Gas tax holiday, Part 3: It is cynical and indefensible no matter who proposes it

[I write this post with some sadness. I would not have expected a major progressive politician who obviously cares about global warming to propose a gas tax holiday, which has no public benefits whatsoever, but at the same time undermines the entire rationale behind a national climate strategy that includes, as it must, a pricing mechanism for greenhouse gases. I try, however, to be as consistent as possible — and if such a proposal was cynical and hypocritical for Sen. McCain, it is equally cynical and hypocritical for Sen. Clinton. Kudos to Sen. Obama for opposing this absurd proposal — double kudos because it might cost him a few votes.

I am turning this into a multipart post to encompass my first two posts: Part 1, “McCain reveals cynicism, hypocrisy with call for summer gas-tax holiday, energy budget freeze” and Part 2, “Is the gasoline tax regressive? Part 4 will Discuss a vastly superior counter proposal from the Center for American Progress.]

The gas tax holiday proposed by McCain and Clinton is indefensible. That, of course, is why just about every independent observer has criticized it. The Washington Post (“Clinton Gas-Tax Proposal Criticized: Economists Share Obama’s View“) and, separately Huffington Post (“Expert Support For Gas Tax Holiday Appears Nonexistent“), have catalogued an impressive list of serious critiques, starting with the rather obvious point that in a demand-driven price shock, a gas tax holiday probably won’t even save consumers a penny — it will just enrich the poor, suffering oil companies:

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.

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.”

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.

The NYT’s Paul Krugman calls the idea “pointless” and “disappointing.” Tom Friedman labeled the plan “so ridiculous … it takes your breath away.” Newsweek‘s Jonathan Alter said,

“Hillary Clinton has now joined John McCain in proposing the most irresponsible policy idea of the year — an idea that actually could aid the terrorists.”

Now I wouldn’t go that far — mainly because I don’t think the proposal would actually lower gasoline prices very much and therefore wouldn’t make us depend much more on foreign oil or send much more money overseas to governments who don’t like us. Huffington Post couldn’t find any serious “economic or environmental analyst” who supported the plan.

And, of course, there is that pesky issue of global warming that McCain and Clinton say they care about — a claim seriously undermined by this absurd proposal:

What I am terribly concerned about is that this strongly suggests a President McCain would be prepared to walk away from the price for carbon he plans to impose upon the public — the first time there is a recession after a cap & trade bill is passed.

Let’s be very clear — the greatest threat to the long-term health and well-being of this country is unrestricted greenhouse gas emissions. The key strategy that McCain and Obama and Clinton have embraced is a cap on emissions coupled with a trading system that sets a market price for carbon dioxide. That is how you get decarbonization at the lowest possible cost. Now, the greatest threat to the success of a cap and trade system is that somebody might artificially limit the carbon price, either through a safety valve designed into the system (see here) or because some weak-kneed President (or Congress) walks away from that price the first time the economy suffers a downturn.

I wrote that last week because I knew McCain was weak-kneed on this issue — heck he is afraid to even use the word “mandatory” with voters to describe his cap and trade system (see here and here).

Weak-kneed is the last word I would have used to describe Sen. Clinton — especially since her husband opposed a similarly misguided proposal by Bob Dole in the 1996 (see here). I hope her campaign will explain how she can be for a gas-tax holiday and for a cap-and-trade system, too. As Kevin Knoblauch, president of the Union of Concerned Scientists, said,

“It sends a confusing message. 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.”

Bottom line, as Robert Shapiro, undersecretary of commerce in the Clinton administration, put it:

Stated as clearly as I can,” he wrote, “it’s utterly misguided both environmentally and economically.

9 Responses to Gas tax holiday, Part 3: It is cynical and indefensible no matter who proposes it

  1. Thanks for posting on this. It is essential to put pressure on the candidates to make them stop feeding us populist ideas in their desperate pursuit of votes, regardless of party.

    I would like to think that once the democrats make their choice, we will continue holding both sides of the aisle accountable to their promises.

  2. Pgosselin says:

    You all remind me of some poor WWII Japanese soldier marooned on an island still thinking the war is going on.
    Hello! Warming stopped 10 years ago, and NOW is projected to be absent for at least another 10 years. This is all over the media.

    What they are saying is: “Sorry all you activists! There won’t be any global warming for another 10 years. But we promise it’ll be back!”.

  3. Jeff Green says:

    I seem a Hillary saying of Barack Obama when he was criticizing her early on that he was a desperate candidate trying to catch up. It seems the tide has turned. Hillary will do whatever it takes to win the presidency. She can and will comproomise her values to win. This could turn on her later.

  4. Brian D says:

    PGosselin, of course, forgets that global warming didn’t stop in 1998 and that this prediction of a decade of no increase explicitly acknowledges AGW, claiming at best to be temporary (to say nothing of what the study’s authors directly told the media releasing this). Additionally, that claim stems from a climate model — the same models the inactivists have been decrying for years.

    If I remind you of a Japanese soldier, you remind me of Wonko the Sane.

    Now, returning to reality (sorry for the snipe, Joe).

    I’d also like to submit that McCain admits this is mostly psychological and won’t have much economic impact. This is, as many realists have remarked, a move to get people through an election, not to get people through the summer.

  5. Dan G. says:

    Pgosselin Says: Go ahead and burn all the fuel you want now because we won’t pay for it environmentally for ten years. It’s a silly argument, global warming doesn’t start and stop in one year or even ten years. Just MAYBE some of the added heat each year will be mixed into lower ocean layers instead of being accumulated at the surface. It won’t help, it will hurt us because (if true) it will lead folks to delay taking needed action.

  6. David B. Benson says:

    Pgosselin — Look at the linked graph of the 10-year average global temperatures since 1850 CE:

    Joe — I don’t classify Senator Clinton as ‘progressive’.

  7. Excellent post Joe. I haven’t been particularly partisan when it comes to the two Democratic contenders, but Clinton’s support for the gas tax here is indefensible and inexcusable. I’d expect this from McCain, but from Clinton? She knows better than this. She’s got some of the best policy advisers in the world on staff. They surely told her this was just plain stupid policy.

    And that makes it even worse: this is pure political pandering.

    Obama deserves considerable credit for standing with every energy and economics expert out there in opposing this dumb-as-rocks policy proposal and being honest with the American people that only a long-term, focused energy smart strategy will break our oil addiction and help save Americans money at the pump.

  8. Susan K says:

    I too am astounded that she would throw us in her policy wonk base under the bus!

    Regarding this:

    “She’s got some of the best policy advisers in the world on staff. ”

    my understanding from is she gets the great legislative ideas in her clean energy plan from advisors at The Center For American progress:

    so isn’t that you: Joseph Romm?

  9. paulm says:

    from attitudes in UK we are/will be way off the mark in meeting targets…. people are not prepared to do what is required…