The Wonderful Thing About Tgrs…

Michael Giberson

Martin Feldstein has a proposal for Tradable Gasoline Rations (TGRs) that is so incredible that it deserves its own song. I’m at work trying to adapt “Tiggers Song” (from Winnie the Pooh and Tigger Too) to the Feldstein particulars. Here’s how far I’ve made it, so far:

The wonderful thing about TGRs
Is TGRs are wonderful things!
Their tops are made out of rubber;
Their bottoms are made out of springs!
They’re bouncy, trouncy, flouncy, pouncy,
Fun! Fun! Fun! Fun! Fun!
But the most wonderful thing about TGRs is…

And then I get stuck, because I can’t think of a single wonderful thing about TGRs.

Do I want the federal government to ration gasoline? No. But wouldn’t this be an elegant way for the federal government to ration gasoline? You mean, kind of like an elegant way to knock your head against a brick wall? But, assuming you did want the government to ration gasoline, wouldn’t this be the way to do it? You mean, assuming I am an idiot, would this be a good way to ration gasoline? I grant that if I were an idiot, this might seem like a good idea.

Okay, okay, okay. I’ll stop. My less sarcastic reactions to the proposal lead to the following considerations:

Okay, we get “gas stamps” kind of like what used to be food stamps. All sorts of practical considerations are raised, and these have been discussed by others. (Follow the links from Lynne’s post or here or here.) How many “rights” are issued, who gets how much, and how are we going to be fair? Do prisoners on death row get TGRs, or is this another perogative that they have lost? How about someone who spends half the year in jail, do they lose half of their TGRs? How about one month? A week?

Who cares about criminals? What about people taking extended holidays overseas, they don’t need domestic TGRs do they? What about tourists visiting from overseas? They need them, but I guess they have to buy them on the open market. What about people visiting from overseas without official permission to be here? Guess you better have people show their papers when they buy or sell TGRs or try to use them at the gas pump.

Okay, TGRs just for adult citizens, except those currently incarcerated after being convicted of a crime. Simple enough. Now, what about diesel? Does a gallon of diesel cost one TGR, or a little more or a little less? Do non-transportation uses of diesel get special treatment (as in current tax policy), or are all diesel uses treated the same. What about ethanol? Politically, ethanol consumption appears to be counted as a good thing. Maybe we should create a Tradable Ethanol Obligation (TEO). Everyone is obligated to buy their fair share of ethanol. When you buy some, you run your TEO credit card through the machine and get your ethanol obligation account credited. At the end of the year, if you haven’t bought your share of ethanol, you can buy credits from some noble citizen who has purchased more than their “good citizen” share of ethanol.

Etc. Etc.

If gasoline consumption imposes a net negative externality at the margin, as serious folks have argued in serious papers, then let’s address that in a straightforward way: increase the federal gas tax and pay the persons suffering the externality. (Something like a double benefit for urban-dwellers with asthma, standard benefit for urban folks without asthma, half-benefit for suburbanites, and none for people in rural areas.) Recall that the standard economics remedy for an externality is tax the source and pay the sufferer. Taxing the source and using the funds for general expenditures is only half of the bridge to correct policy, and half of a bridge doesn’t get you across the river.

I guess I am only thinking of the environmental externality, but Feldstein also mentioned “national security” issues. I leave it to the reader to work out a way to distribute the funds in a way that addresses the national security externality of gasoline consumption.

Look, I agree that CAFE is a bad policy, but just because it is a bad idea to stab oneself in the hand doesn’t make it a good idea to shoot oneself in the foot. I agree that gasoline taxes are difficult to raise, politically speaking, but again that doesn’t make TGRs into a wonderful thing. Federal rationing of gasoline, no matter how well managed by the bureau of gasoline rationing at the U.S. Department of Transportation (or would this be a Homeland Security issue, like boarding airplanes?), simply isn’t the best, or second best, or even third best policy response available.

About the only good thing TGRs would do is provide the political class an object lesson in the complexity of the markets, but we already have plenty of those lessons, at least for those who can remember the 1970s. Feldstein is old enough. He should know better.