The Republican National Committee launched this new Web video ad today criticizing Barack Obama for opposing the three-month “gas-tax holiday” advocated by John McCain and Hillary Clinton:
McCain wants to pay for the tax cut by shifting money from the general fund (already in deficit), while Clinton wants to take it out of the oil companies’ pockets. But no matter the bookkeeping, this RNC ad fails to mention that economists familiar with tax policy and gas prices say the plan is actually a holiday from the real world.
This gas tax supports a federal highway fund that’s already $3.4 billion in the hole. By some estimates, every dollar invested in highway infrastructre brings $5.40 in ecomomic benefits: less traffic, better safety, less vehicle maintenance spending (e.g., your shocks and struts). And the federal government says every $1 billion in highway spending creates almost 35,000 jobs; this proposed gas-tax cut would slash $9 billion from federal highway coffers, so that’s about 315,000 jobs.
On a more practical note, it probably wouldn’t lower gas prices all that much anyway. Economists say it would lead to more gas consumption, and an increase in demand will probably drive the taxless price up to near where it is with the tax now. Meanwhile, people will drive more, meaning more greenhouse gas emissions.
But, hey, don’t take my word for it.
Harvard economist Greg Mankiw, former chairman of President George W. Bush’s Council of Economic Advisers: “I don’t know any prominent economist who favors this McCain-Clinton proposal. More common is the reaction of a friend of mine (a veteran of the Clinton administration) who calls the idea ‘ludicrous.’ ”
Leonard Burman, senior fellow at the Urban Institute and director of the Tax Policy Center, (via Mankiw’s blog): “Yesterday I was on the NewsHour to talk about the gas tax holiday. I asked if there was another guest and the producer said, ‘We tried, but we couldn’t find anyone to argue the other side (that the gas tax holiday made sense).’ ”
Lee Schipper, an energy expert and a visiting scholar at the University of California, Berkeley (via the New York Times): “Higher demand just pushes the world price a bit higher, giving a sizable share of the tax refund to oil producers.”
Tom Firey, managing editor of the libertarian Cato Institute’s magazine Regulation (via the Cato Institute’s blog): (T)he real credit should go to Sen. Barack Obama, who has dismissed the idea entirely as a ‘short-term, quick-fix’ proposal. What Obama said last week about the very small monetary gain of McCain’s call for suspending the tax also covers Clinton’s nicely: ‘A half a tank of gas — that’s [their] big idea.’ ”
Gilbert Metcalf, a Tufts University economics professor and a research associate with the National Bureau of Economic Research (via Reuters): “I think it is a very bad idea… 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… It is a very short-sighted, counterproductive proposal.”
Lawrence Goldstein, an economist at the Energy Policy Research Foundation (via the New York Times): “You don’t want to stimulate consumption… The signal you want to send is the opposite one. Politicians should say that conservation is where people’s mindset ought to be.”
Max Schulz, senior fellow at the Manhattan Institute’s Center for Energy Policy and the Environment and a former senior policy advisor and speechwriting director for U.S. secretaries of energy Samuel Bodman and Spencer Abraham who helped roll out President Bush’s National Energy Policy in 2001 (via the Huffington Post): “I think it is close to political pandering… It is bad policy and political gimmickry. If you want to deliver relief to folks you have to do more than just this little holiday from the gas tax. You have to address what is driving the price of crude oil, even problems with the weak dollar. You aren’t going to win any points doing that, however. But you will get points if you get up and say let’s suspend the gas tax for a few months… I never have seen the wisdom of playing gimmicks games of the tax code.”