Hillary Clinton and John McCain want to suspend the gas tax for the summer to provide financial relief to the American consumer. Is this really a significant savings or a political gimmick as many are saying? Here is one perspective:
Here is another opinion:
“You are just going to push up the price of gas by almost the size of the tax cut,” said Eric Toder, a senior fellow at the Urban-Brookings Tax Policy Center in Washington.
“I think it is a very bad idea,” said Gilbert Metclaf, a economics professor at Tufts University currently working with the National Bureau of Economic Research. “If we want people to invest in energy-saving cars, we need some assurance that the higher price paid for these cars is going to pay off through fuel savings,” he said. “It is a very short-sighted, counterproductive proposal.”
New York Times columnist Paul Krugman was similarly underwhelmed: “It’s Econ 101: the tax cut really goes to the oil companies,” he wrote on his blog on Tuesday.
Click Here for complete article
Senators John McCain and Hillary Rodham Clinton have hit on a new way to pander to American voters: a temporary suspension of the federal gasoline tax between Memorial Day and Labor Day. The proposal may draw applause and votes from Americans feeling the pain of nearly $4-a-gallon gasoline. But it is an expensive and environmentally unsound policy that would do nothing to help American drivers.
Leave aside that suspending the 18.4-cent-a-gallon excise tax would cost the deficit-burdened federal government $9 billion and that turning a tax off in May and on in September would be an administrative nightmare.
Even leave aside that nixing the gas tax would increase demand for gasoline — exactly the wrong response to global warming and rising energy prices. So wrong, in fact, that both Mrs. Clinton and Mr. McCain support policies that would cut carbon emissions and increase the price of energy. (Talk about voting for something before they voted against it.)
The fact is that drivers would, at best, see only the briefest reduction in prices at the pump. Gas prices rise during the summer season of heavy driving as rising demand pushes refiners to produce virtually at full capacity. If a suspension in the excise tax reduced the price at the pump, it would encourage even more driving. This would simply push prices back up. Oil companies would be grateful, drivers less so.
Certain realities need to be faced, even in an election year. First, oil prices are likely to remain high for some time as demand for energy continues to grow at a fast pace in China, India and other developing countries. Second, there is an urgent need to curb the world’s carbon emissions to address the threat of global warming.
Americans — like the rest of the world — must find ways to curb their use of fossil fuels. Higher, not lower, prices are an important way to spur the needed technological innovation and curb demand.
Of course, this logic escapes many politicians. New York State Republicans said they would try to pass a bill that would suspend the 32.4-cent-a-gallon state gas tax during the summer, blowing a $500 million hole in the state budget. Fortunately, it has no chance of passing.
The Bush administration’s answer to high gas prices — increasing domestic supplies — is equally simple-minded. On Tuesday, President Bush again lamented Congress’s unwillingness to open the Arctic National Wildlife Refuge to oil exploration or to allow more refineries to be built on abandoned military bases. He said efforts in Congress to impose restrictions on carbon emissions and tax oil companies’ windfall profits “would make energy even more expensive.”
There is not enough oil in Alaska to provide a lasting solution. And Mr. Bush’s prescription would do nothing to address climate change or quench the thirst for oil.
Fortunately, Mr. Obama has not caved to the rising calls for cheap energy and has refused to follow his rivals down this misguided path.
Until recently, Mrs. Clinton also seemed to get it. Like Mr. Obama, she supports tougher fuel-efficiency standards and a cap-and-trade system to reduce carbon emissions — which would have the effect of raising energy prices and reducing demand for gas. Mr. McCain supports a cap-and-trade program.
Neither Mrs. Clinton nor Mr. McCain have explained the inconsistency in their positions. We know pandering when we see it. We also know that suspending the gas tax for the summer won’t solve this country’s energy problems or even reduce the price of gas.