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Entitled to Indulge
Congress and the administration last week got around to agreement on a 1996 budget (the year is half-spent, anyway), and the deal is distinguished by an absence of progress to balance, and a total failure to control entitlement spending.
Oh, well. Two wrongs don't make a right, but maybe three will. Only days after punting the budget, our heroes have reached consensus on a brand new, open-ended entitlement: all Americans now have the permanent right to cheap gasoline.
Presumably intending to embarrass the President, and establish his tax-cutting credentials, Bob Dole started the game by proposing a repeal of a 4.3 cent-a-gallon gas tax, one which was rammed through Congress by Democrats in 1993.
Mr. Clinton, not to be cornered into defending his own policy, backed the repeal, and upped the ante: he'll sell some oil from the Strategic Petroleum Reserve (SPR) to push prices back down, and send Energy Secretary Hazel O'Leary to investigate this terrible spike in the price of gas.
It would all be funny if it didn't matter so much.
We already have the lowest gasoline taxes of any industrialized nation (roughly one-tenth those in Europe); the SPR is for genuine emergencies; the oil sale is in such trivial volume that it not only won't move the market but will reinforce the power of the market; and Ms. O'Leary, the holder of the world record for personal consumption of jet fuel, is no more likely to figure out the gasoline market than was her Chicago antecedent's cow.
Sure, gas prices are up, and up a lot in California (how many electoral votes out there?). Some of the causes are transient: a cold winter made refineries slow to switch from heating oil to gasoline, and I assume there is some gasoline gouging every spring. California deserves its problem: it just switched to a new, cleaner-burning gasoline without bothering to check supply.
The important parts.
The gas tax repeal will cost $5 billion in lost revenue each year, and neither Mr. Dole nor Mr. Clinton has offered a replacement. Presumably, Mr. Dole will advocate a cut in some uncuttable spending, and Mr. Clinton will pursue an unpassable tax. Net: bigger deficit. Not by much, but the financial markets are exhausted with fiscal footsie, and often express their frustration by raising interest rates.
Next, despite the recent spike to $1.24 per gallon, gas is still cheap -- absurdly so. In 1971 dollars, today's price is thirty-one cents a gallon, cheaper than gas was in 1971 before the first of the OPEC adventures. Remember filling up the 10-gallon VW? It took most of a precious five-dollar bill.
The worst part: by assuring us that cheap gas will be protected, Messrs. Clinton and Dole have encouraged our national indulgence.
The financial markets know full well that our problems with trade balance, inflation, and the value of the dollar are all traceable to overdependence on imported oil, and an attempt to limit the cost of gasoline will only defer the shock of ultimate reckoning.
Fact is, the world price of oil has often hit $23/bbl this spring, a one-third increase from the %14-18/bbl prevailing for most of a decade. Cold, refineries, gouging, and California notwithstanding, world oil supplies are tight. Right now.
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