OIL AND THE DEFICIT

Not only does the US have the cheapest gasoline in the West, it also imposes the lowest tax on it: In 1984, the average price was $1.21 a gallon, of which 25.3% was tax. In other Western countries, the price ranges from $1.79 (West Germany) to $2.27 (Japan), and the tax rate from 37% (Japan) to 58.2% (France).

That has given the London Economist (12/15/84) a drole idea: the US could abolish its deficit by raising gasoline taxes. It is a suggestion which the House of Turkeys is unlikely to overlook (or if it does, it will raise the tax anyway).

But as a realistic way of eliminating the deficit, the idea is pure balderdash. The only realistic way of (eventually) eliminating the deficit and the national debt is to inflate it away by printing paper money. Anyone who believes otherwise must perforce also believe that you can give money to a politician and expect him not to spend it.

Oil has recently been linked to other fiscal measures. My good friend and AtE subscriber Prof. Fred Singer of the U. of Va. points out in the Wall St. J. (1/18/85) that as the OPEC cartel disintegrates, the price of oil could dive to $ 10 to $12 a barrel for a few weeks, causing the closing of marginal US wells and other disruptions, whereupon the price would rise again. Western governments should get together and protect the consumer by a temporary Variable Import Fee.

Objections are voiced by my friend and AtE subscriber Benjamin Zycher of the Rand Corp. (WSJ 1/31/85): Short-term fluctations are smoothed out by speculators in the commodity market, the government would not be able to offset alleged market imperfections, Western governments would be no better at coordinating policies than OPEC, and the fee would create new interest groups.

Sorry, Fred, but on this one I am with Ben. In theory, this is not a case of national defense or protection from wrongdoers, which are the only fields where government force is legitimate; and in practice, a temporary tax is something like a temporary life sentence.