Not All Green Is Green

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[Genesis Of The Meltdown]

Everyone is Green. 

We want environmentally safe cars. We seek to reduce emissions.And of course we desire increase fuel economy- at least those of us, who realize that increased gasoline consumption is not the wave of the future.

But has anyone given a thought to the fiscal cost of improving mileage- without a concurrent increase in the federal fuel tax? 

President-elect Barack Obama has called for an increase in fuel efficiency to lessen American dependence upon foreign oil and to help prop up the foreign trade imbalance. 

But at what cost to the over all economy?  Now, I am not suggesting that fuel economy is bad, but diehard Reaganites have always called for the reduction of big government and a decrease in taxes.  This can be attributed to a belief in the biblical judgment:  “Honor Thy Father and Thy Mother,” which Reaganites have interpreted to mean use your income to pay for our spendthrift days. 

President Obama has called for a stimulus plan, which shall increase the spending on construction- a large part of which is for necessary improvements to the national highway system. But from where shall the funds flow?  Yes, the Treasury shall print the money, but where shall the Treasury eventually raise the money? Not from China. Not from Japan. Not from Germany.But from you, the citizens of the United States.

How shall this be accomplished?  From an increase in the federal tax on fuel- and this includes home heating oil- in the amount of 18 cents per gallon.

Let us assume for the sake of a simplified argument that the average fuel efficiency for a car, not truck, is 20 miles per gallon.  Let us further assume that the fuel efficiency becomes 40 miles per gallon.  We now have doubled the fuel efficiency of a car- and we now save money on gasoline.  Let us assume that the amount of oil used for heating homes remains constant.
But what about the federal government?  It loses money because of fuel efficiency.  We have halved the receipts of the federal government for gasoline and diesel fuel.

So, what must be done?  We must raise the federal fuel tax.  And what is the result?  Homeowners must now pay a disproportionate amount of the federal fuel tax.

This is not Freakonomics. 

This is known as linear activity model of general equilibrium and input-output analysis. Wassily Leontieff, a genius, received the Nobel Prize in Economics for his discoveries.

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