Just yesterday we were paying $3.50 at the pump and ready to pay $4 or $5 if necessary. No blessing has ever come more disguised.If the gas price dipped low enough, Krauthammer would plow some of the tax revenue from the $3 "floor" into funding cuts in the Social Security payroll tax or the income tax. Neither of these strikes me as wise.
Now that we have lived with $3.50 gasoline, $3 seems far less outrageous than, say, a year ago. We have a unique but fleeting opportunity to permanently depress demand by locking in higher gasoline prices.
Put a floor at $3. Every penny that the price goes under $3 should be recaptured in a federal gas tax so that Americans pay $3 at the pump no matter how low the world price goes.
Why is this a good idea? It is the simplest way to induce conservation. People will alter their buying habits. It was the higher fuel prices of the 1970s and early '80s that led to more energy-efficient cars and appliances -- which induced such restraint on demand that the world price of oil ultimately fell through the floor. By 1986, oil was $11 a barrel. Then we got profligate and resumed our old habits, and oil is now $60.
The worst part is that much of this $60 goes overseas to foreigners who wish us no good: Wahhabi Saudi princes who subsidize terrorists; Hugo Chavez, the mini-Mussolini of the Southern Hemisphere; and (through the fungibility of oil) the nuclear-hungry, death-to-America Iranian mullahs. This is insanity.
It makes infinitely more sense to reduce consumption, drive the world price down and let the premium we force ourselves to pay at the pump (which begins the conservation cycle) go to the U.S. Treasury.
A better use for any unexpected revenues would probably be either: 1) additional federal aid for Medicaid (several states have cut services in recent years), or 2) shoring up the Social Security Trust Fund.