Jason Welker on May 1st, 2008 at 1:29 pm #
An accurate and entertaining analysis of the idiocy of the Clinton/McCain “gas tax holiday”. It could be called the “fiscal responsibility holiday” or the “summer of deficit spending”, or any other such name that more accurately describes the reality of this plan. My favorite part is hearing Hillary argue that any loss in revenues from a gas tax can be made up for by taxing oil profits. Okay, so we’ll suspend the gas tax, and increase the OIL tax… What the hell does she think gas is made out of? Fuzzy feelings and happy thoughts? NO! It’s made out of OIL! Any increased tax on oil companies will result in restricted output, higher input costs for refineries, and a tightening of supply, passing the cost of the new taxes right onto consumers. To make things worse, the expectation of the gas taxes return will spurn drivers to up their consumption while it’s still “cheap” over the summer, shifting demand out at the same time that supply is being restricted due to new taxes on oil companies. Now we’ve got the worst of both worlds.
In reality, the US government should begin ratcheting up gas taxes, which are by far the lowest in the industrialized world. Given Americans’ oil addiction, nothing could be worse for weening us from our “escapades” and 2-ton pickups than a pinch at the pump. In an era where $400 billion budget deficits have become acceptable, and oil prices have topped $120, a higher gas tax would create a powerful incentive for drivers to reign in their consumption, promote uses of alternative forms of transportation, and help narrow the endemic budget deficits that we’ve grown so complacent with. I was in Switzerland in December and didn’t see a car larger than a Subaru… gas there is some of the cheapest in Western Europe, at about $7/gallon.
Americans need to rethink what’s important here, and despite what McCain and Hillary say, it ain’t road trips in our Winnebegos… it’s fiscal responsibility and sustainable, renewable energy development. Suspending gas taxes works in the wrong direction on both these fronts!
Great article, thanks for sharing!
Sean on May 1st, 2008 at 3:36 pm #
Jason – Thanks! Yes I agree. Why guns and land yachts are so damned important to some people really escapes me; that requires an entirely different post about our consumerist, sound bite culture, no doubt. Even though I personally love automobiles as an enthusiast, I would love nothing more than to get rid of my car. I lived in London for almost a year without a vehicle and it was liberating, not to mention healthy. A summer spent in NYC without a car was also a fantastic experience. I think there is a hint of xenophobia about it, as well as vanity. I honestly believe if you took a truck away from some people, they would get trauma from it; their entire identity is wrapped up in empty symbolism of big trucks and ribbon bumper stickers.
I completely agree that the high price of gas has the benefit of eventually changing behavior (though it certainly takes a while!). The problem is when the reactionary political “solution” is more of the same crap rather than approaching it with different thinking. I also agree the gas tax should increase. Nothing but politics and extortion keeps the oil guys in business. If our market was truly “free” and meritocratic, we would already have eliminated our foreign dependence in oil by now. We need serious government leadership to help all the promising alternative energy technologies reach their potential. And I’m not talking about cellulosic ethanol, either (another hare brained, inane idea).
Thanks for the comment!
Derek on May 2nd, 2008 at 10:53 am #
Good article. Let’s rob Peter to pay paul. I say start rationing gas and pass legislation to reduce movie prices. To see a first run movie and get popcor you have to take out a loan. Then we can sit inside and watch movies, not drive and turn down out thermostats. Gov’t has it all wrong, it’s not big oil it’s Hollywood and go figure it’s in California…conspiracy I think so.
Sean on May 2nd, 2008 at 11:31 am #
LOL – funny thing is, some nut job exec at Time Warner Records actually proposed a music tax to compensate for music piracy (that presumably would be ear marked for them); forget about them actually having to cannibalize their value chains and embrace new business models like the rest of the world. So there is (almost) some merit to your conspiracy claims . . .
Welker’s Wikinomics Blog » links for 2008-05-02 on May 2nd, 2008 at 11:47 am #
[...] Republicans: War on Economics Here’s an accurate and entertaining critique of the McCain/Clinton gas tax holiday (tags: ta) [...]
Mo Morrissey on May 4th, 2008 at 2:50 pm #
While you’re probably correct, that consumers would not see the entire $0.184 per gallon, let’s also not delude ourselves into thinking that funds raised go only to road repair and conversely that those are the only funds for road repair. All government budget line items are fungible meaning that all the money raised (or swiped from consumers depending on your perspective) does not necessarily go to roads…which you correctly note are in poor shape as it is, so what difference will a few months of tax relief mean?
I also find it hard to believe that even assuming the $0.18 is passed on to consumers the difference between $4.00 and $3.82 for gasoline would increase demand – since we’re already seeing a decrease in demand, the argument might have more veracity if it is phrased in terms of mitigating any further decrease in demand rather than making the argument that it would have the effect of increasing demand. That just seems specious.
You make a fine argument for your position, I just don’t happen to agree.
Jason Welker on May 4th, 2008 at 7:11 pm #
Re: Mo Morissey – “I also find it hard to believe that even assuming the $0.18 is passed on to consumers the difference between $4.00 and $3.82 for gasoline would increase demand…”
If the price does fall due to the tax holiday, demand will not increase, rather quantity demanded will increase in response to the lower price. What COULD increase demand, however, is the expectation that come Labor Day, the tax will be reinstated… causing consumers do increase their demand while gas is still cheap over the summer.
I’m wondering what you mean by “we’re already seeing a decrease in demand”… Is it falling demand that has led to $4.00 gas? I doubt the intention of a gas tax holiday is to “mitigate any further decrease in demand”. If demand for gas were decreasing, politicians would not even consider susupending the gas tax, the price of gas would be falling on its own and our global warming problem would be well on its way to being solved!
Mo, your comments reflect a serious lack of understanding of the reality of the energy market and basic economic concepts… Anyone who argues for a suspension of the gas tax will find it utterly impossible to offer sound economic arguments, and must do so on purely political grounds.
The only sound justification of the gas tax was expressed by a representative from the McCain campaign on NPR’s OnPoint program the other day, when she stated that “60% of Americans favor a suspension of the gas tax”. Pure politics, bad economics…
Mo Morrissey on May 4th, 2008 at 7:57 pm #
Actually, my thought was that your post reflects a serious lack of basic economic concepts and of the energy market, but that’s neither here nor there. What I do think my comments reflect is a serious lack of currency with liberal politics.
For instance, $4.00 gas (or $120/brl oil) is not merely an expression of demand, it is also an expression of a weak dollar against a dollar denominated commodity combined with inflationary concerns. As foreign economies lose confidence in the American dollar, they invest in oil as a hedge. As long as the dollar is weak, as long as China’s and India’s economies are growing and inflation is a serious concern, oil will be expensive. So, the price of oil and subsequently gas is not entirely coupled with demand in the US.
The intention of the gas holiday isn’t necessarily to mitigate decrease in demand, that was simply a counter point to your assertion that it would increase demand – “Causing consumers to increase their demand when gas is still cheap…” I assume you mean, relatively speaking – or put another way, less overly expensive than once the government taxes the commodity again.
But the purpose of your post wasn’t to discuss energy markets or economic concepts, it was to justify a political leaning and/or attack. Which is fine – this is your house – but it does not necessarily mean that those who hold a contrary position don’t know what they’re talking about.
Sean on May 4th, 2008 at 8:22 pm #
Should you wish to address the keeper at the inn, that would be me. I do agree with Jason’s keen understanding of economics (and most economists of any political persuasion about this issue) of course.
You are right in that I am attacking the economics of neo-conservatism in an irreverent reductio ad absurdum manner (and their politics in general), however.
Going back to economics: a major factor in the supply/demand equation of energy is finite refining capacity. Your mention of a weak dollar is an interesting one, as a major contributing factor for the dollar’s decline is squarely placed at the feet of the current administration’s fiscal policies and mounting trade and budget deficits. I was going to rant about all that too ad absurdum but didn’t want to get carried away (that will be a book at some point). My main point is that the Bushies make up the rules (as with everything) rather than adhering to the laws of nature and somehow think if they believe their own BS long enough it will come true. They speak of being strong-dollar proponents yet their economic policies are completely the opposite. Following sound economics, the fastest way to dropping oil prices would be to curb trade and budget deficits. But it will probably require someone that believes the earth is older than 4,000 years to have the sense to get 4 out of 2+2 in my estimation. The current administration is hopeless and it appears that McSame is following in his economic policy footsteps.
Mo Morrissey on May 4th, 2008 at 9:45 pm #
Oops – It would seem I owe the inn-keep an apology, and so I apologize for responding to the wrong person. Nothing like going into someones house and insulting the party host for something another guest had done.
I can’t disagree with your last paragraph – and I wasn’t taking the position the Republicans have their crap together, only that there is more than one side to the story.
EF on May 12th, 2008 at 12:57 pm #
These struggles of ideas seem to me not only centered around a profoundly different Zeitgist that exists between generations, but also result from the tension between an idealized perception of government (“of, by and for the people”) and the realities of the modern military-industrial political economy (thus becoming “of, by and for the corporations and well funded special interests).
I also think that in the spirit of trying to be fair and learn from debate, we have done ourselves an enormous disservice by evolving into a two-party-only political system. We are thus eternally locked into polemics where the very framework of the debate is in voiding the opposite. By means of example, a white person (for the sake of most of these types of questions), is really a question of whether one is a “non-black”, or a “non-Hispanic” person (the reason, btw, I refuse ever to answer such questions, including being called out by a Harris County judge for failing to answer this question on a jury summons). The very nature of the dichotomy starts a circular feedback logic that is difficult to break free of. What I think we really need is some new dialogue entirely. Is it Obama? Possibly, though I wouldn’t hold my breath. He can’t change the very institutions he is beholden to, short of revolution. Is another civil war necessary before we truly reform our institutions to be more democratic? Are the Hummer and 5,000 sf house crowds going to really give up a little to make things work? I have my doubts . . .
So, it should come to no one’s surprise that a new generation of people concerned about profits AND responsibility, environment AND technology, etc, are routinely marginalized by a system of privileged, wealthy, power-elites whose purpose is to balance their constituents’ needs (again, corporations and well funded lobbying groups) against their more immediate selfish interest of being re-elected (term limits for Congress?). It is all-too-easy to see proof of one’s values in the trappings of material and political success, and to thus become aloof. In a similar vein, perhaps we should have a rule that before Congress can support the President in a foreign war, at least 10% of the Congress must have active duty immediate family in combat. Doesn’t anyone find it perplexing that the majority of the nation’s wars are fought by people who have no family members in Congress? Does that beg a question about representation – hello – Boston Tea Party?
Thusly, in this light, the debate on energy policy makes perfect sense. This is not a debate by scientists, entrepreneurs and civil society about well-informed, objective energy policy. It is, rather, a debate of voiding the opposite (“socialists vs. free marketers”), taking care of your constituents (Exxon Mobil, Chevron, etc), paying lip service to the future health of us all, and remaining nice and removed from it all (do you really think that anyone in Congress is THAT concerned about the price of oil except a few looking for a new cause?).
Like all human inventions and even nature itself, our society will survive or die by it’s willingness to learn, change and adapt. One thing never changes – that historical fact. Some days I think I see progress, many days I see a disaster that only massive disruption can address.
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