John Baden Joins the Pigou Club
By Arnold Kling
Rather than a bailout, free the Big Three. Dump CAFE altogether and replace it with an honest and surely more efficient energy tax. Mr. Obama could transcend stalemates and end the 30-year-old fraud of our CAFE fuel-economy rules.
It really would make sense for President-elect Obama, now that his political capital is high, to propose a higher gasoline tax. The economy has shown that it can survive gasoline prices about $2 higher than they are today. A $1 hike in the tax would be much better than the other “green” policies that are likely to be suggested. One approach would be to vote for the tax hike in 2009, but have it take effect in 2011. That would make it less likely that the tax increase would come during a recession or during an election year.
If the global warming scare should go away, it’s not so hard to repeal a tax. On the other hand, once you create a subsidy for “green jobs,” you can never kill it.