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Real change

GB Geo-Blog

Real change

Barack Obama promised change during his campaign for the presidency. He continues to talk about change; however, he has changed very little thus far. His primary focus at this time appears to be health care. Unfortunately, he has not really set out what he would like the new model to be. As a result, the reform that might materialize will not be revolutionary. Instead, it will prove to be evolutionary and rather minor.

Talk is cheap. Action is much more difficult. Thus far, Obama has been mostly talk, for action will alienate certain groups of people.

If President Obama truly is an agent of change, and wants to do something dramatic, he should introduce a carbon tax which would guarantee a minimum price for crude oil of $200 per barrel in the U.S. — the tax would equal the difference between this level and the market price. The tax also should increase annually by 5% until the price for crude oil in the U.S. reaches $400 per barrel.

Detroit as we know it is dead, so this tax would not cause more damage to the auto industry. Indeed, the tax might accelerate the transition to alternative fuel technologies, and boost the fortunes of GM and other auto companies which are betting on battery powered vehicles.

He could use 20% to 30% of the tax revenues for investments in infrastructure, especially public transit, and the remainder should be returned in the form of personal income tax cuts. The revenues should not be used to tackle the massive budget deficits.

It makes no sense whatsoever for U.S. consumers to pay foreign producers of crude oil high prices and enrich speculators who created the 2007-2008 bubble in crude oil and have tried to replicate their success in 2009. The U.S. would be much better off economically and financially if it recycled high crude oil prices internally. A carbon tax will once and for all end the U.S.’s dependence on crude oil, and a guaranteed minimum price would create strong incentives to develop new technologies and alternative energy sources.

Equally important, the carbon tax would lead to a permanent collapse in the market price of crude oil, effectively destroying the ambitions of Iran, Venezuela (this might prove to be devastating to the likes of Oliver Stone, but who cares) and Russia. Obama, unlike his two predecessors, should go out of his way to embrace Putin and work with Russia. Low oil prices would make Putin much more receptive to working with the U.S. on a whole range of important issues.


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