Taking a closer look at the full costs of energy acquisition and dissipation
I like the Mankiew idea. It's the same thing that Tom Friedman keeps saying, which he call the Patriot Tax. Many other countries-England, Spain, and others, have very high gas taxes. That's one reason why Europeans drive Vespas. If we had a high gas tax, it also could show that America really desires alternative energy.
Having a higher gas tax does have a lot of incentives but should not overly burden lower SES families. Eliminating income taxes for families with below a certain income would help this issue. I agree with Palin that we should focus on domestic energy resources. But overall, I'd have to pick Mankiw.
Being a fan of Mankiw myself, it's hard not to pick his side. However, statements such as "prosperity has always been driven by the steady supply of abundant, affordable energy" and "the answer doesn't lie in making energy scarcer and more expensive" just made my choice easier. Let's face it, Palin is definitely not worried about the environment or the US as a whole, but only about Alaska (what can be easily understood, yet not justifiable). It's interesting because he's advocating for the tragedy of the commons. By making energy cheap, you're obviously increasing its demand and, with it, all its negative externalities.It loosely reminds me of "the Dutch disease", but instead of having agricultural commodities versus manufactured goods, it's as if there were cheap, unsustainable energy (the easy way) versus alternative sources of clean energy/higher taxes on gas (the hard way).
I love the fact that Sarah Palin said "We can safely drill for U.S. oil offshore and in a tiny, 2,000-acre corner of the Arctic National Wildlife Refuge", exactly because these "tiny" reserves should cost as much as the market would pay for it, despite all the non-use values that can potentially benefit us and the future generations to come. Maybe she should read Krutilla as well.I completely agree with Mankiw on the $1 tax on the consumption of gas since it is an incentive-based structure in which a numerical measurement is introduced and can be quantified by people. Hence, I will go with Mankiw.To be fair, the cap-n-trade system has various detrimental flaws of its own and in no way is the perfect solution out there (not because of the reasons that Palin listed). One of the biggest arguments against cap-n-trade is that permits are created via CDM (Clean Development Mechanism) projects in which pollution is cut due to the introduction of the particular CDM and the reduction in pollution is then sold as carbon permits. The catch is that these CDM projects are mostly conducted in rapidly developing and industrialized countries such as China, India, and Brazil, who are also the biggest polluters out there. Hence, in essence, the rest of the world pays these polluters to cut down their own pollutions. In the context of Hardin's "the commons", this might be good for the overall planet, but this definitely creates much political opposition.
Mankiew has an interesting idea that could help the environment. Increasing the gas tax would bring with it many incentives, but also many problems. Mankiew believes that higher gas prices will cause people to use public transportation more or move closer to their job. People in low income areas will not have the ability to move closer to their job; it is ridiculous to think that people will move households because of a ten cent a year increase in gas prices. I think that the US should focus on domestic energy sources during the increase in the gas tax. Domestic energy sources would be cheaper, thus giving it room for the gas tax to increase with a huge jump in price. The US needs to focus more on clean energy for the future and end our dependence on foreign oil.
I definitely like Mankiw's thought process more than Palin's. Though I agree with Palin about exploring domestic alternatives, her argument isn't very well founded. Mankiw presents seven legitimate points; all of which make a tax hike sound almost desirable. If everything worked to plan and the tax caused people to use more public transportation and research gasoline alternatives, this idea would be the more environmentally conscious decision.
Mrs. Palin seems to be misinformed on the current state of oil and gas exploration within the United States. The oil projections for the North Slope of Alaska were drastically overestimated, and taping into the reservoirs there would not coincide with her goal of preserving the natural beauty of the environment. To reduce dependence on foreign oil, a goal both writers brought up, Mankiw's idea seems much more appropriate. Even if we tapped into a domestic reservoir large enough to reduce our dependence on foreign oil the likelihood that the production costs would be lower than that for foreign is slim given the US's higher labor costs. Mankiw's proposal has numerous positive benefits associated with the policy such as reducing pollution and I would therefore have to side with him.
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