Is a Gas Tax Now in the National Interest?

Detroit's hanging by a thread, the economy's in the tank, and unemployment's on the rise. The last thing we need right now it a gas tax, right? Not so fast.

Whether we like it or not, America is at a transformational moment in its history right now. The economic model we've been running for the past twenty years or so - with its emphasis on deregulation and free market rhetoric - has been revealed to have feet of clay. Even former Federal Reserve chairman Alan Greenspan, an arch deregulator and free marketeer, and the man whose word was regarded as holy writ on Wall St. for almost 20 years, has admitted as much.

And now we need to clean up the mess.

We need to enable Detroit to sensibly retool for the future, otherwise any bailout will be a waste of money. One of the reasons the Detroit Three became so vulnerable is few of the products they make in the U.S. are suitable for sale anywhere else in the world, primarily because they are too big and too thirsty. It doesn't sense to perpetuate that mistake. Strong demand for more fuel efficient vehicles in the U.S. would allow much more clarity and efficiency in product planning and capital allocation in any bailout scenario. It would also help drive down the cost of fuel efficient technologies, as automakers would be able to amortize them across larger volumes.

We need a long term national energy and transportation policies that seek not only to reduce emissions, but also our reliance on foreign energy sources and technologies. We can drill, baby, drill all we want here in the U.S., but in the long term we're never going to find enough cheap oil to satisfy demand, and besides, the oil companies are under no obligation to sell oil found here to American consumers if they can make more money selling it to someone else. We need an economic imperative for companies to commit to serious alternative fuel and alternative powertrain research and development programs in this country, and to stimulate investment in better public transport infrastructure projects.

And finally, we need to pay for the cost of the bank bailouts, the auto industry bailouts, and the massive public works programs planned by the Obama administration to kickstart the economy. Hey, there's no point whining about whether we should do these things. We're committed, and the money has to come from somewhere - well, us - anyway.

Against this background, a gas tax seems a logical option. The federal gas tax rate is currently 18.4 cents a gallon, and it hasn't been raised since 1993, while diesel is taxed at 24.2 cents a gallon. The federal government collected $29.4 billion from fuel taxes last year. It wouldn't take much of a tax hike to double that number, even allowing for a drop in gas consumption as consumers switched to more fuel efficient vehicles.

Of course a gas tax is regressive, but most taxes are, so that is hardly an argument against having one. And yes, there is a danger that if gas is taxed too high, it could hurt economic growth. But with the average price of gas now under $2 a gallon, and likely to remain under $3 a gallon for some time, based on oil futures, there is a lot of room to maneuver without causing immediate harm while creating some long term benefit.

We need to restart our battered economy, reinvent our shattered auto industry, and re-imagine our tattered future. It's time to invest nation building again; after all, we can't sponge off the legacy of the 1950s forever. So maybe a gas tax is now in the national interest.