Web Of Intervention

The outdated is the story of the farmer who had almost taught his mule to eat sawdust in place of oats—when the critter died. But a modernized version might tell of the motorist who tried to fuel his car with government in place of gasoline.

The 1-cent hike in the federal gasoline tax on October 1, 1959 brought the national average of state and federal gasoline taxes to 10.2 cents a gallon. In addition to these direct state and federal levies, there are corporate income taxes, payroll taxes, real estate taxes, and numerous other assess­ments by all levels of government, all along the line from production to consumption, that also are re­flected in gasoline prices. All told, well over half the retail price of gasoline goes for taxes. With every gallon of gasoline pur­chased, the customer must take at least a “gallon of government.” And motors respond no better to such a fuel mixture than does a sawdust-fed mule.

One clear consequence of the government-boosted price of gaso­line is the current popularity in the United States of small, fuel-conserving, foreign-made cars. Do­mestic auto manufacturers are do­ing their utmost to cope with the situation, by adjusting motor and chassis design and by other meas­ures which eventually will bring pressure upon the U.S. government to impose tariffs, quotas, and other barriers against auto imports. This illustrates how governmental interference with the market at one spot, as in the taxing of gaso­line, inevitably brings demand for corrective intervention at other spots.

The web of intervention also may be traced backward to the reason behind the ever-increasing gaso­line taxes: the now almost unques­tioned view that road building is a function of the government. The more roads demanded of govern­ment, the more taxes needed to de­fray mounting costs. One depar­ture from the free market method of providing the goods and services people want leads on to other de­partures—and to more substitu­tion of coercive intervention for voluntary production and ex­change.

Closely related to these matters of gasoline prices and taxes and intervention is The Question of Governmental Oil Import Restric­tions, examined by New York Uni­versity associate professor of eco­nomics, William H. Peterson, in a 69-page booklet published by the American Enterprise Association, August 1959, $1.00.

Dr. Peterson briefly traces the background and growth of govern­ment oil import policy since the launching of the oil industry a cen­tury ago at Titusville, Pennsyl­vania. The policy was essentially one of free trade in oil up through the end of World War I, the limited government intervention for the most part being to encourage the development of foreign sources of oil. The Great Depression marked a change of policy, however, with tariffs imposed in 1932 and import quotas the following year. Since then, the policy has wavered some­what through hot and cold wars, but culminated in a Presidential proclamation of mandatory im­port control, effective in March 1959, primarily on grounds that national defense requires virtually a self-sufficient oil industry.

Behind this argument lies (1) the fact that known domestic re­serves of oil have failed to keep pace with rates of extraction in re­cent years, (2) the fear of deple­tion of domestic supplies, and (3) the presumption that government protection against foreign oil would encourage exploration and development of new domestic re­serves at a faster rate than known reserves are being consumed.

Dr. Peterson’s analysis of these facts and theories finds no justifi­cation for restricting oil imports. “Quite the contrary;” he concludes, “study of the program in practice indicates that it is harmful to the foreign relations of the United States, disruptive to the defense position of the armed forces, de­pletive to domestic oil reserves, in­jurious to the vitality of the Amer­ican oil industry both at home and abroad, costly to American consumers, and finally it establishes precedents for further interven­tion incompatible with the precepts of a free society.”

So, we are faced again with these precedents for further inter­vention incompatible with the pre­cepts of a free society. The govern­ment is asked to build roads, the precedent for gasoline taxes, which in turn are the precedent for im­port restrictions against foreign-made cars. And who can say that high gasoline taxes are not also responsible for many of the gov­ernment regulations and controls over domestic output and imports of petroleum products? By the early thirties, state and federal gas taxes averaged more than 5 cents a gallon—28 per cent of the average service-station price consumers were paying. If that 5 cents—now doubled—had gone for gasoline in­stead of government, who is to know or say what might have been the effect on discovery and develop­ment of additional oil reserves dur­ing the past quarter century? And what was the effect of these taxes on exhaustion of known reserves and on imports of foreign oil? Would there have been more, or less, stringent prorationing of do­mestic crude oil production in the absence of gasoline taxes? Did the state and federal gas taxes have anything to do with the 27¹/₂ per cent depletion allowance made available to oil producers? And how do each of these and numerous other governmental interventions interact on one another? Just how would the property of taxpayers have been used had the govern­ment not intervened to deny that personal freedom of choice? No one knows or can know that answer, any more than anyone knows or can know how to govern the crea­tive activities of those other than himself.

All we can possibly know in this regard, supported by growing mountains of evidence, is that one governmental intervention leads to another in an endless chain of re­trogression from the best of which free men are capable. What peace­ful persons are forced to give and receive, through governmental in­tervention, cannot help being less satisfying than would have been the consequences of their volun­tary efforts, cooperation, and ex­change. For the effort expended in forcing individuals to produce other than as they choose is that much effort subtracted from the gross productive potential.

Mules cannot live on sawdust. Motors cannot run on government. Human beings cannot realize their potentialities for progress if re­strained and coerced. Coercive ac­tions are precedents for further intervention incompatible with the precepts of a free society.