As Washington bickers about whether to save Detroit, the WSJ and Joe Weisenthal astutely observe that it is also planning to drive the car-makers right out of business–by forcing them to build fuel-efficient cars that no one wants now that gas is back to $1.70 a gallon.
No one will pay a premium for these cars now that gas is again cheap, which means Detroit will be asking strapped consumers to pony up out of the goodness of their hearts. Consumers won’t do this–not because we’re bad people, because our national gas policy is absurd–and Detroit will be forced to dump the cars at a loss. Which will soon send them groveling back to Washington again.
Thankfully, there’s a simple answer: A gas tax.
Not a flat-rate gas tax, which would leave consumers and car makers exposed to the same sort of price spikes that killed them this time around. A gas tax that adjusts depending on the price of oil.
Specifically, a gas tax that fixes the price of a gallon of gas at $4 a gallon nationwide, with the tax being the difference between the market price and $4. The tax will thus adjust with the market price of oil–less tax when oil is expensive, more when it’s cheap. And the price of gas will stay fixed at $4 unless oil prices really soar, at which point it will disappear (and gas prices will float to wherever the prevailing market price is).
To avoid sandbagging Detroit and strapped consumers, Congress could announce now that it plans to implement this tax in 2011, thus giving everyone two years to prepare. The car companies could confidently retool their factories, instead of worrying that they will have to frantically retrofit them every year to make SUVs, then Priuses, then SUVs, etc. Consumers could retool their expectations, assured that they won’t lock themselves into a tin can by buying this year while their neighbour gets to buy a Hummer by waiting until next year (and then goes broke when prices spike again). The government, meanwhile, could raise more of the screamingly-needed new funds necessary for all this infrastructure spending and bailout-out they’re doing.
Will it happen? Of course not. Because the real First Amendment to the US constitution was apparently the right to drive land yachts in perpetuity. But it’s nice to think so.