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$4 Gas Mandate a Poor Idea

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Thomas Friedman thinks the federal government should mandate $4.00 a gallon gas. Why? Because now that we’ve pretty much reached that price point, people are finally changing their habits, driving less and buying smaller cars. Friedman wants to make sure we don’t go back to our gas-guzzling ways.

For many years raising gas taxes to spur conservation has been popular among certain theorists. The plan would almost certainly work but is it fair and should the federal government be playing such games with the economy?

Friedman wants the government to raise taxes every time gas prices drop below $4. He would offset the tax hit on consumers by lowering payroll taxes for those making less than $80,000. O.k. Fine. But if we already feel obliged to question whether or not oil companies are manipulating gas prices for profiteering reasons, just wait for the price mandate. What oil company would ever choose to sell their gasoline for less than $4 a gallon when doing so would give them absolutely no competitive advantage?

A mandated price would be a boon to big oil’s pocketbooks while decreasing incentives those companies have for finding new fossil fuel reserves and developing cost-saving measures or alternative fuels. While encouraging Americans to own more fuel efficient cars is certainly a good thing, the law of unintended consequences makes government price mandates a less than desirable option.

Of course, this debate may be moot. High gas prices could very well be here to stay, at least long enough to significantly change American car buying and driving habits. At this point, we’d be better off letting the free market work its magic and spur innovation rather than trying to use the heavy hand of government to force an outcome that could be riddled with negatives.