The Case For Obama's Transportation Plan

| by Nicholas Roberts
Oil Refinery In Anacortes, WashingtonOil Refinery In Anacortes, Washington

President Barack Obama's final budget proposal, amounting to a whopping $4.1 trillion, was nothing if not ambitious. One of the features of the budget that drew the most outrage from congressional Republicans was the president's proposal to pursue a $10-per-barrel oil tax to fund major reforms in the nation's transportation system.

While such a proposal is a political nonstarter, it is a profoundly good idea that has the backing of many prominent economists, including Gregory Mankiw and Larry Summers, The Washington Post reports.

Imposing a tax on oil production at a time when oil prices are plunging would serve three different purposes to help the economy. As Mankiw explains, the tax would help to combat the negative effects associated with the production and consumption of petroleum.

“Climate change is one of them. But even putting that aside, there are much more mundane externalities like local pollution, congestion, accidents associated with driving. There’s all sorts of bad stuff that goes along with oil that economists view as a kind of market failure. And the simplest way of fixing a market failure is to tax the activity that’s causing these adverse side effects.”

The other effect of the tax would be to hopefully raise revenues for the Highway Trust Fund, which depends on gasoline taxes and which currently has financial woes. Congress has not raised the federal gasoline tax since 1993, according to The Washington Post.

If implemented successfully, the revenues raised from the tax could be used to fund expansions for urban and suburban transit systems, viable investments in high-speed rail projects and a much-needed modernization of the nation's freight system, Global Trade Magazine reports.  

These would all be geared toward moving the U.S. away from fossil fuels, and would eventually help to drastically cut the 30 percent of the country's greenhouse gas emissions that currently come from the transportation sector.

Of course, a negative aspect of the president's plan would be that oil companies would undoubtedly pass on at least part of the tax to consumers in the form of higher energy bills or gas prices, especially at a time when many oil companies are being squeezed due to a global supply glut.

But ultimately, the U.S. drastically needs to update its infrastructure and be serious in doing so. Today's low oil prices make the economic climate as amenable to such changes as they can possibly be, even if there is absolutely no chance of such a proposal being considered.

Click here for the opposing view on this topic.

Sources: Global Trade Magazine, The Washington Post / Photo credit: Wikimedia Commons

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