A remarkable thing is happening in the world of political intellectuals. On the left and the right and everywhere else, commentators are joining together in near unanimous condemnation the idea of suspending the federal gas tax this summer — an idea embraced by both John McCain and Hillary Clinton but not by Barack Obama.

Am I going to be contrarian and disagree with all of them? Well, no. It really is an asinine idea. I would differ on one side issue, though. Although on the whole I consider myself a strong supporter of Obama, I think he's getting way too much credit for being the one to stand firm against this "pandering" proposal.

As near as I can tell, Obama's main objection to the gas tax holiday is that it's too chickenshit. Here he is, quoted in a typical column, by Ben Smith:

So what are you saying, Barack? That if the gas tax holiday saved each American, say, five hundred dollars then it would be a good idea to defund transportation infrastructure, reward frequent driving and bad gas mileage, allow much of the windfall to leak to sellers and producers of gas, and generally interfere with the free market?

I'm also unimpressed by a little aside in a recent fund-raising email from the Obama campaign. (Yes, I'm on their mailing list.) It says:

I'm not anti-government. I think there are a lot of things government can and should do, but I'm not at all convinced that "reduce the price of gas" is one of them. Everyone is calling Obama brave for not supporting the silly gas tax holiday. I'll call him brave — him or any other candidate — when he says, "Yeah, I know people don't like high gas prices, but it's not the government's job to manipulate prices. We believe in the free market here, and for the most part it has served us very well. Now if there were some sort of monopoly pricing or market externality making the market less free, then sure, the government should step in to make the market fair again. But that's not what's happening with gas prices. What's happening is quite simple: global demand is increasing enormously and global supply is not increasing to go with it. When demand exceeds supply, prices go up. That's how the market works. The price is a signal to us that motivates us to shift away from use of a scarce commodity. If we use the government to squash that signal, it does nothing to help the underlying situation; it just makes us behave inefficiently. That's what brought down the Soviet Union."

The gas tax, in fact, is a pretty good tax. It's good not because it pushes the price of gas up or down. Rather the opposite. It's good because it serves the function of collecting money with a minimum of interference. In theory at least, the proceeds of the gas tax pays for our highway transportation infrastructure. This is better than funding it through general income taxes because gas use is a reasonably close approximation of use of that infrastructure: Directly, those who use the roads a lot pay more for them; indirectly, those who buy the products that use the roads for distribution pay more for those goods when the distribution costs are passed on. Compared to most taxes, it's relatively invisible and easy to calculate and collect. This is what every tax should aspire to be.

What should determine whether the gas tax goes up or down is not anything so ridiculous as a national energy policy, nor whether the pre-tax base price of gas gets too high or too low. What should determine the rate is how much money we need to maintain the highway transportation infrastructure. If we're short of transportation funds, we should raise the gas tax, so that it isn't necessary to draw from the general fund and thus have non-users subsidize users. If we have excess transportation funds and gas tax profits are being diverted to general expenses, we should lower the gas tax, so that users don't subsidize non-users.

Our treatment of the oil and gas economy is far from perfect. On the whole, the industry is subsidized. There are a lot of stupid tax deductions and credits unique to the oil and gas industry. (And as a tax professional, I can assure you they are far more baffling and impenetrable than the various alternative energy credits.) There is also the much more expensive indirect subsidization that comes from devoting our gargantuan military apparatus to ensuring a sufficient share of the global oil supply remains in the hands of regimes willing to sell to us. (I almost wrote "in the hands of friendly regimes", but history suggests something different: we don't actually care if they're friendly, just so long as they're willing to sell.)

Thomas Friedman makes the tax incentives the centerpiece of his column on the gas tax holiday:

Well, OK, but the key is that first clause. I don't want to use tax policy to shape energy strategy. Tax breaks are a terrible way to fund policy. We only use them because they're sneakier, and when politicians set out to do things that would be recognized as stupid if they were done openly, they have to do them sneakily. If it's really in the public interest to subsidize the domestic oil and gas industry (and it's not) then subsidize it directly. If it's really in the public interest to subsidize alternative energy research — which is arguable, based on the idea that the market is inadequate for such long-term capital investments — then let's subsidize it directly. But if we do, let's make sure the program is based on a plan to correct the market failure, not just on a vague moral principle of "wind and solar good, oil and gas bad".

Petroleum is not inherently evil. It is bad for a few specific reasons. If those reasons were to magically go away — ie, if it were suddenly cheap and plentiful, and burning it were no longer damaging to the atmosphere — we shouldn't then scowl and curse the twist of fate by which evil oil was rendered respectable (as one suspects some dedicated eco-activists would) but rather shout hurray and go back to burning petroleum with happy abandon.

But the problems are there, and they show no sign of going away, so we should address them. To the extent that burning petroleum products damages the environment, what you want to counter that is a general carbon tax, designed not to punish unpopular industries but to reflect the actual public harm as closely and simply as is practical. To the extent that oil is rapidly becoming scarcer, more expensive, and more burdensome on our foreign policy to secure its continued availability from abroad, yes, it behooves us to change our ways drastically and become less dependent on it. But for that, there is no need for any "energy policy". All we have to do is stop interfering with the market and allow the price to rise as high as the law of supply and demand lifts it.

With rising gas prices, the market is telling us something. Politicians should stop trying to stifle its message.

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