There has been a great deal of discussion of the president’s address concerning the oil spill and U.S. dependence on fossil fuels. Keith Hennessey has ably analyzed the statement, and he offers a very astute reading of the potential political risks facing the president.

The President could have a quick, clean, bipartisan win on legislation that would eliminate the risk of another spill like this one.
Instead he is rolling the dice again, gambling that he can leverage the problems with drilling for oil in deep water to get legislation that also raises costs for power production. He is also choosing a path that he knows will provoke partisan conflict. Maybe he sees an electoral benefit to having the fight.

It’s not clear to Hennessey, or to me, that this electoral benefit will materialize. An essential part of the legislative strategy will be to conceal the costs of the transition. In part, that’s because of the uneven impact of oil dependence on households. The Department of Commerce produced a fascinating look at how middle-class households in the U.S. consume, and it pointed to a serious problem.

To provide a more vivid illustration of the choices facing middle-class families, the report’s authors present three two-parent, two-child families at three different income levels: $80,600 for the median family, $122,800 for the family at the 75th percentile and $50,800 for the family at the 25th percentile. For all three families the cost of owning and maintaining an automobile is staggeringly high. The 75th percentile family spends $15,400 a year on two large sedans or SUVs at a purchase price of $30,000 and drives them a total of 25,000 miles a year. If this sounds profligate, consider that mobility enables a family like this to earn as much as it does: Both parents commute and work long hours, both make trips to the grocery store to stock up on prepackaged meals. The family winds up devoting far more resources to mobility than to medical care, college savings or retirement savings.
The median family is hit even harder by car ownership. Though this family purchases less expensive vehicles, it has to drive just as much. The $12,400 it spends on mobility matches what it has to pay in taxes. And for the family at the 25th percentile, which still has to drive 25,000 miles a year, the cost of mobility dwarfs the amount of taxes owed: $7,900 for two small used sedans against $6,000 in taxes. Consider what happens when you ask these two families to pay a much higher gasoline tax. Or what happens when you offer a tax credit to buy a new fuel-efficient hybrid vehicle. Given how little these families are able to save in an average year, there is no asset cushion that would allow you to buy your way out of oil dependence. The Commerce report sheds light on the angst and anxiety caused by spikes in the price of gasoline, and why efforts by congressional Democrats to pass cap-and-trade have met such ferocious resistance.

As Lisa Margonelli has observed, this actually understates matters: as you might expect, these numbers vary by region. A carbon price would presumably put pressure on coal-burning power plants, and states like Ohio rely heavily on coal. Imagine a basket of policies that raised the price of electricity and gasoline for middle class households in Ohio, and then imagine how this basket of policies might shape electoral outcomes.

Margonelli thus recommends a series of policies that are designed to cushion middle-class households while nevertheless establishing an effective carbon price and raising it over time. And this is the basic idea behind the various cap-and-trade proposals. I don’t get the sense that the cross-subsidies work very well, which is one reason why I’m very skeptical about the latest round of climate proposals, with the possible exception of Senator Lugar’s very modest bill.

Personally, I wish the president had been more explicit about the kind of sacrifice he had in mind. Explain why families should have to pay more to drive and power their homes, and how he intends to use the resulting revenues to provide alternative transportation and electricity generation options. To be sure, this is not generally how politicians persuade the public to embrace their proposals, and it would be a marked departure from the president’s strategy for passing PPACA. But perhaps the public would find this kind of candor refreshing.