Gas Tax Repeal Plan: This Will Take a Bit of Explaining : To escape deficit inflation would require economic magic

Congressional Republican leaders plan to explain as early as today how they would offset the whopping revenue losses that would result if they succeed in repealing the gasoline surcharge of 4.3 cents a gallon enacted in 1993. The ideas they floated on last weekend’s television interview shows were not particularly helpful. Texas Sen. Phil Gramm claims $14 billion a year could be scooped up by slashing federal benefits to legal immigrants. House Republican Leader Dick Armey, also from Texas, contends that tons of money could be saved by squeezing waste out of federal education programs. None of this seems to suggest a credible GOP consensus on how to cut $30 billion-plus from the gasoline tax over the next seven years without boosting the budget deficit.

Only in an election year would anybody seriously suggest a gasoline surcharge repeal as a way to offset higher pump prices. No one, of course, enjoys paying taxes, but there simply is no compelling case for cutting fuel taxes now. From all the evidence, the recent jump in the cost of refined products like gasoline and jet fuel is temporary, and the market forces that will push prices back down are probably already at work. The price run-ups this spring can be traced to an exceptionally high winter demand for heating oil that gave refiners a late start in building up gasoline inventories; a decline in crude oil stocks held by the oil companies, partly in anticipation of lower crude prices; some loss of refining capacity due to accidents, and--something a lot of Americans don’t like to hear and politicians avoid talking about--a demand for gasoline that has been steadily rising because motorists are driving more, at higher speeds, in vehicles that overall are less fuel-efficient than a few years ago.

The American Petroleum Institute, a trade association, notes that gasoline prices last year, adjusted for inflation, were lower than at any time since 1918. Even with the increases of the last few months, pump prices remain relatively low compared with historical norms. Too low, some economists and energy experts would argue, because cheap fuel has helped encourage a troubling boost in demand. One result is that Americans now depend on foreign suppliers for close to half of the oil they use. The grim lessons about over-dependency of the 1970s are being forgotten, and the conservation ethic is slipping away.

The current higher pump prices, while irritating and, for some, burdensome, do not warrant rolling back either federal or, as some bandwagon-jumpers now propose, state gasoline taxes. That kind of encouragement to consumption is the last thing the country needs.