21 July 2008

Petroleum, Rebates, and Taxes – Surely There's a Connection

Oil Down – After President bush called on Congress to lift the ban on offshore drilling, oil prices dropped 11% in the last half of the week (Toronto Star). Of course, that doesn’t mean that Speaker Pelosi or Senator Reid will allow any vote on the matter before the summer recess comes around. Instead, Speaker Pelosi pushed forward a “use it or lose it” measure on land leases – again. It failed to reach a two-thirds majority – again. And she may push President Bush to open the Strategic Reserve – again (Digital Journal). It doesn’t seem curious to me at all that Congress’ approval rating is lower than the President’s. I suspect it will be…unless…

Rebate, Part Deux – In a move that would just really split my side, Congress is considering pushing for another economic stimulus package. This one would be smaller – just a meager $50 billion. Bloomberg reports that Speaker Pelosi claims that (and this is not reported as a direct quote), “The benefits from the first round of rebate checks have been eroded by rising energy costs.” Like her call to opening the Strategic Petroleum Reserve, this notion of a $50 billion rebate is just a band-aid, though one which just might fool some into thinking that the Congress is actually doing something. Of course, they just might do something which would require a rebate as an economic band-aid measure…if one uses a bit of twisted logic...

Raising Gas and Diesel TaxesFox News reports that the idea (and a bad one at that) of a “summer holiday” from federal gas taxes have taken an interesting turn. Why? Because rising construction costs and a drop in gas and diesel demand are teaming up to create a serious deficit. “The American Road & Transportation Builders Association is calling for a 10-cent-a-gallon raise and indexing the tax to inflation. (Snip) Just three years ago, that trust fund enjoyed a surplus of $10 billion. Even without a tax freeze, the fund is projected to finish 2009 with a deficit of $3 billion. That could grow as Americans drive less and buy less gas because of higher pump prices.” As the Fox News article points out, this is a double-edges sword. Raising taxes will hurt people and businesses just as oil prices begin to dip. On the other hand, not funding road building and infrastructure projects will cost jobs. What’s the Congress to do?

It seems to me that the highly educated members of Congress could connect these dots, read the tea leaves, and do some serious work for the people. Instead of feeding into the downward spiral of high prices for oil, reduced demand for gas and diesel because of high prices, and the resulting drop in tax revenue which will, long term, result in degraded national infrastructure, the Congress could take positive steps – however out of character that may be.

First, abandon the dance of “use it or lose it” legislation and pleas to open the Strategic Reserve. Instead, drop the ban on offshore drilling, and put other measures up to a vote in the congress regarding ANWR and other domestic sources. Second, drop the idea of a rebate as economic stimulus; the predicted drop in oil prices will probably exceed the $50 billion. And anyway, the rebate will more than likely attract a plethora of pork-barrel leeches that the electorate not only doesn’t need but can’t afford. Last, if the gas and diesel tax needs to be raised to build and maintain infrastructure, then it should be raised. But Congress should not allow itself to either load that bill up with pork or shift any of the funds to other, much more dubious projects.

I may be crazy, but I think that if Congress really wanted to, both bodies could move on some or all of these. It’s difficult to tell, though, if anything of the sort will happen, this being an election year. Anything except stimulus dollars and band-aid proposals, that is.

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