Unveiled in February, President Obama’s proposed budget includes hundreds of billions of dollars of investments in transportation, from mass transit to self-driving cars. What may be most notable about the proposal, though, is the way he proposes to pay for them: with a $10 per barrel tax on oil.
Leaders in Congress have already called the proposal dead on arrival, but the idea should not be dismissed so quickly. Oil prices remain low, and economists tend to agree that a tax on oil is a smart idea. “There’s all sorts of bad stuff that goes along with oil that economists view as a kind of market failure,” said Gregory Mankiw, an economic adviser to George W. Bush and Mitt Romney. “And the simplest way of fixing a market failure is to tax the activity that’s causing these adverse side effects.”
These “adverse side effects” include climate change but also nuisances that may be easier for the general public to relate to, like congestion and car accidents. A tax on oil is an incentive to consider other modes of transportation. Rail travel, buses and, yes, even self-driving cars represent safer and more efficient ways to travel. Mr. Obama’s proposed budget also includes money for road improvements and repair (this is the United States, after all), but the amount no longer dwarfs investments in travel alternatives. It should be remembered, too, that better public transit is especially important for poor communities, where people do not have access to safe or reliable modes of transportation. Investments in public transit can be a way to fight climate change and serve people in need.