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CNN Live Saturday

Some Suggest Raising Gas Taxes To Reduce Dependence

Aired October 11, 2003 - 18:40   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


CAROL LIN, CNN ANCHOR: Most drivers closely track prices at the pump. The cost of gasoline in the United States is actually much lower than in other parts of the world. Some people argue we should raise our gasoline taxes by as much as $1.00 a gallon in order to reduce our dependence on Middle Eastern oil and help pay the cost of rebuilding Iraq.
Now, that's a terrible idea in the minds of many others. Joining us is Jerry Taylor of the Cato Institute. I need to point out that we did invite somebody from the Sierra Club who was very much for the gas tax to join us, but they initially agreed and then canceled. So it is you and me, Jerry.

JERRY TAYLOR, CATO INSTITUTE: OK. Good evening, Carol.

LIN: Good evening. What do you think about this idea of a gas tax, $1.00 a gallon? Actually, Thomas Friedman just wrote about it in "The New York Times."

TAYLOR: Well, there's a couple of misperceptions here. There are a lot of people who think that if we reduced our imports of oil from the Middle East we'd be less vulnerable, say, to an OPEC price shock. Well, that just simply isn't true.

Even if all of our oil came from Texas and Alaska, a production cutback in the Middle East would increase the price of Alaskan or Texan crude just as much as it would increase the price of Saudi or Kuwaiti crude, because the world's just one big giant market. The oil sloshes around and goes to wherever the prices are highest. So there's really no way we can immunize ourselves from the effects of OPEC or from events in the Middle East by reducing imports. And any economist would tell you that.

LIN: But it's got to make people think twice about taking that extra trip to the store when they're paying, you know, as much as $20 more every time the go to the pump.

TAYLOR: Oh, yes. I mean, if you want to keep people from driving to the store and you want to raise gas prices $20 a gallon, that would certainly do it. I'm not sure that would be a very good policy.

And as we saw in California, Americans don't like it when the price of driving goes up a little bit. The increase in the car tax helped sack Governor Gray Davis. I think you'd see a similar public revolt if you tried to increase gasoline prices as much as, say, Tom Friedman at "The New York Times" thinks they ought to be increased. LIN: But look at what happened after the 1973 oil embargo, when there were gas lines around the corner, gas stations across the country. The fact of the matter is, it got the government talking about alternative fuels, and it got the car companies developing cars that were getting 30 miles to the gallon now.

TAYLOR: Oh, sure. When gasoline prices go up, people have an incentive to conserve. That's why you don't really need a lot of conservation programs. Consumers can save money themselves and can conserve without any help from Uncle Sam.

But what's interesting about the '73 crisis is why there was gas lines, why there was this sort of panic. It really wasn't the embargo; it wasn't the war going on, the Yom Kippur war at the time. It was government rationing.

LIN: All right. Well, what's the -- what is the worst possible thing that could possibly happen if there is another tax on gasoline to fund a cause like rebuilding Iraq?

TAYLOR: Well, the worst thing that happens, of course, is everybody's wallets get a little lighter because hundreds of dollars, or maybe even more than $1,000, depending upon how big the tax is, goes out of your paycheck every year that you would have otherwise had for college education or for a vacation or for buying a house if you rent. These are resources that people during a recession really need.

An increase in gasoline prices takes away resources from people. It could also help tip the economy back into a recession if the tax were large enough. I mean, we don't -- the economy isn't going to grow healthier the more we load taxes on it. It's simply not a good way to go.

LIN: Well Jerry, you know Governor Gray Davis had a solution that he was suggesting to Arnold Schwarzenegger to eliminate the California budget crisis. And that was simply to donate his salary from "Terminator 3". So maybe we should get more Hollywood stars to run for the White House.

TAYLOR: Well, maybe. You know they certainly have a lot of money.

LIN: There you go. All right. Thanks so much, Jerry, for joining us today. Jerry Taylor with the Cato Institute. He's the director of natural resource studies.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com







Aired October 11, 2003 - 18:40   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL LIN, CNN ANCHOR: Most drivers closely track prices at the pump. The cost of gasoline in the United States is actually much lower than in other parts of the world. Some people argue we should raise our gasoline taxes by as much as $1.00 a gallon in order to reduce our dependence on Middle Eastern oil and help pay the cost of rebuilding Iraq.
Now, that's a terrible idea in the minds of many others. Joining us is Jerry Taylor of the Cato Institute. I need to point out that we did invite somebody from the Sierra Club who was very much for the gas tax to join us, but they initially agreed and then canceled. So it is you and me, Jerry.

JERRY TAYLOR, CATO INSTITUTE: OK. Good evening, Carol.

LIN: Good evening. What do you think about this idea of a gas tax, $1.00 a gallon? Actually, Thomas Friedman just wrote about it in "The New York Times."

TAYLOR: Well, there's a couple of misperceptions here. There are a lot of people who think that if we reduced our imports of oil from the Middle East we'd be less vulnerable, say, to an OPEC price shock. Well, that just simply isn't true.

Even if all of our oil came from Texas and Alaska, a production cutback in the Middle East would increase the price of Alaskan or Texan crude just as much as it would increase the price of Saudi or Kuwaiti crude, because the world's just one big giant market. The oil sloshes around and goes to wherever the prices are highest. So there's really no way we can immunize ourselves from the effects of OPEC or from events in the Middle East by reducing imports. And any economist would tell you that.

LIN: But it's got to make people think twice about taking that extra trip to the store when they're paying, you know, as much as $20 more every time the go to the pump.

TAYLOR: Oh, yes. I mean, if you want to keep people from driving to the store and you want to raise gas prices $20 a gallon, that would certainly do it. I'm not sure that would be a very good policy.

And as we saw in California, Americans don't like it when the price of driving goes up a little bit. The increase in the car tax helped sack Governor Gray Davis. I think you'd see a similar public revolt if you tried to increase gasoline prices as much as, say, Tom Friedman at "The New York Times" thinks they ought to be increased. LIN: But look at what happened after the 1973 oil embargo, when there were gas lines around the corner, gas stations across the country. The fact of the matter is, it got the government talking about alternative fuels, and it got the car companies developing cars that were getting 30 miles to the gallon now.

TAYLOR: Oh, sure. When gasoline prices go up, people have an incentive to conserve. That's why you don't really need a lot of conservation programs. Consumers can save money themselves and can conserve without any help from Uncle Sam.

But what's interesting about the '73 crisis is why there was gas lines, why there was this sort of panic. It really wasn't the embargo; it wasn't the war going on, the Yom Kippur war at the time. It was government rationing.

LIN: All right. Well, what's the -- what is the worst possible thing that could possibly happen if there is another tax on gasoline to fund a cause like rebuilding Iraq?

TAYLOR: Well, the worst thing that happens, of course, is everybody's wallets get a little lighter because hundreds of dollars, or maybe even more than $1,000, depending upon how big the tax is, goes out of your paycheck every year that you would have otherwise had for college education or for a vacation or for buying a house if you rent. These are resources that people during a recession really need.

An increase in gasoline prices takes away resources from people. It could also help tip the economy back into a recession if the tax were large enough. I mean, we don't -- the economy isn't going to grow healthier the more we load taxes on it. It's simply not a good way to go.

LIN: Well Jerry, you know Governor Gray Davis had a solution that he was suggesting to Arnold Schwarzenegger to eliminate the California budget crisis. And that was simply to donate his salary from "Terminator 3". So maybe we should get more Hollywood stars to run for the White House.

TAYLOR: Well, maybe. You know they certainly have a lot of money.

LIN: There you go. All right. Thanks so much, Jerry, for joining us today. Jerry Taylor with the Cato Institute. He's the director of natural resource studies.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com