Last month, President Obama, while discussing his concerns regarding the record high cost of gasoline, stated there was no “silver bullet” to solve the U.S. addiction to oil. Further, he said the process will be long and his goal is to cut oil imports by one third by 2025 through a strategy that relies on alternative and renewable energy sources. With all due respect to the President, we need a solution now.

I think we are all aware of our country’s precarious condition. One of the major headwinds we face is being forced to accept rising fuel costs from a foreign monopoly. The overarching question is will our current condition be the norm and is it a harbinger of our impending decline in wealth and power in the 21st Century because of our addiction to oil?

America needs a straightforward, immediate plan that can provide a bridge to the long-term solutions advocated by President Obama. During the past two years several well respected organizations published reports on the American economy and infrastructure investment and concluded that the solution to jump-starting the economy is to create permanent jobs that can’t be outsourced by investing $750 billion over 5 years in rebuilding and repairing America’s transportation infrastructure. The U.S. Department of Transportation estimated that each $1 billion spent on the federal highway system would create 30,000 jobs. Thus, $750 billion over 5 years would create 4.5 million jobs which would reduce unemployment 33% or 3 points, bringing the unemployment rate down to 6%. This major increase in employment would ignite a sequential chain reaction in our economy. Tax revenues, which would increase from the additional wages as well as follow-on purchases of goods and services, would be used to pay down debt and restore America’s credit rating to positive. Demand for housing would stabilize and grow. This increased economic activity would propel an increase in bond and stock market indexes increasing the value of pension and retirement assets.

This all sounds good but the missing component in the solution is the money to fund the $750 billion infrastructure investment. The current federal fuel tax, which funds our roads and bridges inadequately and has not been increased since 1993, produces approximately $30 billion per year in total revenues. That’s $120 billion south of the $150 billion needed for our infrastructure. We are all well aware of the strong political opposition to any increase in the federal fuel tax. Both political parties have stated it’s “off the table” because, “The American people can’t afford it in this economic crisis.”

We need a politically acceptable viable option to find the necessary funds to invest in infrastructure, solve our economic crisis, and end our dependence on foreign oil. Currently the U.S. consumes 19.6 million barrels of oil per day, 70% of which is used to produce motor fuel. There are 42 gallons of oil in a barrel of oil. If a tax of 57 cents per gallon were levied, it would yield a total of $171 billion per year; 70% of that amount equals the $120 billion per year needed for transportation infrastructure. The remaining 30% of the tax revenue, $51 billion, could be used for repairing our water infrastructure. By taxing oil in the barrel in this manner, the burden of the tax would fall on the domestic and foreign oil companies who, depending on their competitive positions and strategy, may or may not pass it through to the American consumer as a price increase, but not a tax. In the likely event of a price increase, alternative energy companies and manufacturers of efficient motor vehicles would see their comparative competitive positions enhanced. Further, in order to offset any oil price increase to the American consumer, Congress could extend the January, 2011 employee social security tax decrease by several years.

Summarizing, a 57 cent per gallon tax increase on oil in the barrel, should be politically acceptable, will not burden the American consumer with additional net expense and will provide the following benefits that will flow from investments in infrastructures:
• Rebuilt, efficient transportation infrastructure
• Rebuilt, modern water infrastructure
• 4.5 million added jobs that can’t be outsourced
• Housing stabilized and increased
• Pension and retirement assets enhanced
• Federal debt reduction
• Energy independence initiated
• Global leadership enhanced

In order for this plan - this “silver bullet” – to be shot into the economic and geopolitical mix, your voice is the gun that is needed to bring it to the urgent attention of our political and industry leaders. I urge you to email your support of this “silver bullet” to your elected representatives.

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