The Persian Gulf/federal deficit/gas tax connection

It looks great on paper, and I certainly think that people in the U.S. protest overmuch about gas prices. On the other hand, "sin" taxes are a huge can of worms. Do they reduce the "sin", should we rely on that income. And to take it to its logical conclusion, should we regulate and tax other "sins", such as prostitution and narcotics? I think yes, but boy let's watch the fur fly on that one.

So the Russians and the Gulf states are effectively financing our federal deficit with the dollars that we send them to buy oil.

the way I read it, its the Brits who have been financing our debt--using dollars they are getting from sale of (assets? goods? bonds?) to the Russians and Gulf States, which is a little different.

And if that is the case, the question is "why would the brits do this?" -- other than sentimental reasons, the only thing I can come up with is that Labour wants to convert to the Euro, and in order to accomplish that they need to make the pound/Euro exchange rate more favorable to Britain -- and holding too many dollars puts the kind of downward pressure on the pound that converting to the Euro looks like a bargain....

Nobody I know is driving around using gasoline because it's so cheap. Adding $1.50 to the price would not lower consumption, only increase costs for business and eventually everyone.

OT, A question I asked Karen:

"Karen, one thing Huckabee has promised is to abolish the IRS. Is that remotely credible?

I mean I understand that he intends (or says he intends) to eliminate the income tax and replace it with a sales tax, combined with some sort of a negative income tax for lower income people to offset the sales tax. But is there any reason to think that wouldn't cost as much or more to administer than the current system? I guess you can give it a name other than the Inland Revenue System, but we're still going to need a system to collect revenue. Then again maybe this is more a question for Justin Fox.."

P_lukasiak -- need to read again, the Gulf states and Russia are not getting goods in England, they are using English banks to funnel their purchases of our dept.

So basically China, Russia and the Gulf, literally own us.... and if they want to collect it will ruin our ecomony more effectily than a direct military action would. Only fools allow themselves to get into dept with bankers with an interest in harming us .....oh, for the days of the Clinton surplus.

Justin--I think you've officially joined Greg Mankiw's Pigou Club, which has advocated higher taxes for gas for a long time. Your basic premise is sound except for the political impact. If the Feds raised an extra $200 billion on gas taxes, would there be a balanced budget or would many more 'needs' get discovered?

Thanx Corinthia.

Any thoughts on why the "oil exporting countries" would be using British banks, rather than just buying our Treasury notes directly? Is there some sort of "buy $9 billion dollars worth of US Treasury Notes, get the next billion FREE!" promotion or something like that being run by the Brits?

I believe that governments need to tax the masses of their citizens into poverty. People will learn to live without much and will therefore learn how to enjoy life with next to nothing. Kings and Queens knew this. People were happier when they knew they had no chance at getting rich. The idea that one can get rich tortures the human mind more than the realization that poverty is a way of life.

P_lukasiak

My best guess is that due to embargoes -- and restrictions on certain golf states, it is not legal for them to buy directly (think Iran)-- or bad public opinion (theirs and ours)

As to why Russia is doing this? No ideal -- the writer of the article should have given reasons for this arrangement. With that much money involved there should be some pretty good reasons.