US economy- Higher gas tax could help solve U.S. economic woes - by Amy Myers and Kenneth Medlock
President-elect Barack Obama will likely move quickly to offer a stimulus package to aid the flailing U.S. economy. In doing so, as counter intuitive as it might seem, he might at the same time give strong consideration to adding to the package an increased federal gasoline tax and higher corporate average automobile efficiency standards (CAFE). Gasoline consumption is the single most important factor behind the rising American dependence on foreign oil. In addition to broader concerns of energy security, increased dependence contributes to a worsening U.S. trade balance. In 2007 the U.S. oil import bill totaled $327 billion and it was around $450 billion in 2008. In fact, the U.S. oil import bill is accounting for an increasing share of the overall U.S. trade deficit. The associated financial burden reduces the value of the U.S. dollar and creates challenges for the U.S. economy. Massive financial transfers to oil producing countries as oil prices rise have also created global “hot money” investment bubbles, such as those that have plagued the financial system in recent years and contributed to the current U.S. banking and financial crises. A higher gasoline tax could accomplish several goals at once. For one, it would signal that the administration understands that improving the U.S. balance of trade is important to the longer-term health of the U.S. economy. A stimulus package without such a signal could portend a weaker dollar and higher inflation, which would only serve to exacerbate the situation in the long term.
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