Elections, Hot Air, and Gas

Election season is probably the best time for bad economic policies to garner support — and one of the roles of academic economists is to call the candidates out on terrible policy.

From yesterday’s New York Times, we learn that:

Senator Hillary Rodham Clinton lined up with Senator John McCain, the presumptive Republican nominee for president, in endorsing a plan to suspend the federal excise tax on gasoline, 18.4 cents a gallon, for the summer travel season. But Senator Barack Obama, Mrs. Clinton’s Democratic rival, spoke out firmly against the proposal, saying it would save consumers little and do nothing to curtail oil consumption and imports.

Greg Mankiw
‘s commentary
is spot on:

I don’t know any prominent economist who favors this McCain-Clinton proposal. More common is the reaction of a friend of mine (a veteran of the Clinton administration) who calls the idea “ludicrous.”

I’m all for giving folks a helping hand, if that is the rationale. But why give a bigger helping hand to those who drive more, pollute more, and cause more car accidents? And why encourage even greater consumption of gasoline?

Let me go a step further, and pose a challenge:

If any reader can find a coherent economist not affiliated with any of the major campaigns who thinks this is a good idea, then please add a link in the comments.

My prediction:

Perhaps some hot air, but we won’t find any economist willing to support this nonsense. Not a right-wing economist, not a left-wing economist, and not even a two-handed economist.

Critics might note (fairly) that we economists are often wrong. But when opinion is unanimous that a proposal is terrible, it is probably time for the electorate to send a message to their wannabe leaders that they expect something a bit more responsible.

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  1. jen says:

    I was disappointed when I heard McCain propose this, I always thought this was a fair tax compared to other taxes, paying the govt under $2 a fill up doesn’t bug me. I use the road, I pay, I don’t have a problem with it.

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  2. Barb says:

    I’d rather get another “economic-stimulus” check…

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  3. Mike says:

    Let’s have a positive response from the economists

    What simple/understandable policy proposal would result in reducing demand, if not short term, then long term.

    Infrastructure investments in alternative transportation?

    Behavior modification – transit, walking, biking, carpooling promotions?

    Policies that favor home ownership in compact sustainable communities – over sprawling suburbs?

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  4. Helen says:

    It truly is one of the most idiotic proposals yet.

    Rather than subsidizing gas consumption, why not keep the gas tax — or even increase it for ‘retail’ fill-ups, let the long-haul truckers pay the same rate they do now — and instead offer a tax deduction/credit for use of mass transit/low emission options.

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  5. Rick says:

    I remain fairly ambivalent about the candidates. However, I think it’s quite evident that Obama is the one least willing to pander — both in his policy and his politics.

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  6. orphancow says:

    There shouldn’t be a federal tax on gasoline in the first place, so suspending for the summer isn’t quite the right answer. The tax should be removed. This is not a question of environmentalism, but rather an issue of a repressive tax. I’m already using dollars that have been taxed by the government (federal income tax). As far as worrying about the environment… leave it up to current and future entrepreneurs. They will solve the problem. Let me give you a hypothetical scenario: If I were to tell you that in 150 years the population of the earth would multiply by 5 and the energy consumption would increase by a factor of 15-18, what kind of policies would you need to enact to provide for the huge increase in population and energy consumption??? Nothing. In 1850 the world’s population was approximately 1.2 bn, in 2000 approx. 6 bn. and the world’s energy consumption has increased from approx. 25 EJ/year to 450 EJ/year over the same time.
    (http://rand.org/pubs/research_briefs/RB5045/index1.html (figure 1) see also 1st graph here: http://www.energy.ca.gov/commission/commissioners/rosenfeld_docs/rosenfeld_effect/presentations/HOLDREN.pdf)
    The point is that if it was 1850 and you could somehow know that a huge increase in population and energy consumption was going to happen, you couldn’t possibly implement any policies to meet those increased energy demands using the knowledge possessed in 1850. You can’t solve the future’s problems with today’s ideas.
    Quite a tangent/rant, but the federal gasoline tax should be judged on its economic basis rather than its environmental impact. Removal of the federal tax for the summer will have little effect, but it should be removed on principle since I’ve already been taxed by the federal government on any money I spend at gas stations. Maybe the government should allow people to put pre-tax dollars into accounts for gas purchases like health savings accounts. GSA’s? Gas savings accounts, anyone?

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  7. Todd says:

    Swap a gas tax for a windfall profit tax? For the summer? $10B in subsidies/transfers over three months in a $14T economy doesn’t even qualify as moving a pawn on the energy policy chessboard.

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  8. Jennifer says:

    I’m a Clinton supporter, but this is a terrible idea (and one of the few on which she and Obama actually differ).

    I am loathe to admit it, but this seems like a ploy to win votes from the less intelligent among us.


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