not the answer. It's just another avenue for the elite to soak the public and invest in their little pork projects. I'll believe the fed gas tax will reduce the payroll tax right after the fed stops raiding the Social Security surplus for other programs.

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    [QUOTE=BrooklynBound;2210643]How about we just end all subsidies? Big oil gets tons of subsidies. Take away those, and alternative energy is a lot more competitive. A tax which will never go away is not the answer. It's just another avenue for the elite to soak the public and invest in their little pork projects. I'll believe the fed gas tax will reduce the payroll tax right after the fed stops raiding the Social Security surplus for other programs.[/QUOTE]

    Fair enough... other options, ideas, plans are a lot better than saying "Nah that will never happen."

    Not for nothing but... [URL="http://abcnews.go.com/Politics/wireStory?id=2805859"]http://abcnews.go.com/Politics/wireStory?id=2805859[/URL]

    It has yet to go before the Senate because Reid is afraid of not getting the Republican votes to override an imminent Bush veto.

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    [QUOTE=bigalbarracuda;2210614]The operative term here Warfish is "Could Have," emphasis on [B]could[/B]. No where did Friedman claim that it 100% would happen, he is simply quoting an economist who is making a point, hence the title of the piece "Coulda, Woulda, Shoulda."

    [B]The point:[/B] If we taxed gasoline consumption then it would be smart policy to relax the payroll tax... so that employers could raise wages to match the increase in their workers' transportation costs.

    Therefore your argument basically amounts to "this doesn't make sense because gov't wouldn't do anything that logical." To which I say, fair enough.

    But should this plan, this "theory" as you term it, go into effect wouldn't it be feasible for your wages to go up $1,170 or more based upon a roll back of payroll taxes? Between all the variables of money saved by the employer , possible wage increase, type of vehicle driven, and driving habits in general I'd have to say that I'd be shocked if they didn't. This would NOT hurt the middle class if done right.

    Either way aren't Friedman's conclusions correct about sparking innovation, providing incentives and making the U.S. energy situation more stable considering that we won't be funnelling money into OPEC? Instead of saying "Nah this would never happen" maybe you should be thinking "How could this happen?" Because maybe it should.

    P.S. You like how I incorporated the title into that last line? Haha :D[/QUOTE]

    I did like that, yes.:D

    Again my friend, theory is great. Wake me when that theory means something, i.e. is actually reflective of reality.

    A $1.00 gas Tax was and is Political Suicide (same excuse Dems give for not defunding the War they hate so deeply). And removing Oil Subsidies won;t change a thing, that cost will get passed on, and the everyday American will get shafted, same as always. Gas at $3 or Gas at $10, I still gotta get to work.

    And again, the Govt COULD do alot of things, doesn't mean they ever will in the real world. A Gas Tax does not mean a reduced Payroll Tax, never has, never will, no matter how much logic or theory it may have behind it. It's a weak argument frankly, backed by...um....nothing but more theorycraft.

    Eh, sorry man, call me a realist on this one. I'd love to believe this article, but I know enough to know it's all exactly what it seems: theoretical nonsense, and nothing more. It's akin, in it's "we shoulda..." vibe as articles I've read on Clinton and Terrorism pre-Bush. Yea, he "coulda" done alot of things....but the real world works as it works, and he didn't. Hindsight and theorycraft do not mean much today.

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    [QUOTE=bigalbarracuda;2210635]Interesting points WB.

    I don't think innovation in this instance would be based on tax policy. The whole idea behind this proposed gas tax would be to make it long lasting... to which point new technologies will become the new energy infrastructure making it impossible to go back to our financial support of the OPEC nations. I guess we'll just have to disagree there.

    As far as your next point goes, a little nudge in the direction of energy independence given the status of world events and where we get our energy from right now might not be a bad thing. The market is getting us there as we can plainly see but I see no problem with sparking it, especially while rolling back something as middle-class heavy as payroll taxes.

    As to your point regarding biofuels I think that it is more appropriate and 100 percent correct concerning ethanol. Ethanol is just something that politicians support and fund because of the Iowa Caucus. Other types of biofuel have nothing to do with arable land or water supplies. A good example would be Amyris synthetic biofuels, which unlike ethanol cut CO2 emissions by 85 percent, can be transported using existing pipelines, and can be engineered to work in conventional engines. Google it if you don't believe me.[/QUOTE]


    The best way for business to plan and invest for the future is based on risk taking based on economic return on investment. By government jumping in and out and rigging the field for one constituent or another depending on who is in power or what's in vogue or who is paying off whom leads to billions of wasted investment. That doesn't even begin to adress the impact of taking all those dollars that would flow into the economy randomely if it was left in the publics pocket in the first place.

    If the government wanted to stop the flow of oil from certain countries there's and easy way to do it, prohibit oil from being imported from them.

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    [QUOTE=Warfish;2210874]I did like that, yes.:D

    Again my friend, theory is great. Wake me when that theory means something, i.e. is actually reflective of reality.

    A $1.00 gas Tax was and is Political Suicide (same excuse Dems give for not defunding the War they hate so deeply). And removing Oil Subsidies won;t change a thing, that cost will get passed on, and the everyday American will get shafted, same as always. Gas at $3 or Gas at $10, I still gotta get to work.

    And again, the Govt COULD do alot of things, doesn't mean they ever will in the real world. A Gas Tax does not mean a reduced Payroll Tax, never has, never will, no matter how much logic or theory it may have behind it. It's a weak argument frankly, backed by...um....nothing but more theorycraft.

    Eh, sorry man, call me a realist on this one. I'd love to believe this article, but I know enough to know it's all exactly what it seems: theoretical nonsense, and nothing more. It's akin, in it's "we shoulda..." vibe as articles I've read on Clinton and Terrorism pre-Bush. Yea, he "coulda" done alot of things....but the real world works as it works, and he didn't. Hindsight and theorycraft do not mean much today.[/QUOTE]

    What do you mean removing subsidies won't work? It will achieve what it's supposed to - remove inefficiencies in the market

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    [QUOTE=BrooklynBound;2210976]What do you mean removing subsidies won't work? It will achieve what it's supposed to - remove inefficiencies in the market[/QUOTE]

    Depends on what your purpose is. Personally, I want cheap transportation costs. Removing Subsidies will increase my costs exponentially.

    I suppose if your goal is to go "green", then removing the subsidies may do some good, althogh I doubt it would have the end effect you assume. Most folks will simply suck it up and pay more per gallon.

    All comes down to goals, why you do things, and what you want to see come out of it.

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    [QUOTE=Warfish;2211245]Depends on what your purpose is. Personally, I want cheap transportation costs. Removing Subsidies will increase my costs exponentially.

    I suppose if your goal is to go "green", then removing the subsidies may do some good, althogh I doubt it would have the end effect you assume. Most folks will simply suck it up and pay more per gallon.

    All comes down to goals, why you do things, and what you want to see come out of it.[/QUOTE]

    Sort of like taxing the crap out of rich folks so the middle class can have cheap health care.

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    maybe thomas friedman is feeling bad about not investing in oil stocks back in 2001.

    shoulda woulda coulda

    if only we have a time machine I could buy apple at 13 and haliburton at 15

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    [QUOTE=Winstonbiggs;2211288]Sort of like taxing the crap out of rich folks so the middle class can have cheap health care.[/QUOTE]

    Or like taxing the crap out of the middle class so that politicians can have cheap health care.

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    [QUOTE=PlumberKhan;2211548]Or like taxing the crap out of the middle class so that politicians can have cheap health care.[/QUOTE]

    Huh?:confused:

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    No way in hell, How about putting a usage tax on SUV's and the other Gas guzzlers!

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    Warfish you say that they would never cut payroll taxes. Well I have the solution. In the same bill that places the $1/gallon Fed tax have an equal reduction of the payroll tax. In this way it DOES happen.

    Let the free market work and let the $ go into the fed coffers rather than to OPEC.

    Sounds like a brilliant idea. Of course it will never happen as Republicans are afraid to vote for anything that looks like a tax increase and the oil co lobbyists would put a full court press on to defeat the bill.

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    [QUOTE=Queens Jet Fan;2212013]Warfish you say that they would never cut payroll taxes. Well I have the solution. In the same bill that places the $1/gallon Fed tax have an equal reduction of the payroll tax. In this way it DOES happen.

    Let the free market work and let the $ go into the fed coffers rather than to OPEC.

    Sounds like a brilliant idea. Of course it will never happen as Republicans are afraid to vote for anything that looks like a tax increase and the oil co lobbyists would put a full court press on to defeat the bill.[/QUOTE]

    One of the lobby groups that would defeat it is the Auto workers who would make sure the Democrats would defeat this bill. I love how this phoney scenario wouldn't be allowed to happen because of Republicans in the hands of big oil when the Democrats have consistently tried to make an issue out of high oil prices.

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    [QUOTE=Queens Jet Fan;2212013]Warfish you say that they would never cut payroll taxes. Well I have the solution. In the same bill that places the $1/gallon Fed tax have an equal reduction of the payroll tax. In this way it DOES happen.

    Let the free market work and let the $ go into the fed coffers rather than to OPEC.

    Sounds like a brilliant idea. Of course it will never happen as Republicans are afraid to vote for anything that looks like a tax increase and the oil co lobbyists would put a full court press on to defeat the bill.[/QUOTE]

    Again, just because you say it, doesn't mean it would ever happen. Republican? Democrat? Neither would pass such a bill (for their own reasons), and I'm frankly suprised you would think otherwise....

    By the way, I truly hope your not naive enough to think the "Oil Lobyists" only have Republicans in their pocket.:rolleyes:

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    [QUOTE=Queens Jet Fan;2212013]Warfish you say that they would never cut payroll taxes. Well I have the solution. In the same bill that places the $1/gallon Fed tax have an equal reduction of the payroll tax. In this way it DOES happen.

    Let the free market work and let the $ go into the fed coffers rather than to OPEC.

    Sounds like a brilliant idea. Of course it will never happen as Republicans are afraid to vote for anything that looks like a tax increase and the oil co lobbyists would put a full court press on to defeat the bill.[/QUOTE]

    Raisin taxes isn't the free market though

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