The common thread here is anti-intellectual, populist demagoguery. Economists believe the gas tax suspension won’t help consumers. Under current market conditions, the after-tax price of gasoline won’t fall. (And the precedent this would set would be a disaster for the future of weaning Americans off of cheap, carbon-intensive fuel.) So the fact that economists or Tom Friedman may live in cities is obviously not relevant at all. I can imagine Clinton and McCain promising to solve the health care crisis by promising free government-issued leeches, and when doctors insist the leeches won’t help, they reply that it’s easy for rich doctors with their lavish medical plans to say we don’t need a solution.
Generally, betting on the intelligence of the American public is a bad move. But, like Noam, I think this is a great fight for Obama right now. Here’s how pointing out his refusal to pander on the gas tax helps Obama….
The story-behind-the story is that a very large part of the current non-functionality in American politics is due to the fact that one political party overwhelmingly prefers having problems to having solutions.
That way, they can create greater dependency on government (and them), and every election they can say that the [i]other[/i] party will take away your [Social Security, urban development block grant, clean air, student loan, whatever] — fill in the blank.
It’s no different with energy. America hasn’t built a new refinery since my now-graying son was a snotty nosed pre-schooler. No nuclear power plants, either. No drilling here, there, or anywhere.
NIMBY (not in my back yard) has, for one party, become BANANA (build absolutely nothing anywhere near anyone). That same party is pushing for an EPA ‘threatened’ designation for polar bears on the basis of habitat loss, which will thence allow them to litigate any and every attempt to produce more energy, on the basis of “global warming,” which I and many other geologists think is pure bunk.
Meantime they can continue to demagogue EEE-vil big oil (two-thirds of which is owned by union pension funds and such) for making perhaps a dime per gallon profit on gasoline, while governments take an average of 43 cents per gallon.
They [i]want[/i] high gas prices, because it upsets people, so they block real solutions to the problem — most recently, for example, by designating Canadian oil sands syn-crude unacceptable for use by the federal government or any of its contractors, and requiring the bureaucratic paperwork to prove the petroleum products purchased didn’t come for syn-crude.
Then they blame oil producers for the high price, say they’ll tax away any “illegitimate” profits, and continue to block real solutions, so they can continue to have the problem, but without having their fingerprints on it.
Remember a few years back when that same party said gas prices were too [i]low[/i], allowing people to drive too much? The same folks made a big political issue out of banks refusal to write mortgages in areas with a long history of defaults — then when banks were browbeaten into lending to those people and actually expected them to make their payments … attacking the banks as evil and predatory.
It’s all part of a very sorry pattern. Energy is just the latest manifestation.
Excuse me, but if the federal government temporarily stops collecting the gasoline tax, how is it that the price won’t go down by the amount of the tax? When my state has a weekend sales tax holiday, I can indeed buy stuff minus the sales tax.
folks, don’t get too worked up about this article – it’s just the ranting of another MSM journalist who is drunk on the Obama kool-aid.
#2 —
Because the price of gasoline tends to be much more volatile than the price of manufactured goods (probably because a certain portion of the demand is highly elastic). A reduction in the price at the pump (and gas taxes are included in the pump price, not added on when the sale is rung up) will tend to stimulate demand, which in turn will drive up the price, particularly when supply is fairly tight, as it appears to be now.
Okay, I get the supply and demand part. The price is going to fluctuate anyhow. I still don’t buy the idea that a tax holiday wouldn’t help at all. I doubt that the demand would immediately erase the tax amount.
The fact that the taxes are charged in the per-gallon price and not separately is probably why we have tolerated high gas taxes without uproar for a long time.
“A very large part of the current non-functionality in American politics is due to the fact that one political party overwhelmingly prefers having problems to having solutions” —Bart [#1]
Well, we certainly have one political party that expects to get something for nothing (i.e., government without taxes) and let future generations pay the bill for our current profligacy.
The reason why the gas tax wouldn’t work is there is still no incentive for oil companies to bring the price down. Instead, the money goes to the oil companies rather than to the consumer. The government loses revenue that would go to help infrastructure. The people don’t really get a decrease in price. But the oil companies get the difference.
My own feeling is that our oil prices are too low. The prices don’t include the costs of lots of externalities we take for granted. Perhaps if people purchased fewer SUVs – and used less oil – we’d see a reduction in price.
It is a good piece of analysis on how the issue may help Obama. Although I agree that Obama’s risk of trusting people’s natural intelligence is not part of the normal political playbook.
“This article [is] just the ranting of another MSM journalist who is drunk on the Obama kool-aid”
What an inane comment. If we’re going to have a government, it ought to pay its bills. Paying your way is the norm in adult life. In the case of a government, that requires taxes.
Taxing gasoline consumption is, under the circumstances, perfectly reasonable. It both raises revenue and (in the long term) marginally diminishes consumption.
Whining about the gas tax is silly demagogy—particularly coming from politicians and other bloviators with no politically realistic proposals for replacing the lost revenue. McCain and Clinton both know better than to join the whinefest.
As Bart has rightly pointed out, the gas companies make less than a dime on every dollar of gas they sell. (Exxon does a bit better; I assume that’s due to superior management). Some of that money gets reinvested in the company–oil exploration, replacement of leaky oil tankers and other machinery, salaries). The rest of it goes to the shareholders–75% of whom are pension funds, mutual funds and similar institutions.
Oil companies are engaged in a risky business–while they have constant demand, most of their supply comes from places with difficult political climates, and accidents and mishaps are expensive. While there are lots of people who want to seize “windfall profits” now, I don’t remember anyone suggesting that we should subsidize the oil companies during bad times, when oil was $10 a barrel, and the consumer was paying less than $1/gallon,even with all those taxes.
Greater demand might drive prices up, but probably not by the whole 18 cents/gallon (unless there were some other problem with supply). Besides, it’s not a bad thing for price to be determined by the demand of the total populace, instead of the demand of a bunch of bureaucrats.
Irenaeus–that political party that thinks you can have government without taxes must be very small–I’ve certainly never heard that argument. Now i do know of a major party that advocates lower taxes, in part because our historic experience is that when top tax rates are cut, government revenue rises , but clearly you have some other party in mind.
[blockquote]Generally, betting on the intelligence of the American public is a bad move.[/blockquote]
An interesting sentiment. Mr. Chait is surely burdened by a surfeit of
arroganceintelligence.I have a son-in-law who once worked as an engineer for a well known oil refinery. He stated that there are proven reserves in and in American offshores that if they were used would put the Saudis either in dire strates or out of business. He also referred to a claim by the coal companies that our proven coal reserves could last 700 years. Of course the refineries would have to update some of their rusting out 50+ year old refineries to keep going. Oh and as far as I can tell from reading newspaper articles there isn’t one fully pledged refinery in oil-producing countries. I really wonder where the money is going??
It is interesting that this story ran the same day as the announcement of a $38 MM settlement in the Minneapolis I-35W bridge collapse case (not counting the $234 MM cost of the replacement bridge). Where do Senators McCain and Clinton think that most of that money is ultimately coming from if not the gas taxes going into the Federal Highway Fund?
If they think the Fund is flush with cash, why do they think that necessary maintenance wasn’t—and isn’t—being done on I-35 and the rest of the federal highway system? Why do they think that the federal Department of Transportation is massively cutting back on its spending?
As of the last time I heard, federal “rescissions” or callbacks of previously authorized grants from the Federal Highway Fund to the Texas Department of Transportation have already totaled about $667 MM, with another $259 MM expected in 2008 and $600 MM in 2009. As a result, state highway construction in Texas (including federal highways maintained by the state and local projects assisted by the state) has completely stopped. The remaining funding (largely from state taxes on fuels) is not even sufficient to keep up with maintenance in a state with rapidly growing urban areas separated by great distances. All the other states are in a similar fix.
Unlike most taxes, the motor fuel tax (1) is actually related to the cost of providing the specific governmental service that it funds, and (2) can be legally avoided by many taxpayers. All other things being equal, heavier vehicles tear up the roads more than light ones. They also use more fuel and pay higher taxes. By driving smaller cars, moving closer to work, and/or using public transit, people can substantially reduce their liability for direct fuel taxes.
That is precisely what Europeans do. As of a few minutes ago, the average cost of petrol in Cambridge, UK, was 111p/litre, which is $7.96/US gallon. Diesel was 122p/litre or $9.07/US gallon. Most of the difference in price from the US is caused by additional taxation. Britons don’t drive unless they have to, which (not coincidentally) reduces the cost to government of building and maintaining additional roads.
Making gas cheaper by eliminating the fuel tax, even temporarily, will increase traffic, and thus wear-and-tear on the highway system, while simultaneously reducing the funds available to fix the resulting damage. Both Senator McCain and Senator Clinton know that, which is why their advocacy of a fuel tax moratorium can hardly be characterized as anything but demagoguery.
The gas tax cut is for three months, not forever. The people who oppose a brief tax holiday now, are the same ones who will be looking for the government to help out all the people with summer concessions, or souvenir shops, or restaurants near the shore, after they’ve had a dismal summer because of the tight economy.
“The people don’t really get a decrease in price.”
I would like to have the gas tax cut and take my chances on whether I actually “save” any money. I know for certain that I am not saving money when they tax me.
A major problem analyzing this issue is the near impossibility of obtaining or even calculating the true costs of alternatives, including both direct and indirect costs. E.g. while, as Dale correctly points out, trucks and heavier vehicles pay more gasoline taxes, the relationship is not linear. The last study I saw was that over 90% of the cost of highways is attributable to making the roadbeds strong enough for trucks. So the much smaller number of trucks can never make up the difference. This is just one example.
As a minor point, Dale, the I-35 bridge collapse was cause by a design flaw, not a maintenance issue.
If we don’t want coal belching smoke into the sky, and we don’t want petroleum products doing likewise, the obvious solution is nuclear power.
With any luck, the nonsensical “stimulus” package and the gas tax holiday aren’t really necessary, since the economy will soon repair itself.
#14 – perhaps you would prefer tolls on every road? That’s one fairer way to tax driving, rather than taxing everyone.
#16 – reminds me of Keynes’ adage. You’re right that the economy will “repair” itself – in the long run. But in the long run we’re all dead.
#17–At first glance, tolls look fairer. But they, like the gas tax, tend to be regressive taxes. Similarly, a gas tax holiday will make the most difference to lower income families.
As for the economy–in this case, the “long run” seems to be 6-9 months. There are many signs that we are already beginning to pull out of the recent downturn (which never made it into recession territory).
Speaking of Keynes–did you know that he advocated a top tax rate of only 25%, because he believed the burden of greater taxation would slow economic growth?