Lowman S. Henry: Gas Tax Cuts or Infrastructure Spending: A False Choice
As our ancestors labored in Philadelphia to write what would become the enduring Constitution of the United States, they were careful not only to divide power among three branches of government, but also to create a two-chamber national legislature with the specific intent to have the United States Senate being the “cooling saucer” to, as James Madison put it, “provide necessary closure” against passions.
The events of the past few months have indeed proven the wisdom of the framers in creating a federal government, which, while frustratingly slow at times, also does not act hastily and foolishly in response to transient events.
A perfect example is the set of cross-currents created by soaring fuel prices and the parallel need to invest in the nation’s infrastructure. The two are linked because gasoline taxes, federal and state, are an important source of funding for the maintenance and improvement of our roads and bridges.
Last month, when the Fern Hollow Bridge in Pittsburgh collapsed into the valley below, the need to invest more money in infrastructure topped the national agenda. Congress, in a rare surge of bipartisan support, passed a mammoth infrastructure bill that directed most new spending to the left’s radical environmental agenda, but indeed provided significant dollars for traditional infrastructure. .
Fast forward a few weeks and the federal government’s two-year spending orgy has sparked hyperinflation, with prices for basics like groceries and gasoline rising exponentially. Gasoline, as well as natural gas and heating oil are particularly sensitive products for consumers.
Searching for a scapegoat, the Biden administration is trying to blame soaring gas prices on the Russian invasion of Ukraine. The facts are that domestic oil and gas production was drastically reduced in 2020 and 2021 due to lower demand as people sheltered in place during the COVID-19 pandemic.
But, as demand returned to normal, production did not. Indeed, the Biden administration has waged a war on fossil fuels to appease environmental extremists in its electoral coalition. The cancellation of the Keystone XL pipeline, ban on drilling on federal lands, additional regulatory hurdles, among other factors, have impeded domestic supply expansion.
It is an indisputable law of economics that when demand exceeds supply, the price of the product increases. So despite the fact that the United States is sitting on more than enough gas and oil to be energy self-sufficient, government restraints on the industry produced a shortage that triggered rising prices at the pump.
The cost of gasoline and home heating products has become so high that consumers are pushing elected officials to do something about it. This has resulted in calls at the state and national levels to reduce or temporarily suspend gasoline taxes. Tax cuts are generally a good thing, but such action here would be akin to treating the symptoms rather than the disease.
Connecting the dots: a few weeks ago there was a call to spend more money on roads and bridges, now the rhetoric is focused on suspending gasoline taxes – the very set of taxes that fund infrastructure maintenance. These conflicting demands are precisely the type of “passions” that our ancestors warned us against.
Ulrik Boesen, senior policy analyst at the Tax Foundation, points out that the federal gasoline tax of 18.4 cents per gallon “contributes the majority of the money to federal funding for roads and bridges. If you take that out for any period of time, you end up having to top that money off with more deficit spending. More deficit spending, he concluded, “will increase inflationary pressures.” In other words, a suspension of the federal gas tax would make the current historically high rate of inflation even higher.
Pennsylvania currently levies the highest gasoline tax in the nation, at 58.7 cents per gallon. This tax provides funds not only for the maintenance and repair of roads and bridges, but also for a variety of state and local municipal needs. A reduction or suspension of the state gasoline tax would require, as at the federal level, additional revenue from another source – or a temporary reduction in infrastructure spending.
It would seem that the growing demands for increased infrastructure spending and lower fuel taxes are running counter to the tide. But there is a more realistic and effective solution: addressing the root causes of the problem.
It is time for government at all levels to pull their boot from the throat of the fossil fuel industry and allow the free market to dictate the development of our natural resources. By allowing demand, rather than ideological politics, to dictate supply, we can reduce fuel costs while meeting our infrastructure needs.
Lowman S. Henry is president and CEO of the Lincoln Institute and host of the weekly American Radio Journal and the Lincoln Radio Journal. His email address is [email protected]