Greenspan Joins Movement Advocating Gas Tax Increases

<p>Alan Greenspan, Chairman of the Federal Reserve for two decades, is the latest Republican economist to join a small academic movement to increase gas taxes to address market imperfections so as to reduce energy consumption.</p>
October 13, 2006, 9am PDT | Irvin Dawid
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"Mr. Greenspan was hardly a proponent of raising taxes on energy to encourage conservation, a policy prescription generally associated with the politicians and economists of the left.

Until now. In late September, as he spoke to a group of business executives in Massachusetts, a question was posed as to whether he'd like to see an increase in the federal gasoline tax, which has stood at 18.4 cents a gallon since 1993. "Yes, I would," Mr. Greenspan responded with atypical clarity. "That's the way to get consumption down. It's a national security issue."

"Gregory Mankiw, the Harvard economist who served as chairman of President Bush's Council of Economic Advisers from 2003 to 2005, favored a higher gas tax before going to Washington, and has been banging the drum loudly for it since he left. On his blog, Mr. Mankiw has formed the Pigou Club, named for Arthur C. Pigou, the British economist credited with introducing the notion that taxes could be used to correct imperfections in the market. The roster of what Mr. Mankiw calls "economists and pundits with the good sense to have publicly advocated higher Pigovian taxes, such as gasoline taxes or carbon taxes," includes some of the usual suspects - Paul Krugman, a columnist for The New York Times, and Al Gore, for example - as well as unusual suspects like Gary S. Becker, the economics professor and Nobel laureate at the University of Chicago."

"What gives? Clearly, there is an emerging consensus among economists - right and left - that the nation would be better off, geopolitically and economically, if Americans used less gasoline. "Given the role that imported oil plays today, you can't continue to be a responsible economist and not talk about ways to reduce that dependence," said Andrew A. Samwick, chief economist on the Council of Economic Advisers from July 2003 to June 2004, and a professor of economics at Dartmouth. "If you are concerned about the external consequences of imported oil, then you should raise the cost of it." And free-market economists view a higher gas tax as a more elegant solution than, for example, raising auto efficiency standards."

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Published on Sunday, October 8, 2006 in The New York Times
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