May 1, 2008
Economists Knock Proposed Gas Tax Break
Washington Post: Experts Say Plan Supported By McCain, Clinton Would Bring Little Savings, Cause Other Problems
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Candidates Target Gas Tax
Gas prices are busting Americans' budgets. With President Bush offering few suggestions, Hillary Clinton and John McCain have called for the federal gas tax to be suspended. Jim Axelrod reports.
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Democratic presidential hopeful Sen. Hillary Rodham Clinton, D-N.Y., speaks about gas prices as sheet metal worker Jason Allan Wilfing puts $63 worth of gas into his pickup truck, Wednesday, April 30, 2008, during a campaign event in South Bend, Ind. (AP Photo/Elise Amendola)
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A growing chorus -- including a top congressional Democrat -- labeled Sen. Hillary Rodham Clinton's proposal for suspending the federal gasoline tax ineffective and shortsighted yesterday, even as she continued to paint Sen. Barack Obama as insensitive to drivers' woes for not endorsing the plan.
The Democrats' clash on the issue has emerged as a flash point in the week before the presidential primaries in Indiana and North Carolina and is emblematic of the broader contrast that the candidates have presented: Clinton says she would make immediate bread-and-butter fixes for struggling Americans, while Obama portrays himself as a truth-teller who would bring a new kind of politics to Washington and produce more lasting change.
Backing up Obama's position against Clinton's proposal to suspend the 18.4-cent-per-gallon tax for the summer is a slew of economists who argue that the proposal, first offered by Sen. John McCain, the presumptive GOP nominee, would be counterproductive. They argue that cutting the tax would drive up demand for gas at a time when the supply is tight, which would mean that the price at the pump would drop by much less than 18 cents per gallon.
The tax suspension would, as a result, cut into the highway trust fund that the tax supports, a loss of about $9 billion over the summer, but also result in fatter profit margins for oil companies. Clinton says she would replace the lost revenue by raising taxes on the oil industry.
Harvard professor N. Gregory Mankiw, who has written a best-selling textbook on economics, said what he teaches is different from what Clinton and McCain are saying about gas taxes. "What you learn in Economics 101 is that if producers can't produce much more, when you cut the tax on that good the tax is kept . . . by the suppliers and is not passed on to consumers," he said.
Clinton has an ad running in North Carolina and Indiana that attacks Obama for his opposition to lifting the tax. Yesterday, she added visuals to her pitch by joining a sheet-metal worker on his ride to work, stopping with him at a gas station to fill up the pickup truck he was driving as her motorcade's SUVs idled nearby.
"I'm willing to give you a little more relief on a short-term basis," Clinton said. In Apex, N.C., her husband chimed in by telling voters, according to ABC News: "There's a difference between the two candidates here. Her opponent says, 'Well, she's just pandering to voters.' That's not true. Look, folks, there are people out here who are choosing every week now between driving to work and having enough food for their kids, between driving to work and paying their medicine bills."
Obama, who as a state senator supported temporarily suspending the Illinois gas tax in 2000, cast Clinton's proposal as a ploy that would, according to an estimate by the Congressional Budget Office, save the average family about $30 for the summer -- or, he said yesterday, "30 cents a day, which is less than you can buy a cup of coffee for at 7-Eleven." He began running a 60-second ad showing a clip of him responding to what he calls the "Clinton-McCain proposal" at a rally.
That's typical of how Washington works. There's a problem, everybody's upset about gas prices -- let's find some short-term quick fix, that we can say we did something even though we're not really doing anything," he says in the ad. "We cannot deliver on a better energy policy unless we change how business is done in Washington. . . . That's what you need from a president -- someone who's going to tell you the truth."
Obama is proposing to reduce the cost of driving by suspending purchases for the country's Strategic Petroleum Reserve. Over the long term he would also tax windfall oil profits and cap carbon emissions to provide rebates for low-income Americans and money to invest in renewable-energy research.
He supports ethanol, which is a boon to his state's corn growers but has driven up food prices.
Leonard Burman, director of the Tax Policy Center of the Urban Institute and the Brookings Institution, said the laws of the market argue against a tax suspension. "Every summer, the refiners are running full out. If the price fell, people would want to drive more and there would be shortages," he said. "It's a basic economic principle that if the supply is fixed, the price is going to be determined by demand."
Joining in the criticism was House Majority Leader Steny H. Hoyer (D-Md.), who said that the Democratic leadership of Congress has no intention of pursuing the summer tax suspension that Clinton touted. The move "would not be positive," he said. "The oil companies would just raise their prices."
Clinton stresses that she, unlike McCain, would push for a windfall-profits tax on oil companies to offset any benefit to them and replace the revenue loss to the highway trust fund. Burman called this "utterly incoherent," saying that a windfall-profits tax would over the long term only exacerbate the supply problems caused by lifting the gas tax, because it would discourage the exploration for and development of new sources of petroleum. "So a policy intended to lower prices, but which won't do that, will be offset with a policy that's likely to raise prices over the long term," he said.
Environmentalists noted that suspending the gas tax also would undermine efforts to curb global warming because it would increase the use of gasoline, a fossil fuel that contributes to climate change. It would also reduce incentives for buying fuel-efficient vehicles and developing alternative fuels. Relying on a windfall-profits tax to replenish the highway fund would leave less to invest in renewable energy, which is what Clinton had previously said a windfall tax would go toward.
More generally, they said, stoking ire about the cost of gas undermines efforts to build a case for limiting carbon emissions, which could raise prices at the pump. "It sends a confusing message," said Kevin Knoblauch, president of the Union of Concerned Scientists. "What's more helpful is if [politicians] help consumers understand that this isn't about near-term gas prices, it's about a comprehensive and smart approach to energy policies."
That leaves the question, though, of whether the proposal will score points on the campaign trail. In Kokomo, Ind., last week, Kathy Spier said the rising cost of gas is to blame for the 50 percent drop-off in sales at her three exotic lingerie stores. "They don't have extra money to spend on frivolous things," she said.
Political consultant Carter Eskew, a former Al Gore adviser, said that if he were advising Obama, he would have said: "If you want to oppose this . . . you're going to have to spend a lot of time and energy explaining.
"I don't think it's brilliant economics; unfortunately, it may be good politics. The smart people say 'It's stupid,' and the people who aren't as schooled say 'At least it will do something for me,'" he said. "I don't know that anyone connects the dots: that there have been a series of politically expedient decisions . . . that have added up to an economic picture that is not at all rosy and in fact fairly disastrous."
Staff writers Perry Bacon Jr. in North Carolina, Peter Slevin in Indiana and Jonathan Weisman in Washington contributed to this report.
© 2008 The Washington Post Company
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See all 154 Commentscanada is selling us the most oil, so we are paying cananda a higher price, not opec..get it and look at mexico, running real close to 3rd
The Number represents oil imports in the month of December 2007
CANADA 2,326
SAUDI ARABIA 1,686
VENEZUELA 1,382
MEXICO 1,322
NIGERIA 1,271
ALGERIA 600
ANGOLA 439
IRAQ 378
VIRGIN ISLANDS 369
RUSSIA 287
ECUADOR 201
UNITED KINGDOM 179
BRAZIL 178
KUWAIT 158
LIBYA 138
I agree that we get more Canadian crude and gasoline costs more than what we pay. By giving tax holiday on gasoline for summer we will have 10 billions less for bridge repairs, free repairs, etc. Budget deficit is too high at 400 billions and it increases further more. It is not good economics. Get tax increase that this Prez. gave to richie rich that helps up to 135 billions an year then fund for gasoline tax holiday if at all.
Posted by standlee5 at 09:53 AM : May 01, 2008
Because once they have it, they will never give it up or give it back. That''s how dem tax increases work. It costs the gov''t $12K to send a kid to a government school, and $8K for private (where the get a superior education.)
What''s their answer? Spend MORE MONEY.....WE''RE NOT SPENDING ENOUGH.
Instability in the Middle East has nothing to do with American oil producers profiting at the front and the back of the oil game!
The most serious damage would be loss of funding for Highways, etc., and, by extension, would cause greater budget deficits, increasing of the national debt, and interest on it.
However, most of the other bad effects could be prevented if the price of gasoline were to be capped to existing prices at all locations at the time of, and for the duration of, the suspensions, to prevent oil companies from substituting price increases for the tax cuts
I suspect that McCain and Clinton are too controlled by campaign donors to propose, or support, that.
I don%u2019t know if Obama would support it or not.
Posted by standlee5 at 09:53 AM : May 01, 2008
Reckless spending here or abroad ?? Which is it ? Cuz Dems are trying to spend money here, while McCain and all the other Repugs want it spent abroad - so which party are you placing the blame on ???
The most unavoidable damage would be the loss of funding for Highways, etc., and, by extension, would cause greater budget deficits, increasing of the national debt, and the interest on it.
However, most of the other bad effects could be prevented if the price of gasoline were to be capped to existing prices at all locations at the time of, and for the duration of, the suspensions, to prevent oil companies from substituting price increases for the tax cuts
I suspect/believe that McCain and Clinton are too controlled by campaign donors to propose, or support, that.
I don%u2019t know if Obama would support it or not.
lolll..thanks for pointing that irony out, CBS...the fact is that if there weren''t so many SUVs going back and forth to the mall and soccer practice gas wouldn''t cost so much...
Posted by RowdyTexan2 at 10:30 AM : May 01, 2008
Libs just slay me. Insane lib environmentalists, in cahoots with democrats, have had a moratorium on oil exploration in this country for over 30 years. They have prevented drilling off the Pacific as well as the Atlantic.
They have prevented refineries from expanding to meet demand and they have stopped nuclear plant construction.
What''s the lib answer to all this? Blae Bush and the ''big oil'' companies. You f**king libs are pathetic. To quote a favorite Rev of mine.......''your chickens have come home to roost.''
Either the tax pays for something related to driving on 1 gallon of gas, like road repair and environmental externalities and should not be suspended or it does not pay for something related to driving in which case it shouldn''t exist in the first place. Clearly the first case is true.
As a Libertarian, I am not keen on either McCain or Obama, but would be open to listening to them in debates before deciding. If Hillary wins on the Democratic side, I will unenthusiastically vote for McCain.
When the people who own the Federal Reserve in charge of fiscal policy also own the major oil companies, there is not much they can do!
Gas is not high because the weakness of our dollar. Gas is sold in U.S. currency. So except for IRAN which just kicked our Dollar to the curb! Prices are always balanced! Unless oil exporters raise their prices to offset the struggling dollar! Due to sales from international markets!
obama 08
The oil industry would then pass the cost on to the consumer, net result, no change in the cost of gas. So why do it then? I am not saying her plan does not make sense, I am saying explain to me how your plan is supposed to work.
This is wrong. Consumers from other countries convert their currencies to dollars to buy oil. If they can buy more dollars with the same amount of their currency, this is what they are calculating the value of oil in. Even if oil is sold in dollars on the world market, it is resold in local currencies and this determines the value to those who buy it. The value of oil in a local economy is partly determined by salary levels and the cost of other things in that economy, which is all priced in local currency.
Unfortunately economies don''t run on wishful thinking.
Sugar tastes good, but eating too much gives you Diabetes.
Actually, bad analogy. I guess the growing problems with Diabetes and obesity in this country show that people aren''t even willing to think about longer term consequences when it comes to health, let alone economics.
http://abcnews.go.com/Politics/Vote2008/story?id=4757257&page=1
When will CBS cover this story?
http://savagepolitics.com/?p=317
I saw this today, and HAD to share it with everyone. It is just a brilliantly researched and written list of inconsistencies with several of Obama''s stories. I think it should be done for ALL three candidates, but I guess this is a good way to start at finally looking at the candidates with some honesty.
http://savagepolitics.com/?p=317
How is she going to be able to pick up the phone @3AM when she cant even pump gas or pour coffee by herself?
"McCain-Clinton 08"
Senility and Dishonesty On Day One
Posted by jjp735i at 12:11 PM : May 01, 2008
............
And its just part of the typical economically illiterate Neo-Conservatives who feel that a measly tax break, for anything, will solve all problems.
I would guess pandering and lies about jobs and gas affect the lives of Indiana more than a crazy preacher (?)
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Then I guess you will put your money where your mouth is at and send back your tax rebate money. Just another bogus LIB statement to support their agenda.
You could also tie in the Iraq war and say this adds up to a pattern when it comes to Hillary of making decisions based on what''s politically beneficial to her rather than what''s good for us as a nation . . . maybe that helps to better paint the picture for people of how a seemingly good idea can turn disastrous.
Thank you for the Exxon propagandist line.
The oil companies have already proven beyond any doubt that prices will go up regardless of any market forces, so long as the politicians sit back and watch or play election year games which don''t adress the price gouging.
It was reported just yesterday that supplies have come in well above estimates. Do you see the market reacting in a rational and market-based manner to that news? We always hear that prices are based upon future expectaions. Why aren''t they going down today then?
So, 1/2 of $3.60 is $1.80.. we have $1.80 / gallon gas.. AbOUT what it was 7 yrs ago..!
ALL of these ninnies should STOP focusing on Gas, just ONE thing, and focus on a stronger US dollar..as FOOD, GAS, ENERGY is ALL priced in the international marketplace.. where we suck!
Get us a stonger US Dollar and SOLVE this problem.. don''t make it a stupid PR event.
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Just like saying I would vote for a Democrat if they had someone that was trustworthy.
Also build new modern oil refineries that make better use of the crude oil.
GET IT DONE FOR THE LONG TERM.
GAS IS NOT EXPEN$IVE!! The US Dollar is WEAK! The dollar is worth about half what it was 7 yrs ago, due to the Stupidity of Bush and Congress in running up the huge Budget Deficit, promoting a TRADE deficit, and ALL of them generally having a BRAIN deficit...
So, 1/2 of $3.60 is $1.80.. we have $1.80 / gallon gas.. AbOUT what it was 7 yrs ago..!
ALL of these ninnies should STOP focusing on Gas, just ONE thing, and focus on a stronger US dollar..as FOOD, GAS, ENERGY is ALL priced in the international marketplace.. where we suck!
Get us a stonger US Dollar and SOLVE this problem.. don''''t make it a stupid PR event.
It''s more than just Michelle being able to show that she feels peoples'' pain - is it just me or do other people feel like their marriage seems the most like everybody else''s out of the three?
- Mutual respect (no Monica, Vickie Iseman, sexual harassment suits, pointing out bald spots, retorting that your wife is a ''c*unt'', etc)
- give-and-take partnership (no husband stealing the limelight to defend his legacy, no pre-nups, no bringing home orphans without telling your husband after visiting mother Theresa, no hiding drug addictions, etc)
- struggling to keep it all going (knowing how to serve yourself coffee and gas at the 7/11 because you don''t have a chauffeur, having recipes you actually use because you haven''t grown up with a live-in cook, etc)
I couldn''t agree more. I think they''ll make the best First Family since the Kennedy''s.
Posted by BKS59 at 12:55 PM : May 01, 2008
I almost cracked up when I saw that. What kind of an idiot uses a truck like that for a 45 min commute (one way!) and then has the gall to bit*ch about gas prices!
Posted by SgtRDS
The Gores would have been great, but well . . . grrr! Anyway - hopefully yeah a lot of other ppl think so to, especially the people in Indiana and North Carolina! (I hope I hope!)
Posted by SamTheTVCat at 01:00 PM : May 01, 2008
So would the Edwards, but still I can''t remember the last time I saw a political couple, or really any other couple at all, who have responded to vicious and unfair attacks with such grace.
The Clinton-McCain proposal is nothing more than election-year pandering.
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