Can 300 economists be wrong?

When John McCain and Hillary Clinton suggested the 18 cent federal gas tax should be waived for the summer, over 300 economists signed an open letter denouncing the plan. These included four Nobel laureates, four current or past presidents of the American Economic Association, multiple past presidential economic advisers, and members of all political parties (not to mention many professors with whom I've taken courses).

I find it hard to argue against any tax cuts, even those intended to be only temporary. I suppose it is possible to design degenerate cases, but in principle any cut in taxes, especially when accompanied by a cut in spending, leads to a smaller and more constitutional government with less possibility of corruption and violations of our rights. Can you imagine a world where you weren't forced to pay for other people's retirement benefits, medical costs, and a foreign war of aggression? Can you imagine how much extra free time and money you would have? Probably more than enough to help pay the retirement benefits and medical costs of everybody you personally care about.

Remember: Your money belongs to you. The burden of proof is on the government to justify taking even a nickel. But this is not the consensus view. Politicians and, as we will now see, economists make the fatal mistake of assuming the uncollected tax revenue is money that belongs to the government. They see a tax cut as an expenditure by the government and they wonder if that is the best way to spend "their" money. It's like advising a mugger not to return a wallet to his victim because the mugger should really give the money to charity; the victim wouldn't spend it as wisely.

Keep your eye on this question: Whose money is it?

The economists make four points. "First," they say, "research shows that waiving the gas tax would generate major profits for oil companies rather than significantly lowering prices for consumers."

Let's suppose this is true. The basic economic argument is that there is not enough time during the summer for competition to provide enough of a new supply of oil to bring the pump price down; instead, while the price of gas will fall, it won't fall by much, since people will demand more at the lower price. Thus, much of the 18 cent drop in the cost to oil companies would merely result in extra profit. This is at heart a technological argument, since it assumes the oil companies would not be able to pump enough oil to satisfy the increased demand at the lower price. I don't know if this is true or not but I have no problem assuming that it is.

But is it relevant?

The federal government imposes an implicit surcharge on the amount you pay for gas at every station in the nation, ostensibly to build and maintain a federal interstate system of highways. This system was designed to mimic Germany's Autobahn, but it has been widely viewed as a failure, and rightly so. It costs too much, it collapses too often, and it would have been much better to just let each state build its own transportation infrastructure.

In short, the federal government has no moral justification to charge a gas tax. So waiving it, even if only for three short months, is like having a mugger go on hiatus. He should never come back, but at least you can relax for the next three months.

So let's stipulate the first argument of the economists but note that it is irrelevant. It is none of their business if the money not spent on gas taxes goes to oil companies or toy companies or music companies. It's not their money; it's ours.

"Second," the economists continue, "it would encourage people to keep buying costly imported oil and do nothing to encourage conservation."

Let's suppose this is also true but note the use of the word "encourage."

It sickens me when people assume the government ought to "encourage" anything. Being a free nation means letting people be free to make mistakes. If I don't want to conserve, that's my choice. If I want to overpay for foreign oil, that's my choice. If you don't like it, if you prefer to hoard the oil, then you go ahead and buy it with your money. Don't "encourage" me to give you mine.

"Third, a tax holiday would provide very little relief to families feeling squeezed."

How do you spell relief? Which families? This third point has little, if any, informational content. But let's suppose it is true nonetheless. The basic point the economists are making here is that it's not "worth it" to waive the gas tax because the poor would not benefit much. But even if true, that's not the deciding factor of whether a tax is appropriate or not. The deciding factor is whether the tax is legitimate or not to begin with. A federal, as opposed to state, gas tax is not.

"Fourth, the gas tax suspension would threaten to increase the already record deficit in the coming year and reduce the amount of money going into the highway trust fund that maintains our infrastructure."

A-ha! Here the viewpoint is clearest of all. The government has a "deficit," meaning it didn't quite collect enough in revenues to pay for its costs. They were "deficient" in getting enough money from you to pay for stuff.

That's the wrong viewpoint. The right viewpoint is that it's not the government's money. The problem is not too little revenue, but too much spending!

Even Hillary Clinton, in supporting a waiver of the gas tax, resorts to the wrong viewpoint. She says we will "pay for" the lost revenue with a "windfall profit tax" on oil companies. She has no right to pick and choose who should pay taxes.

The essential difference I have with these economists is the basis for deciding legitimacy. The implied viewpoint behind their argument, indeed all of their arguments, is one of a cost-benefit analysis. Here is how it works: Take a proposal, whether it is a tax cut or a new deduction or anything else. Then count up what it would cost and to who. Then count up who would benefit and how much. Compare.

In this case, they say oil companies benefit a lot, and the rest of us pay the price by not having enough money to maintain our highways. Therefore, we shouldn't do it.

The right viewpoint is one explained by Frederic Bastiat more than 150 years ago when he wrote a stunning little book called The Law. In observing the rise of socialism in France, he clearly described how to distinguish just laws from unjust laws. The test is simple: does it protect property rights (just) or does it enable plunder (unjust)?

A federal gas tax is an unjust law. Gas taxes, if any, should be levied by states that choose to so harm their own citizens. There should be no federal highways anymore than there should be federal bus companies, federal airlines, federal banks, or federal oil companies.

Eliminating an unjust law, even if only for a while, is a good idea. It's not a question of economics. It's a question of justice, morality, beauty, peace, decency, and constitutionality. And if you disagree, if you emotionally hate the profits the oil companies are making, if you side with the hundreds of legendary economists, ask yourself this: Would you support imposing a 99 percent tax on the wealth of Bill Gates? It would barely harm him and it would benefit everybody.

This is a battle of viewpoints, far greater in importance than a few cents at the pump. We have to remember that it's our money, not theirs. No matter how hard they try to make us think otherwise.