This is days old now — an eternity in blog years — but the blogosphere was all a-twitter earlier in the week about this paper by economist Jayanta Sen, arguing that a stiff tax on crude oil, far from bankrupting the US economy, would actually transfer more than $100 billion a year from foreign governments to U.S. consumers.
Yes, consumers would pay steeper prices for gasoline. But since all of the oil-tax revenue stays within the U.S., that money continues to stimulate the economy. Meanwhile, we’d import less oil — and, as a consequence, we’d export less money to pay for it. I’ll let Sen explain things:
[T]he wealth transfer savings for the United States … should be in the range of $108 to $152 billion a year. The new tax revenues … can be returned to the U.S. consumers as a lump sum, thus providing the economic stimulus. The reduction in crude oil consumption ranges from 7.13% to 10.30% while providing a stimulus (defined as additional purchasing power to consumers) to the economy of $95 billion to $133 billion a year.
The title of Sen’s paper: "A Tax to Save the US $100 Billion a Year and Solve Global Warming?" Now, cutting back U.S. gasoline consumption by 10 percent won’t solve global warming by any means. Still, it sounds like a nifty plan to me. Any takers?