Felix Salmon

How to structure a gas tax? You could make it a flat X cents per gallon; alternatively (and this is essentially what a cap-and-trade system does, too) you could make it Y%, with the tax increasing with the price of gasoline.

Today, Jim Surowiecki comes up with a third option, where the tax decreases when the price of gasoline goes up:

Rather than leave so much of our fate to chance, we’d be better off doing what politicians always say they want to do: lessen the U.S. economy’s dependence on oil. One step toward that would be to phase in a gas tax designed to smooth out oil’s spikes and plunges by keeping the price of gasoline fixed (the tax would rise when the price of gas fell, and vice versa).

Surowiecki makes a strong case that consumer behavior, when it comes to reducing gasoline consumption, only really changes when there’s a spike in gas prices. As a result, his proposal would seem designed to have the least possible effect on gasoline consumption, and on our dependence on oil. Sure, it’s a sensible way of raising government revenues and reducing the fiscal deficit.

Either you want to effect consumer behavior and reduce gasoline consumption — in which case you actually welcome price spikes. Or else you want to smooth out price spikes, in which case you slowly boil the frog (to use one of the stupidest metaphors ever) and keep consumption high. But you can’t have it both ways. Which is it to be, Jim?

Ryan Avent and the MPG illusion both examine the “cash-for-clunkers” bill from the perspective of how much in the way of carbon emissions will actually be saved when someone takes advantage of it. But there are a few sums missing in these posts, so I thought it would be worth filling them out. Here’s Ryan, for instance:

For passenger cars, the incentive is reasonably ambitious: those moving from less than 18 mpg to better than 22 mpg qualify for $3,500 for a four mpg improvement and $4,500 for a 10 mpg improvement.

But standards quickly decline as you move up in size. For SUVs and light trucks one qualifies simply by moving from below 18 mpg to above 18 mpg. A $3,500 voucher is available for an improvement of just two mpg, while a mere five mpg improvement gets you the full $4,500 available.

The full table is here, but only in MPG form. In terms of gallons of fuel used per 100 miles, things look a bit different. Here’s how things work out in useful gallons per mile, rather than silly miles per gallon.

To get a $3,500 voucher by trading in a car, you need to move from 18mpg to 22mpg — which is an improvement of 1 gallon per 100 miles.

To get a $3,500 voucher by trading in a small SUV/truck, you need to move from 16mpg to 18mpg — which is an improvement of 0.7 gallons per 100 miles.

To get a $3,500 voucher by trading in a large SUV/truck, you need to move from 14mpg to 15mpg — which is an improvement of 0.5 gallons per 100 miles.

To get a $4,500 voucher by trading in a car, you need to move from 12mpg to 22mpg — which is an improvement of a whopping 3.8 gallons per 100 miles.

To get a $4,500 voucher by trading in a small SUV/truck, you need to move from 13mpg to 18mpg — which is an improvement of 2.1 gallons per 100 miles.

To get a $4,500 voucher by trading in a large SUV/truck, you need to move from 13mpg to 15mpg — which is an improvement of 1 gallon per 100 miles.

So Ryan’s absolutely right: the criteria for SUVs are much weaker than the criteria for trucks. Why do you need to improve by 3.8 gallons per 100 miles in order to get the $4,500 voucher on a car, when you can improve by just 0.5 gallons per 100 miles in order to get a $3,500 voucher on a large truck? It doesn’t make a lot of sense.

We knew there was a lot of nuclear waste on Lehman’s balance sheet. But we didn’t know that was literally true:

Lehman Brothers Holdings Inc. is sitting on enough uranium cake to make a nuclear bomb as it waits for prices of the commodity to rebound, according to traders and nuclear experts.

At least uranium can in theory be used as a force for good, in nuclear power stations. Which is more than can be said for CDO-squareds.

(Via Wiesenthal)