Rebuttal or Charles Krauthammer is a F’n Genius

I can understand Mr. Lytle’s worry over the Master’s latest proposal. I had the same worries as well. But, allow me a moment to offer some arguments in the Master’s defense.

First, Mr. Lytle asks what incentive oil companies will have to lower gas prices if the government is going to fix the price at $3. The Master’s plan focuses on world oil prices, not gas prices, and as Mr. Lytle and I have both stated numerous times, the oil companies do not set the price of oil. That is determined by the forces of supply and demand. This plan is intended to use those forces to bring the world oil price down. As Mr. Lytle says, if the price is set too high then a surplus will result. That is precisely what the Master is trying to do: cause a surplus and drive the world price down.

But that may not be an adequate answer to Mr. Lytle’s question. Let us not forget that the Master proposes lowering the Social Security and income taxes in response to higher gas taxes. That is a very good incentive for the oil companies to keep costs and prices low. Keeping gas prices low results in lower taxes. We should all have it so good. Imagine, the more efficient you are at running your business, the less you have to pay in taxes.

Mr. Lytle also asks about premium blends. The Master does not cover this in his short article, so I will offer my idea. The new gas tax would be set by the price of regular gas. For example, if the price of regular gas is $2.50, then the tax would be 50 cents. The tax on premium gas would also be 50 cents. So, if regular gas is priced at $2.50, and premium gas is $2.70, then the after tax price would be $3.00 and $3.20. No new bureaucracy is needed.

I must also disagree with Mr. Lytle when he says that the solution here is more competition, not less. Certainly, less competition does no good. But more competition doesn’t necessarily improve the situation. The problem here is too much demand and not enough supply. The genius of the Master’s plan is it uses market forces to fix our oil problems. He raises the price of gas to encourage conservation. But conservation alone won’t fix the problem. So, he also loosens (indeed, removes) restrictions on oil production and refining. Then he gives tax incentives to encourage oil companies to reduce their prices by increasing supply. In the meantime, we have reduced our consumption by a considerable amount, increased our domestic production, and improved our security and our position on the geopolitical stage by becoming more self-sufficient. No more kowtowing to the Saudis because they have what we need.

One quick point I would like to make about this kowtowing to the Saudis. Sure, they have the oil, and we need it. But on the flip side, we have food, and they need it. I see no reason why we shouldn’t make it abundantly clear to all the oil producing arab nations that any attempt on their part to harm our economy and security by refusing to sell oil to us would result in our refusal to sell food to them. Two can play at that game. Now, back to the topic.

It is unclear if the Master intends this plan to be permanent or temporary. I get the feeling that he hopes to replace the income tax with this new gas tax. That wouldn’t be such a bad thing. Mr. Lytle also advocates a national sales tax. But I think it would be better to break the tax free of the $3 mark and fix it at a certain rate (preventing a sudden increase in income taxes) once we have accomplished our ultimate goal of reducing our dependency on foreign oil. At some point, we may even stop using gas altogether, and then the gas tax would become obsolete and some other form of taxation would have to take its place. That is unless, of course, the American people force their government to make do with its dwindling gas tax revenue.

–J.E. Heath
per-fidem.org

Texian Weblog © Copyright 2005, Jason E. Heath