Getting Real About Energy

When he spoke to the nation on Tuesday, President Obama offered the usual cliches and platitudes - perhaps better described as processed organic refuse ejected from the south end of a northbound bull - about ending our 'century old addiction to fossil fuels'. Since he did not offer any solutions, the only conclusion that can reasonably be reached is that Mr. Obama entirely deserves the title of Posturer in Chief.

What then should the President have proposed?

Start with a very simple concept from Economics 101. If the price of a good increases, the demand will decrease. The President, then, should have proposed a substantial tax - say $5.00 per gallon - on fossil fuel used for transportation and a somewhat smaller tax on all other energy derived from fossil fuels. The reason for the different rates is to take into account the fact that users of fuel for transport can more easily and rapidly reduce their energy consumption than can industrial, residential and commercial facilities.

Because of the time required to improve the fuel efficiency of equipment and vehicles, alter behaviors, and change housing patterns (suburban sprawl and long drives to jobs), these taxes will need to be phased in over a fairly substantial period of time. If the taxes are to be effective, the phase in period should last no more than seven years which, not coincidentally, is the average length of time that people own each of their homes and less than the average length of time that they own their vehicles.

How should the receipts from these taxes be used?

A good solution would be to rebate the tax by reducing the Social Security and Medicare taxes paid by employers. Since this will significantly reduce labor costs, demand - and therefore employment - can be expected to increase. In addition, demand for labor will increase as companies and homeowners take action to reduce energy consumption. The result will be that the market, through the price mechanism which is generally efficient, rather than government, using always inefficient subsidies, will determine the future of non-fossil fuel energy sources. Although there will be winners and losers, the net impact on tax revenue is zero with the likelihood that business competitiveness improves and fossil fuel use is reduced.

Approval from most Democrats can be assumed while many Republicans, save only those those who are entirely consumed by chants of 'No New Taxes' or by mindless opposition to anything proposed by a President from the other party, should be able to support such a program.

Take inspiration, Mr. President, from these many times written words of Winston Churchill: "Action this day."