The Gas Tax Suspension: Political Pandering of the Worst Kind

This morning, I had to wake up to another article about John McCain's and Hillary Clinton's proposal to temporarily waive the gas tax this summer. That's it. I'm just going to have to come out and say it: this is a really, really, really stupid idea. Period.

I'm not an economist--far from it--but you don't have to be one to see the flaws in this plan. I'm not going to go into the details too much here, but for more check out this article from the Washington Post or this op-ed from Thomas Friedman. Also, Jake has a nice summary at Pure Pedantry. The intended purpose of this gas tax suspension is to supposedly lower the price that drivers will have to pay at the pumps, putting more money in the hands of consumers, encouraging an increase in gas production, and hopefully stimulating the sluggish economy. This is a total pipe dream, though, as basic economic theory dictates that under these circumstances, cutting out the taxes is unlikely to significantly reduce prices at all (see links above for details). Instead, steady prices and decreased taxes will just lead to larger profits for the oil companies. Such fuzzy, counterproductive, and industry-friendly economic logic seems perfectly at home in the Republican Party, but Democrats should be aghast that Clinton is even considering such a proposal.

The even greater absurdity here is that lower gas prices--as politically popular as they might be--are not a such a worthy goal for a society that is serious about addressing global warming, as they only encourage the same habits that have put us on the brink of environmental disaster (not to mention that they've also forced us into so many deadly foreign entanglements). If anything, we should be increasing the gas tax, not only as a tool to help curb emissions (currently, the US has one of the world's lowest gas taxes but highest gas consumption), but as a way to encourage further innovation in alternative fuels. Naturally, the increased tax revenues should go toward the development of renewable and cleaner energy sources. Of course, this is just a pipe dream right now as well, since Congress lately hasn't even been capable of extending basic tax credits for renewable energy sources.

Despite the flawed nature of her and McCain's gas tax suspension proposal, Clinton has been on the attack, continuing to try to paint Barack Obama--the one presidential candidate who has had the political will to resist such transparent pandering--as elitist and out-of-touch with the American people. (This was the subject of today's article.) Although this isn't out of character for her campaign, it's still striking just how cynical and desperate these attacks have become. At the end of the day, Clinton can say what she likes about Obama, but at least he's not out-of-touch with reality--as she seems to be--and hopefully voters won't lose sight of that fact.

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I agree that decreasing gas taxes is exactly the wrong way to go. Our country needs to get over the idea that we have a right to inexpensive energy. Increasing the gas tax is one way to do that, while promoting conservation. Goodbye Hummers, hello Smart Cars (which I'm happy to see more of, even in the sticks where I live).

agreed ... well said ... it's all about pandering, they know it has no chance of happening ... that way they can talk about it all they want and not have to deal with repercussions to the economy if it actually happened.

While a tax break may be pandering, the candidates proposing it are in touch with how much rural poor and middle class are affected by high gas prices. It will take many years to transition to a energy efficient society. It shouldn't be balanced on those who can least afford it. With the job market and housing market in disarray, options are limited to reduce gas consumption outside of reductions in unnecessary trips, car pooling, etc. We are already seeing the effects of high gas prices in food and other essential commodities, this will also impact those least able to afford it.
A tax increase is economic insanity, unless you are in favor of curbing emissions by throwing the economy into a deeper recession. We are at the beginning of a serious inflationary cycle, adding to it won't help. Gas demand is decreasing and will continue to do so as prices increase. In NYS we pay 31 cents state/local tax on a gallon. I'm all for seeing all other states come up to this level. In the meantime, hit up someone else for money to transition to a carbon neutral economy.
Finally, unless we have some serious carbon sequestration technology deployed in the next ten years, I imagine we are cooked.

The main point here is that a temporary suspension of the gas tax is not not likely to lead to any significant decrease in gas prices.