A Foreign Policy Worth Paying For
From the August 18, 2003 issue: But the Bush administration doesn't have a plan for doing so.
Aug 18, 2003, Vol. 8, No. 46 • By IRWIN M. STELZER
Would such a tax hurt the economy? Perhaps, but not certainly. For one thing, if we really believe that a pacific Middle East is in our interest--among other things we would no longer have to police the Gulf and be prepared to defend oil-rich monarchies from takeover by anti-American Islamic fanatics--the long-run benefits should vastly exceed the short-run costs.
For another, if the OPEC cartel believes that the current price of $30 per barrel maximizes its profits, and that a higher price will curtail demand for its oil, a $5 tax might force it to lower its target price by an equivalent amount. After all, OPEC routinely complains that the high gasoline taxes levied in Europe reduce the demand for its oil--which is another way of saying that the consumer nations' taxes reduce the producer nations' ability to raise prices.
That done, the administration can address the financial problems created by the triumph of compassion over conservatism. For starters, whatever happened to tax reform? A truly innovative tax program--one that taxes consumption rather than work, pollution rather than output, windfalls rather than rewards for risk-taking--might indeed yield more tax revenues to finance foreign and domestic programs without adversely affecting the economy's growth rate. But if even a fundamental change cannot pay for all that the administration would like to do, it would then have to face the hard job of confronting the American people with the necessity of making choices, allowing us to decide whether we love our new entitlements enough to pay for them.
Removing one's head from the sand can initially be blindingly painful, but a few blinks in the new sunlight, and one's vision clears. I'm told it works for ostriches; surely it would work for the Bush team.
Irwin M. Stelzer is a contributing editor to The Weekly Standard, director of economic policy studies at the Hudson Institute, and a columnist for the Sunday Times (London).