GOP Giveaway

From Bloomberg via the NY Sun:

Senate Majority Leader Frist unveiled a Republican proposal to relieve high gasoline prices, calling for a $100 rebate to consumers and drilling for oil and natural gas in Alaska.

The whole thing here.

Calling it a “rebate,” doesn’t change the fact that it’s a big government subsidy. If they want to reduce or eliminate gas taxes, fine. But giving away $100 is worthy of the party of FDR, not the party of Reagan.

Not only is it a big government proposal, but it’s highly inefficient. Beyond the administrative costs, as far as I can tell, there’s nothing in the proposal to ensure that people actually spend the money on gasoline. What’s to stop people from using the money toward buying an iPod, or eating a fancy steak dinner?

There’s also an ethical dilemma involved. What about people who don’t have cars? If you give them the $100, then the rebate ends up having nothing to do with gas costs, it’s just giving people $100. If you only give $100 to people who have cars, then it’s unfair to people who live in large cities who ride public transportation.

I don’t think Americans have a right to cheap gas. Besides the war in Iraq and tension with Iran (shorter term shocks), we’re facing a long-term shift in global demand with the growing economies of China and India. Over the last few decades, these countries with more than a third of the world’s population have been relatively out of the market, making it easier for Americans to consume a disproportionate amount of oil. Granted this is easy for me to say because I live in NYC, but I think Americans need to recalibrate their expectations of what the price of gas should be. And in the long run, high gas prices may create enough demand for alternative fuel to force companies to invest in new technologies in a big way. I think that’s long overdue and ultimately it’s an issue of national security. It makes me sick to think of countries like Iran, Saudi Arablia, Sudan, etc. being awash in oil money.

2 thoughts on “GOP Giveaway”

  1. How does giving everyone, across the board, $100 in this instance differ from a tax rebate like Bush’s $300 giveaway in ’01?

    Not that it isn’t idiotic, pointless, cheap political scheme. If they really want to do this they could give everyone a $100 tax deduction…ah, but that wouldn’t be in time for the elections.

    Oh well, there are worse things than the government giving back money. And, for the record, mine definitely goes towards a new ipod.

  2. Tax rebates can be subsidies too. There’s a minor difference between Bush’s $300 rebates, which were a token giveaway as part of his more comprehensive changes, and Frist’s proposal, which is a straight subsidy of people below the $125,000 cap by people above the cap under the guise of doing something about gas prices (as Phil points out, it has nothing at all to do with gas prices).

    Anytime the government “gives back money,” it has to come from somewhere. If it’s not part of some logically consistent tax scheme, it’s called a subsidy. Rephrase that as “there are worse things than the government giving out subsidies,” and see how that sounds. It’s a sad illustration of our system that people can’t tell the difference anymore.

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