Well, I guess I struck a nerve with a Gravel supporter

My post about the Mike Gravel ad got the attention of Greg Chase – the gentleman that I mentioned that is putting his money where his support is!  I read through his comment that he left on his post and then emailed him back.

Here at the ‘Grok, we  never back down from a potential debate (with a grin on face – why should we?  We’re right!)

Anyways, I’ve decided to bring the comment forward, and then comment on it.  Greg will then have his  chance to comment back, and we’ll see where it goes! 

And yes, I am not always going to give extensive answers – I want the debate!

Thanks for your blog entry.  Those are my ads so let me stab at responding.

People hear a lot about oil but often don’t know basic facts about it: the process of refining, US production, consumption, imports, etc.    The Oil ad you refer to aims to lay out some of that basic information, and make the assertion that if we want to reduce our dependence on foreign oil a good way to do it is a fuel tax.

Almost every politician says they’d like to get off foreign oil. No debate there. When asked to quantify how much they want to get off foreign oil, i.e. what they are going to do about it, things either go silent or get excessively vague.

Well, I’m not going silent, nor get vague.  Frankly, I think that your general premise is wrong, and here’s why.

You, of all people being a trader, understand far better than most that price is determined not only by demand but also by supply. Also, what can happen to pricing when artifacts to the market are introduced by government.

By inserting government into the process of price setting by artificially raising the price of gas by increased taxes, you may well lower the demand as you espouse.  However, I am probably on safe ground by saying that the price at the pump will turn out to be inelastic (we just don’t know what that pricing point is yet). Yes, the price per barrel skyrocketed to the $100 per; that really did not get reflected fully at the pump.  Indeed, price went up about 60% per barrel but only 30% at the pump.  If the entire run up had appeared at the pump, coupled with much higher taxes, our prices will approach that of Europe – which HAS raised the cost of gas by high taxes.  Even with that,  I note that their usage of foreign oil hasn’t really backed down all that much. 

I’m willing to bet that brunt of Gravel’s tax raise will be on the backs of those least able to adjust for that spike – the poor and the working stiffs of America.  Thus, forcing economic choices that otherwise would not be present will most likely trickle upward in a negative fashion, as those folks (with lower amounts of disposable dollars) start to account for that artifically induced price increase and making the  tradeoffs – more for gas and less for other consumables as their incomes really are rather inelastic.

Oil should not be seen as just oil – economies need energy and oil is a great transport mechanism for that. 

And right now, with China and India rising (along with other developing nations that are moving more towards free market economies and increasing their citizens standards of living), if we do not purchase it, others will.  The Middle East, Russia, et al will not suffer losses if we purchase less of that commodity from them (or from others – after all, most of our oil comes from Canada, Mexico, and other non-ME states).

Huckabee is a great example. He’s got a whole page devoted to the topic on his site: http://www.mikehuckabee.com/?FuseAction=Issues.View&Issue_id=21 .  He decries the problem quite effectively (I wish I could write as well as whatever staffer put that page together), but then falls flat on a solution.  He talks about knocking heads, pouring federal money at the problem, hoping or regulating that the private sector will pony up research dollars as well, forcing the federal government to purchase alternative energies, etc.    This seems like a mildly souped-up version of what we already do.

If you remove the mention of Abortion and Christian values from Huckabee, you’d have a hard time figuring out his utterances from those of John Edwards.  Populist sayings appeal to those that don’t think things through.  And if you notice, I think that the use of government to mandate behavior doesn’t much differ betweent the two either….or the other Dems.

Most people accept that our collective dependence on oil has the negative externalities of environmental damage and/or reduced national security.  Options I see at the federal level to address energy independence:

1. Fund public research
2. Fund private research
3. Give tax breaks to chosen activities (drilling for fossil fuels domestically, hybrid car incentives, solar panel incentives, etc.)
4. Rhetoric: Nice talk about alternatives.  We’ve done this for 30 years.
5. Regulate: Haggle with Detroit about fuel economy standards, mandate certain fractions of power come from certain sources, etc.
6. Tax the thing you want to discourage.
7. Bury head in the sand.

I think 6 is by far the "free-est" market solution.  It simply encodes the externalities into the price of oil products.  Nothing we do is technically free market with our federal tax burden.<br><br>

Democrats using Government to regulate the rest of us is not new.  In fact, it seems to be the only way that they can control things – it certainly seems to be that their attempts to persuade in the actual marketplace are either non-existent or have been deemed so silly that the marketplace dismisses them out of hand. 

While you may label Number 6 as the "free-est", by definition it is NOT Free Market economics – any economist would agree that taxation is NOT part of a free market.  What you advocate for is for  people using the levers of government to make people obey what they think are good ideas (it is how laws get done – and laws pertain to government and not corporations or the market).  That was where I had the problem with the ad. 

Look, Free Market by all known definitions exclude government interference.  That’s why I excoriated the ad – it claims the mantle of the free market and yet 6 of your seven ideas are useless without the force of government (and the force it brings in enforcing laws and regulations):

1. Fund public research

Why should government be in the business of determining a "winner" in this area of energy research?  Why not let the corporations fight that out amongst themselves to determine winners?

2. Fund private research

Ditto

3. Give tax breaks to chosen activities (drilling for fossil fuels domestically, hybrid car incentives, solar panel incentives, etc.)

Ah!  Why DON’T we do what should be done!

Look, any industrialized / developed economy such as ours requires energy.  Price is set not only by demand, but also by supply.  We artificially (again, by those that believe that "nice views" are more important) limit where we can get at our own supplies.  ANWR, Gulf coast oil, heck – look at Cape Wind! Democrats just seem to restrict things, and not let the grow by the choice of the people.

I call these people that do so busybodies and Nanny-Staters. 

Get government out of the way and let the Free Market go.  Capitalism works far better and far nimbler than the government behemoth.

 

 

4. Rhetoric: Nice talk about alternatives.  We’ve done this for 30 years.

I disagree – one quick dip into the PV industry shows that there are HUGE improvements in basic technologies, and some are finally coming to market.  Ditto the shale oil deposits in Colorado and the tar sands in Canada.

 

 

 

5. Regulate: Haggle with Detroit about fuel economy standards, mandate certain fractions of power come from certain sources, etc.

 

"Haggle"?  Ha! 

The "not talked about result" is that these new CAFE standards that the Dems pushed through will result in more deaths.  With your physics degrees, you have to agree that lighter cars, even with exotic composites, will be more dangerous when these lighter cars tangle with 18 wheelers and other trucks.  And in many situations, more cars will be on the road – if a family is larger than 3 or 4, it will need 2 cars to transport them all – whereas an SUV will do the trick.

And (twinkle in eye) – moving snow with the plow on my Suburban in 4 wheel drive is far easier than if this 50 year old back had to use a shovel! 

Look, if the marketplace wanted high mileage cars, they would be here already.  Companies exist to fill demand (and therefore make profits) – if there was a huge demand, those vehicles would already be in mass productions.  Instead 

6. Tax the thing you want to discourage.

THIS bothers me the most!  It assumes that the person that thinks that what needs to be discouraged is wrong to all people!  It assumes the worst of society: "I know better than you and I will limit your choice and freedom because I DO know better what you need than you do".

Hubris, short and sweet (and yes, this brings out the libertarian in me that I never realized I had)!

This country was built around the concept of freedom – and when we are silly enough to limit those choices of the kind you talk about, we all lose freedoms outside of the actual area of discussion (spillover always occurs). 

7. Bury head in the sand.

No one is burying their head in the sand…..although there are a few heads I’d love to insert into such!

The view that a revenue-neutral fuel tax will cripple the economy is bogus.  Don’t forget, our current tax code taxes the heck out of labor.  I’d say labor is a pretty integral part of the economy.  Matter of fact, labor is more indispensable than energy.

I have heard lots of proponents of carbon based taxes – not once have I heard of the taxes that would be removed from the marketplace.  NO tax is ever neutral – someone will be gored (hmm – no, I won’t go there) while someone benefits.  I highly doubt that income taxes (which is THE tax on labor for the vast majority of us) would be cut to account for your tax.

I’m not a Dem, and to
answer your question I don’t think you’re stupid, but I do wonder what specifically you would support doing, if anything, about our dependence on foreign oil?

Increase supply – let our companies drill in more places (e.g., like off Florida and California that keep that from happening).  Make it easier to construct more refineries to distribute risk and capacity.  And WHY do we have to have so many boutique gasoline formulations that always seem to bollix up the marketplace during switch-over times? IF the new technologies work on the shale oil deposits in the Colorado areas, open them up – some pundits believe that the amount there could rival if not exceed that of the Saudi reserves.

A discussion of taxation would follow a similar arc.  I find it odd that you suggest people who think their taxes are too low should just write a bigger check to the IRS.  By similar logic anyone who thinks consumption of foreign oil is a severe national problem should drive around a moped and call it a day.

And you find that odd…why?  If one really believes that they are undertaxed, why not just send in a check?  Why is it that just because they feel that way, why should others get hit with that problem?  There is NOTHING that stops them in mailing it in and assuaging their guilt / sense of indebtedness.  But WHY does it have to be a collective effort based on government dictates? 

And yes, I do believe that those who believe that the foreign oil should be doing concrete things in their own lives first, and then persuade the rest of us in the marketplace of ideas.  If valid and sufficient arguments are presented, then they will persuade the rest of us of the brightness of their ideas and will follow suit.  Frankly, Al Gore, and all of the other celebrities who say the words but then don’t walk the talk in their personal lives are

hypocrites.

There is truth in the phrase "lead by example".  Isn’t that better than using the full might of the Federal Government to coerce behavior?

Telling me to figuratively wear a hair shirt and shiver in the cold and bake in the heat and then jump into the private jet to fly thousands of miles just to do that all over again smacks of pure "Do as I say (but I won’t)".

I’ve tried to match the tone of your post.  Please don’t take my response the wrong way. I do sincerely appreciate the entry and respect your views.  These issues seem quite challenging to me, but not to be ignored.

And I hope we keep this up!