Smog envelopes the Vincent Thomas Bridge, a blimp and shipping yard cranes in the shipyards of the Port of Long Beach in Los Angeles. (David McNew/Getty Images)
What if you were told there is a policy prescription that not only pays for itself but is a ‘two-for’—actually a ‘multi-for’? No, I am not a politician nor a snake-oil salesman. I do plead guilty, however, for living inside the Washington, DC beltway and having earned—many years ago, I might add—a doctorate in economics. Before you conclude I’m an egghead, much of my career has been in the private sector, including the building of several commercial enterprises, and I’ve long stopped being considered an economist by my fellow businessmen and businesswomen. Oh, and I’m no wacko.
Here’s the policy prescription: As the Trump White House and the Congress try to turn their attention to tax reform and to increase investment to modernize the world’s largest economy’s embarrassingly sub-par infrastructure network, there is simply no excuse for them to not enact the addition of a specific federal surcharge to the retail prices of gasoline and diesel fuel. And, below, I propose a magnitude for one.
We can call it a tax, a fee or a surcharge—even a ‘duck’, as the late Richard Darman famously quipped just prior to his Senate confirmation hearing as President George H.W Bush’s nominee for Director of the Office of Management and Budget. The label is irrelevant, although politicians will surely argue vehemently for the least onerous sounding moniker.
My own view is that it’s best to think of it as the U.S. population paying a national insurance premium—one that can help stem both present-day as well as prospective, or intergenerational, human and economic losses due to the risks arising from our dilapidated infrastructure and our use of fossil fuels that emit greenhouse gases.
Why the need for such insurance?
Most people understand the concept that there are some products whose prices paid by those who consume them do not reflect (in whole or in part) the costs their use inflicts on others—whether in real time or in some later period. Everyone probably has a favorite candidate for such a product, with cigarettes perhaps being at the top of many lists. They are likely ranked highest because both the smoke produced is patently visible, and such smoke is known to cause cancer not only of the smoker him- or herself, but also potentially of third parties who neither paid for nor even smoked the cigarettes—commonly referred to a ‘passive smoking’.
The so-called social costs of passive smoking are not fully included in the price paid by the cigarette purchaser, although to this end, cigarettes are now highly taxed, which helps instill some monetary disincentive to cigarette purchases. And, beyond this penalty, cigarette smoking is also curbed through traditional ‘command and control’ measures: for example, banning smoking in certain areas or establishing age limits for the purchase of cigarettes.
It’s not far-fetched to suggest this is an analogous situation to the pump price of a gallon of gasoline or of diesel. The greater the amount of these fuels purchased for each automobile, truck, bus, train or airplane—among other uses—the larger are the social costs. These come in the form of particulate pollution and greenhouse gas emissions; wear and tear of road or rail surfaces and bridge and tunnel structures; traffic congestion, which leads to large numbers of hours not worked, diminishing both personal income and the economy’s productivity; and several other costs spread across society. In years past, when OPEC was an effective cartel able to exercise some semblance of control over world petroleum supplies and prices, these social costs also included the risk of sudden oil production cutbacks and price hikes, threatening our energy security.