May 8, 2008
From the Crow’s Nest: No quick cure for pain at the pump
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Whining about gasoline prices has become redundant and commonplace, but the complaint stirs anew in every driver with each fill-up.
Predictably quick to hear rumblings of discontent in the electorate, politicians have been struggling to find solutions, but so far have been able only to suggest “pain transference,” that is easing the pinch at the gas pumps by causing some squeeze elsewhere in the consumer budget.
An example is the “gas tax holiday” proposed for this summer in Connecticut by Republican leaders in the General Assembly. But with the legislature in mandated adjournment yesterday, the idea appeared “dead on arrival” in the hopper just a week ago.
To implement it, the legislature would have had to revise the $18.5 billion tax and spending plan already approved for 2008-09, a tall order on short notice. Keeping the original budget intact may very well be the only thing the Republican governor, M. Jodi Rell, and the Democratic speaker of the House, James Amman, have agreed on in this session.
Gas tax holidays have been futile in the past and a revival of the idea now reflects the desperation with which relief is sought. At other times when the tax was cut back a bit, only small and short-lived savings were realized by drivers because the reduction was offset by the oil industry’s price increases.
Furthermore, the tax break suggested would cost the State $25 million in lost revenue. The State’s budget already has been described as “bare bones” and many real needs, ranging from more municipal aid to social welfare programs, may be short-changed.
Gov. Rell says she would like to provide some relief at the gas pumps, but she also said last week that she would veto the $10 million that had been earmarked to reinforce the criminal justice system because the State can’t afford it.
Also, a troubled economy suggests that even the revenues projected can fall short of the mark. Just three months ago, for example, a surplus of $263 million was anticipated. Suddenly, it dwindled to $11 million and last week, as everybody played the blame game, Gov. Rell said it has morphed into a $68 million deficit and may still be headed down.
In addition, gas tax receipts are supposed to be targeted for highway and public transportation improvements, attention the State’s infrastructure desperately needs. It’s bad enough that this fund is sometimes depleted by diverting money into other uses.
Advocates of cutting the gas tax temporarily by a dime on a gallon would pay for it with an early retirement incentive program for State employees. Savings from such “golden handshakes” in the past were fleeting and short-lived and, in fact, cost the State the services of some of its most experienced personnel.
Washington suffers the same headaches, of course. Hillary Clinton and John McCain have called for a summertime gas tax cut, but Barack Obama says more prudently its value is dubious and dismisses the idea as a political ploy to curry favor with voters. President Bush also favors some relief for gas pains, but looks in vain for acceptable ways to offset the revenue shortfall that would result.
On the principle that the supply and demand laws of economics drive prices, we have looked to other means of supplementing fuel stock. Corn fuels such as ethanol were regarded as helpful and soon there were federal subsidies for growers and states mandated percentages added to gasoline.
Missouri was among the first, requiring gas to be 10 percent ethanol, and is now contemplating repeal of the mandate. Ethanol production reduces grain supplies available for food and for livestock feed, triggering more price hikes at the grocery store to go with those at the gas pump. Nor is ethanol expected to bring down the price of gas or anything else any time soon.
In the meantime, the total tax on gasoline in Connecticut is the fourth highest in the nation, topped only by California, Hawaii and Nevada. The state levy in Connecticut is 29.7 cents a gallon and the federal tax is 18.4, bringing the total to 48.1. That’s an appreciable hunk of the average overall price of $3.79 a gallon.
The only clear thing in the entire gas “crisis” is that there is no easy solution. In the short term, drivers can rein in their expenses only by cutting down on consumption. Conversely, making gas a bit cheaper for a short time will only pander to our addiction to low-cost fuel and encourage increased consumption, much to the dismay of environmentalists. In the long run, we will have to look for long overdue government and industry commitment to developing alternative energy sources and production of vehicles that are more fuel-efficient.
Perhaps American drivers can be consoled by realizing that it could be worse. Gasoline sells for six or seven dollars a gallon in Europe. In the meantime, too, soaring gas prices will at least help us decide what to do with that magnanimous government gift, our tax rebate checks.
© Copyright 2008 by Hersam Acorn Newspapers
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