# Are Gas Prices Draining the Economy?



## KenpoTess (Mar 16, 2004)

Are Gas Prices Draining the Economy?

(March 9) -- Consumers and airlines may be feeling the impact of higher oil and gasoline prices right now. But a number of economists believe going forward that higher energy prices will have a slowing effect on economic growth overall.

As of Monday, gas prices were just a penny shy of an all-time record, before adjusting for inflation ? the national average was $1.74 per gallon, up 22 cents from the beginning of the year. The previous record was $1.75 in August of last year.

Energy Department officials expect a new record soon. And many states are already reporting record highs ? Virginia, North Carolina, South Carolina, Florida, Mississippi, California and Nevada to name a few. California still has the highest average at $2.12 a gallon, with gas prices in Los Angeles at $2.18.


Kathy Bostjancic, senior economist for Merrill Lynch, says the higher gasoline prices act as a "tax on consumers and corporations." Consumers pay more to fill their gas tanks and heat their homes, explains Bostjancic, and this "diminishes their disposable income."

Merrill Lynch estimates that every penny increase at the pump is equal to $1 billion in lost consumer spending. Using that equation, the 20-cent-a-gallon increase at the pump this year is taking $20 billion in spending out of the economy.


Wiping Out Benefit of Tax Cut?

Another way to think about it? Merrill Lynch estimates federal tax refunds this year would total about $55 billion from February through May. That would be about 30 percent higher than last year and would, theoretically, give the economy another boost similar to the one it got last summer from child tax credit checks.

But Bostjancic says Merrill Lynch believes the higher pump prices will wipe out as much as a third to half of the economic impact of federal refunds. Oil economist Phil Verleger of PK Verleger in Newport Beach, Calif., agrees. "The higher pump price is taking it [impact of refunds] all away. It has struck out the benefit of the tax cut".


Airlines are feeling the impact right now, Verleger says, but they are unable to pass the higher cost for jet fuel on to customers. "Continental tried to initiate a fuel surcharge last week, but the industry would not go along with it," he notes.

Verleger and airline analyst Ray Neidl of Blaylock in New York say airlines have excess capacity and too much competition, and they will have to absorb the higher fuel prices.

Bostjancic adds businesses have to do the same right now. "This is a tax on corporations," says Bostjancic, "The environment is such they can't pass along higher energy prices to end-use consumers at this time. You are not going to see higher cookie prices in the stores."

Verleger suggests down the road continuing price increases "will put pressure on corporate profits, which might lead to more layoffs."



Gas is at $1.67/gal  in Martinsburg,WV

How much is it around you?


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## satans.barber (Mar 16, 2004)

KenpoTess said:
			
		

> Gas is at $1.67/gal  in Martinsburg,WV
> 
> How much is it around you?



1 US gallon = 3.7854118 litres
75.4p/litre = £2.85/us gallon
2.85 GBP = 5.16872 USD

so *$5.16/gallon*.

Think yourselves lucky!

Ian.


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## michaeledward (Mar 16, 2004)

In New Hampshire, we're paying about $1.70 per gallon.

Gasoline prices are not a tax on corporations, that can not be passed along to consumers, as asserted in the article. Gasoline is a cost of doing business. Businesses need to move their goods and services to where consumers can use them. If competative pressures will not allow a 'Fuel Surcharge' to be passed along to consumers, that is Capitalistic Markets at work. 

While I am paying more at the fuel pump, and therefore having less money to put into the economy, those corporations that provide us with gasoline seem to be having very good financial times. Hmmm.


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## TheRustyOne (Mar 16, 2004)

At Citgo, it's about $1.68 around here in eastern Maryland/Delaware area. Crazyness..

*goes hunting for pic sent to me*


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## KenpoTess (Mar 16, 2004)

Posting a pic for Rusty 
A good one too ~! *G*


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## OUMoose (Mar 16, 2004)

Unfortunately I drive a Lincoln, so premium gas is all I can use, to the tune of 1.85 - 1.99 a gallon...


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## Rich Parsons (Mar 16, 2004)

In mY opinion it does effect the economy.


If I have less in my pocket I spend less on gadgets and toys.

I still buy food and pay house and car bills, yet it is the little extras that get cut out.


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## Seig (Mar 16, 2004)

In this area, fuel oil is used alot for furnaces too.  I had a conversation with my landlord the other day.  Our home is 150 years old with out dated wiring.  I told him that I insisted he upgrade the wiring as fuel oil was costing me nearly $400 a month.  With fuel prices the way they are, I am having to put $1600 worth of motor into my car, as my truck only gets 12 miles to the gallon.  So with my 30 mile commute to work, it is costing me nearly $120 a week in gas.  So, if nothing were to change, I would have to budget over $880 just for fuel.  Yes, this has a strenuous impact on my consumer habits.  I can no longer afford most beef, hamburger is nearly $2.00 a pound, chicken or pork.  Seafood is cheaper, albeit healthier.  As Rich said, I cannot buy my toys and gadgets, I cannot go out to dinner more than once or twice a month. Whether anyone wants to acknowledge it or not, rising fuel prices effect all aspects of the economy.


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## Touch Of Death (Mar 16, 2004)

Seig said:
			
		

> In this area, fuel oil is used alot for furnaces too.  I had a conversation with my landlord the other day.  Our home is 150 years old with out dated wiring.  I told him that I insisted he upgrade the wiring as fuel oil was costing me nearly $400 a month.  With fuel prices the way they are, I am having to put $1600 worth of motor into my car, as my truck only gets 12 miles to the gallon.  So with my 30 mile commute to work, it is costing me nearly $120 a week in gas.  So, if nothing were to change, I would have to budget over $880 just for fuel.  Yes, this has a strenuous impact on my consumer habits.  I can no longer afford most beef, hamburger is nearly $2.00 a pound, chicken or pork.  Seafood is cheaper, albeit healthier.  As Rich said, I cannot buy my toys and gadgets, I cannot go out to dinner more than once or twice a month. Whether anyone wants to acknowledge it or not, rising fuel prices effect all aspects of the economy.


I'm a little hazy as to why, but my economics course explained that the price of feul has a direct effect on the price of land, and its from there that the rest of the economy is effected. Just a peice of trivial info floating around in my head.
Sean


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## Ender (Mar 16, 2004)

Interesting question, 

at first glance you would say yes because you are now spending more on gas than you had before. But people use substitution when the price of a commodity goes up. For example, if the price of beef goes up, then people will buy more fish and chicken. Since the price of gas goes up, people will start buying more economical cars and use less gas. Or they will start using public transporation more and polluting less. It's not always a bad thing. Low gas prices only feed our dependence on oil.


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## Bob Hubbard (Mar 16, 2004)

$1.89 for the cheep stuff.... premiums over the $2 mark.
Beef has been eliminated from the diet due to the insane prices being charged locally....and I'm really getting sick of chicken..... >_<


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## KenpoTex (Mar 17, 2004)

About $1.55 for Regular and the rest, who cares? I drive an old truck.  

I definately think the price of fuel has a big impact on the economy.  What really ticks me off is the fact that about 2/3 of the price of a gallon is tax.


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## michaeledward (Mar 17, 2004)

kenpotex said:
			
		

> I definately think the price of fuel has a big impact on the economy. What really ticks me off is the fact that about 2/3 of the price of a gallon is tax.


Please justify this hyperbolic statement. What state do you live in? How much is a gallon of gasoline? How much of that goes into the State tax system? How much of that goes into the Federal tax system? And for a kicker - How much money did your state receive in Federal Highway monies in the last fiscal year?

* * * * EDIT * * * *
As of March 9, 2004
The federal gasoline tax is 18.4 cents per gallon.
The average tax on gasoline, including Federal, State, and Local taxes is 41 cents per gallon.
http://www.cbo.gov/showdoc.cfm?index=5159&sequence=0

The New Hampshire total is 39 cents per gallon, which is not 2/3rd of the cost of a gallon.
http://www.energy.ca.gov/gasoline/statistics/gas_taxes_by_state_2002.html

As of 10/1/2003, the state of New Hampshire received 1.7 million dollars in Federal Highway Monies.
http://www.nhtsa.dot.gov/nhtsa/whatsup/tea21/tea21programs/fy03$tea21.html
* * * * END OF EDIT * * * *


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## Rich Parsons (Mar 17, 2004)

Ender said:
			
		

> Interesting question,
> 
> at first glance you would say yes because you are now spending more on gas than you had before. But people use substitution when the price of a commodity goes up. For example, if the price of beef goes up, then people will buy more fish and chicken. Since the price of gas goes up, people will start buying more economical cars and use less gas. Or they will start using public transporation more and polluting less. It's not always a bad thing. Low gas prices only feed our dependence on oil.


Ender,

What do I do with the new truck I bought. I sell it at a lose, to get a cheaper car. So, I ahve to loose that money and therefore not spend it into the economy. If I wait until the vehicle is old and on its' last leg then in the years inbetween  I spend less into the economy for other goods. The total is always the same, yet some itmes will nto be bought and therefore some people will not get paid and then businesses will go away and people will be unemployed.

Yes, the logic is not real straight, yet it is the same for both, they ignore certain aspects and or variables into the equation.

Now as to promoting cheaper cars and more fuel efficient vehicle. More has been done with legislation for emissions. By get the vehicles under control or closed loop controls then it is easier to control the emissions, and also thereby get better fuel economy. Yet, in the long run the price of vehicles go way up to deal with the increased sensors and computers. This increases the jobs, yet the average person cannot afford the new cars. Yet this is my pet peeve, many young people today refuse to drive an older car, they all want to have a new one even if they have to lease it. Add in safety requirements and the vehicle also goes up in price.  

As to mass transit I agree that it works, if you build an infrastructure to support it. Yet this costs money and is usually done by bonds and or taxes. You still pay for it. And the buses are deisel and produce more emissions then cars carrying single people. The trains if electric get their power from the electric power plants that burn sulfur coal, which produce more emissions and cause acid rain. If the trains are deisel then well see the bus comment.

So, we need cold fusion, which has been proven not a workable solution. We need fuel cells, that are still not consistantly over 50% efficient. People are working on them. Electric cars or vehicles, see power plants above to create the electricity, also add in the special HazMat requirements to dispose of the batteries. Nothing is easier. Yet, raising the price of gas may actually make some people think, it most likely will only make them upset and vote for a new person for congress and or president. Yet, if people would actually take the time to go research and get educated or the government took the initiative to educate people on this. Alcoa did recycling way before it was popular, why? Tax benefits to run commercials about recycling. 

Sorry for the rant just some of my opinions


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## michaeledward (Mar 17, 2004)

Gasoline is a tremendous bargain in our country. Dennis Miller was commenting that it is a pretty good deal; you spend a couple of bucks, and you can move a 3000 pound vehicle 20 miles. Gee, that is pretty neat, isn't it.

If we were to put higher taxes in place, would it be possible to reduce those 30 mile commutes? Why do we choose to live so far away from our work places? 

Currently, my wife drives our Mini-van, alone, to and from work. That's an awful lot of space to move 1 person. Why don't more of us use a scooter to transport our bodies to and from work (certainly, it would work today in NH ... 5 - 6 inches of snow)? 
http://powersports.honda.com/scooters/model.asp?ModelName=Metropolitan+II&ModelYear=2004&ModelId=CHF50P4

Happy motoring - Mike


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## Seig (Mar 17, 2004)

michaeledward said:
			
		

> Gasoline is a tremendous bargain in our country. Dennis Miller was commenting that it is a pretty good deal; you spend a couple of bucks, and you can move a 3000 pound vehicle 20 miles. Gee, that is pretty neat, isn't it.
> 
> If we were to put higher taxes in place, would it be possible to reduce those 30 mile commutes? Why do we choose to live so far away from our work places?
> 
> ...


Gasoline is not a bargain.  It is leverage.  That "couple of bucks" adds up to an amount that if not brought in line will cost me either my job or my home.  It is already costing me my lifestyle.  I live 30 miles from where I work because I do not make enough money to live closer with the cost of housing and I cannot work closer because then I would not make enough to afford my current housing.  Commutes for many are a necessary evil.  I travel I-81, motor scooters are not legal on the interstate.  All in all, the oil companies are gouging us and have us over a barrel to boot.


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## edhead2000 (Mar 17, 2004)

michaeledward said:
			
		

> Please justify this hyperbolic statement. What state do you live in? How much is a gallon of gasoline? How much of that goes into the State tax system? How much of that goes into the Federal tax system? And for a kicker - How much money did your state receive in Federal Highway monies in the last fiscal year?
> 
> * * * * EDIT * * * *
> As of March 9, 2004
> ...


Looks like VA has the 11th cheapest state taxes on gas.  Not bad. Total state and federal taxes per gallon: 37.3 cents

TEA-21 HIGHWAY SAFETY FUNDING, FY 2003 FUNDING for VA: $21,463,762.

So let me get this straight: In VA, you pay 1.7 cents less per gallon of gasoline in taxes, but we get 12.5 times the highway safety funding than New Hampshire? Good deal.


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## KenpoTex (Mar 18, 2004)

michaeledward said:
			
		

> Please justify this hyperbolic statement. What state do you live in? How much is a gallon of gasoline?


 Missouri, about $1.45-$1.55/gal. depending on when you ask.



			
				michaeledward said:
			
		

> How much of that goes into the State tax system?


 35.4 cents/gal.



			
				michaeledward said:
			
		

> How much of that goes into the Federal tax system?


 According to the info you posted: 18.4 cents/gal. 

Total: 53.8 cents/gal. or, slightly over 30% tax per gallon...but I _was_ exagerating...geez.



			
				michaeledward said:
			
		

> And for a kicker - How much money did your state receive in Federal Highway monies in the last fiscal year?


 Just under 20 million (using the link you posted).  Although I am trying to figure out why New York gets over 40 million while Texas (which is as large as New York, all of New England, Pennsylvania, Ohio and North Carolina combined.) gets only about 26.5 mil.


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## michaeledward (Mar 18, 2004)

Seig said:
			
		

> Gasoline is not a bargain. It is leverage. That "couple of bucks" adds up to an amount that if not brought in line will cost me either my job or my home. It is already costing me my lifestyle. I live 30 miles from where I work because I do not make enough money to live closer with the cost of housing and I cannot work closer because then I would not make enough to afford my current housing. Commutes for many are a necessary evil. I travel I-81, motor scooters are not legal on the interstate. All in all, the oil companies are gouging us and have us over a barrel to boot.


Seig ... I feel for you, really. And *individually* certainly, gasoline prices have the effects you describe. But as a *society*, we have built up our communities around the availability of cheap gasoline. Over the last 60 years, the size of the average new house has increased by almost 500 square feet per decade. While recently, (in my area) yard sizes have been decreasing, our society has tended to build OUT from the urban centers, rather than rejuvinate them. How many cities have barren wastelands in the downtown area, and all the business districts form a ring around the city, and all the workers live in suburbs around that ring. And as a society, we put in place incentives (tax breaks, building highways, etc) to encourage this type of growth.

We have built our lifestyle around the availability of cheap gasoline.

Two last thoughts:
Seems to me that Al Gore got ridiculed when he tried to address the problem of 'SPRAWL' in the last election cycle.
*If* the oil companies are gouging us, do you think the current administration is looking out for you and me, or the oil companies?


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## michaeledward (Mar 18, 2004)

kenpotex said:
			
		

> Total: 53.8 cents/gal. or, slightly over 30% tax per gallon...but I _was_ exagerating...geez.


Yes, I know you were exaggerating. But, I am a True Blue Democrat, and with the beatings we take whenever the word TAXES is mentioned, it gets my hackles up. We all like to complain about taxes, but so many of us think the system is unfair, when we aren't even sure what the system is.

I think it was Ian who posted the price of petrol in England .... now there, you probably have 2/3rds going to the state. Ian, do you know?



			
				kenpotex said:
			
		

> Just under 20 million (using the link you posted). Although I am trying to figure out why New York gets over 40 million while Texas (which is as large as New York, all of New England, Pennsylvania, Ohio and North Carolina combined.) gets only about 26.5 mil.


There is an explaination in the link as to how Congress disburses that Highway money. Some of it is based on a State matching program, so if Texas doesn't authorize Highway spending, it reduces the amount of Federal Highway Funds the state receives.
Here in New Hampshire, we do not have a seat-belt law for those over 18 years of age. This reduces the amount of Federal Highway money my state receives. 
Also, I think how many cars are on the road has a bearing on how much.
And of course, how much "juice" your congresspeople and senators have probably plays a part too.

Mike


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## TheRustyOne (Mar 18, 2004)

Delaware: #23   (41.1 total fed.&state)
Maryland: #23.5 (41.9   "     "   &  "    )

Delaware gets more in TEA-21 than DC *snicker*
 4,195,834

Maryland gets:  8,113,238 


Difference between Delaware and Maryland gas prices is maybe $0.01


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## Rich Parsons (Mar 18, 2004)

michaeledward said:
			
		

> Gasoline is a tremendous bargain in our country. Dennis Miller was commenting that it is a pretty good deal; you spend a couple of bucks, and you can move a 3000 pound vehicle 20 miles. Gee, that is pretty neat, isn't it.
> 
> If we were to put higher taxes in place, would it be possible to reduce those 30 mile commutes? Why do we choose to live so far away from our work places?
> 
> ...


I choose to live 32 miles by expressway or 28 miles by back roads away from work. Why? Economics. The house I bought is 2000 square foot for $153,000 brick ranh two car attacehed garage partial finished basement. If I would have bought this close to work I would have to pay about $225,000 or more.

What you are quoting is like the Bring 'em back alive drive 55 campaign in the late 70's. After lwoering teh speed limit to 55 where most of the V8's were more fuel efficient they realized that there were less deathes because of the lower speeds. Hence the drive 55 and Bring 'em Back alive. This was a nice side affect.

If we tax ourselves more, then we will generate a better car. Well in California you have to sell 2% of your volume as 0% emissions at the tail pipe. The only way is Electric ars at the moment. The technology is not there. Yet it was mandated by State Congress for 10 years now. Why has nto something been done to increase the technology to get us there? Answer, everyone has tried. They sell electric cars or strong hybrids a loop whole in the law, to meet the regulated requirement. Yet, it costs us more to make that electricity and it is much worse for emissions. Yet it is not at the tail pipe. I guess we need to go back to theose 50 MPG and 75 MPG carbeurators that all the car companies barried in Mexico to bring us Fuel injection whihc is harder to work on and costs more money.

I agree legislation would help, only if it smart legislation such as joint vetures and or proof of existing technology to be used, only it might not be cost efficient. Yet, we have no technology to just jump the MPH with out doing one of two things. Either you shift the cost to some place else, such as electricity and you loose travel distance, and or you loose safety.

Not many people can afford three cars, two commuter cars, and one for the family when everyone wants to go someplace.

Please do not take this as a personal slam. The bikes and scooters would work, given clear weather and moderate temperatures. I use my Honda Sabre on those days. When there is no snow I drive my sports car that gets 26 to 31 MPG versus my 4x4 truck that gets 16 to 18 MPG. 

I agree in large cities such as Boston and New York and Chicago where there is an infrastructure for buses and trains and or bikes such as in Nagoya Japan, this would work much better. It would require a major shift in the way people think in the U.S.A. This would require education of the population above what they are used too. They would have to understand Science (Chemistry, Physics, Engineering) and Macro Economics at a raised level of understanding. There would be cries from the political parties of rhetoric and peopel would not listen. I hope you can come up with an idea to help us here. I honestly do.

Now, to why most of those mini's will not work for me. I am 6'3" and large, ad I cannto drive this small cars. I cannot get my long legs underneath the steering wheel. There are vehicles out there that I physically cannot get into the driver's seat. This does nothing for me, in trying to by a real small car. Also when I did ride some scooters in the Bahama's the one I was on drained its' gas much more quickly then that of the ex-wife's. Why? because the poor little engine had to work harder jsut to keep up. Smaller is nto always better, just like bigger is not always better.

:asian:


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## michaeledward (Mar 18, 2004)

Rich Parsons said:
			
		

> I choose to live 32 miles by expressway or 28 miles by back roads away from work. Why? Economics. The house I bought is 2000 square foot for $153,000 brick ranh two car attacehed garage partial finished basement. If I would have bought this close to work I would have to pay about $225,000 or more.


I hear you. As I mentioned, our whole society is built around the notion of cheap gasoline. If gasoline was $5.00 per gallon, would you have purchased a home that was 30 miles away from your work place? If gasoline was $5.00 per gallon, would you have purchased a truck that gets 16 miles per gallon?

It's a chicken/egg paradox, and I am not really argueing for either position. But certainly, housing developments 30 and 40 and 50 miles from work centers are not uncommon. What would those house-farms look like if the daily commute cost $20.00 instead of $4.00?

If gasoline had been $5.00 per gallon throughout the 1990s and looking forward into the future, it didn't look as if it would change .... would the $75,000 price difference between your home, and one closer to work have been as attractive? How much cheaper would that house have to be, if fuel costs were significantly higher?

From my point of view (personally, as opposed to socieitaly), the 32 mile commute would be unbearable because of the time involved, regardless of the fuel costs.


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## Rich Parsons (Mar 18, 2004)

michaeledward said:
			
		

> I hear you. As I mentioned, our whole society is built around the notion of cheap gasoline. If gasoline was $5.00 per gallon, would you have purchased a home that was 30 miles away from your work place? If gasoline was $5.00 per gallon, would you have purchased a truck that gets 16 miles per gallon?
> 
> It's a chicken/egg paradox, and I am not really argueing for either position. But certainly, housing developments 30 and 40 and 50 miles from work centers are not uncommon. What would those house-farms look like if the daily commute cost $20.00 instead of $4.00?
> 
> ...


As you said Chicken and Egg.

If the gas was that expensive then everyone would have build closer and on top of each other. Then the price further out would have been even cheaper.
I did the math and figured I could support myself and it was cheaper to buy cars then it was to spend more for a house. I included my spread sheet of bills which had gas and maintenance I have paid over the years, to help in the cost determination.

Like I said an education level, that many are not ready to believe they need.


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## Cryozombie (Mar 18, 2004)

1.96 a gallon, as of yesterday here in the Near North Burbs of Chicago.

THIS is why I ride a motorcycle in the summer. 

1 week of driving to and from work and class in my car = 1 tank of gas, or apprx 10 gallons.

1 week of driving to and from work and class on my bike = 1 - 1 1/2 tanks of gas or apprx 5 gallons.


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## KenpoTex (Mar 19, 2004)

This is a little off topic, just have to vent a little...



			
				michaeledward said:
			
		

> Here in New Hampshire, we do not have a seat-belt law for those over 18 years of age. This reduces the amount of Federal Highway money my state receives.


 This is something else that ticks me off; the federal government using the highway funds to coerce the states into passing laws that the feds. can't (i.e. seat-belt laws and B.A.C. limits).


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## TonyM. (Mar 19, 2004)

They did exactly the same thing with the drinking age.


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