Tags: humor, religion
Current Mood: hungry

The advocates of a "gas tax holiday" are exaggerating the benefits to consumers from their proposal. If the Illinois experience is a guide, there is likely to be some reduction in the price of gas, but it would fall well short of the size of the tax reduction. In order to pay for the tax cut, the government would have to cut back on highway construction and maintenance or find some other way of plugging the shortfall in revenues to the Highway Trust Fund.

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...

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...

Reason #1: [R]emoving the gas tax will be a windfall for refineries, not for consumers. This is because the short-term supply of gas is relatively inelastic, so the tax incidence is largely on producers rather than consumers already...

Reason #2: From a long-term point of view, we need high gas prices.

TAANSAFL, dammit. If it is indeed our intention to reduce oil consumption and fight climate change, then we are certainly not going to do it by lowering oil prices. You can argue whether it is wiser to have carbon credits or a carbon tax or carbon quotas. (I fall on the side of a carbon tax...) But you can't argue that whatever we do is going to be utterly without pain.

A long period of high oil prices will do more for lowering demand for gasoline in this country than anything the government could possibly do. If you want to fight global warming, you have to admit that belt tightening is involved.

Tags: climate, economics, politics, usa
Current Mood: still hungry