Gas Tax Redux

Last week I posed a simple challenge: Try to find any coherent economist willing to support the gas tax holiday proposed by candidates McCain and Clinton.

The challenge remains unanswered, but here’s some interesting commentary collected during the week:

1. George Stephanopoulos posed my challenge directly to Senator Clinton (video here), asking: “Can you name one economist — a credible economist — who supports the suspension?”

After Clinton side-stepped the question, he pushed on: “But can you name an economist who thinks this makes sense.” Clinton’s response: “Well I’ll tell you what, I’m not going to put my lot in with economists.” (HT: Mark Thoma)

2. Sam Stein took my challenge fairly directly, playing the economics version of “Where’s gas-tax-supporting Waldo now?”

He tried Clinton’s spokesperson, libertarians, conservatives, progressives, ex-Clinton staffers, even the transportation workers union or the American Trucking Association, but still couldn’t find any support for the gas tax holiday.

3. Greg Mankiw received a note from Len Burman:

Yesterday I was on the NewsHour to talk about the gas tax holiday. I asked if there was another guest and the producer said, “We tried, but couldn’t find anyone to argue the other side (that the gas tax holiday made sense).”

4. By contrast, Henry Aaron from Brookings, managed to very quickly whip up a list of 150 economists opposed to the gas tax holiday. And there are some pretty impressive folks on the list, from across the political spectrum.

This makes me proud to be an economist. In any election silly season, you can usually find someone willing to support just about any kind of nonsense. And reality T.V. teaches us that people are often willing to do or say nearly anything to get their faces on T.V.

But it appears that the economics profession just isn’t that silly.

My $0.02: This issue isn’t that important in the grand scheme of things. But hopefully sufficient negative reaction to silly ideas this early in the election season will deter future silly ideas when the election heats up.

Finally, for those interested in economic research on the effects of a gas tax moratorium on gas prices, let me suggest a recent paper by Joe Doyle and Krislert Samphantharak (available here). There are reasons to think that the previous state-level gas tax reductions they study may not provide perfect guidance to the current proposal, but it is a start.

[Freakonomics trivia: Steve Levitt was Joe's dissertation advisor.]

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  1. AaronS says:

    Someone wisely said that if you laid every economist end-to-end in the Sahara Desert, they would still reach no conclusion.

    Very simply, economics is, in some ways, like psychology (and is likely related). That is, it has enough logical/scientific underpinnings to make it respected…but then it all comes a bit unglued when it gets beyond theory and into realism. In fact, I’ll bet a Coca-Cola that I can come up with as good an “economic” reason to end the gas tax as economists can come up with to keep it. Here goes…

    Yes, keeping the gas tax works to drive down consumption. Given.

    But, consider that many people are simply doing NECESSARY driving–to work, home, school, etc. These people’s discretionary income is being hurt. They’re going to have to ask for more money from work, cut back on education, stop buying things, or use the credit card.

    Consider what happens if truckers strike because of the cost of fuel. Food prices skyrocket. People demand salary increases to keep up with the cost of living. And there you go.

    I’m not saying Hillary is right and the economists wrong, but like buying or not buying a stock, you can usually find good reasons for either course of action.

    And if there is any group on earth that I don’t trust to have the answers, it’s economists. If they had the answers, everyone would have either agreed with–or disagreed with–Reagonomics.

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  2. AJ says:

    I don’t think I’m saying something here that most in this forum don’t already know but here goes. Correct me if I have this wrong.

    The demand for gas is highly inelastic and all politicians know this. Any excise tax (i.e. windfall tax on profits) placed upon the oil companies by the govt will just be passed on to the consumer as an increase in the price of gas. Since the demand for gas is inelastic, the tax incidence will pass to the consumer, not the producer. However, the govt will still get their tax money as they had in the past.

    Most people have no concept of the taxing of highly inelastic products and who actuallly bears the burden of the tax. That demand curve needs to change before any real drop in price will be seen. The govt up to this point has said alot but done nothing because they know what really is going on behind the scenes. Why would they want to ruin a good thing?

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  3. kebko says:

    AaronS: You owe me a coke.

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  4. mmm says:

    But you don’t have to be an economist to know how stupid the gas tax is for the purposes stated. To name a few:
    1. In the short run, the tax savings will be kept by either the oil companies or the distributors or the station.
    2. Even if the prices are forced down by competition, the cost will increase with demand.
    3. Even if you assume the best, the everyday consumer will likely save less than $50 over the course of the holiday. A trucker driving more will likely save more but it’s unclear that trucking companies would ever price the temporary adjustment into the cost of shipping goods–companies don’t usually change shippers all of the time.
    4. From a liberal policy perspective, encouraging more driving is not entirely consistent with Hilary’s other positions.
    5. The money will be taken from somewhere: probably transportation funds. Crappy roads and bridges will actually increase the costs to consumers.

    Hilary and John are pandering, plain and simple.

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  5. Ari Indik says:

    I think you could find economists who would favor a repeal of the gas tax. But that’s not what Clinton and McCain are proposing. They are proposing a temporary holiday, which has none of the long run benefits of a repeal with most of the costs. You won’t find an economist to support that. And if you did, you certainly won’t find one who supports replacing it with a windfall profits tax (this because economists understand tax incidence).

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  6. jblog says:

    To borrow a phrase from Francis Ford Coppola, accusing politicians of pandering is like handing out speeding tickets at the Indy 500. It’s all one big panderfest

    McCain and Clinton offering to allow people to keep a little more of their own money is no more pandering than Obama telling members of the wholly corrupt teamsters union they don’t really need all that government supervision.

    Ultimately, suspending the gas tax will probably not affect consumption one way or another, and it probably won’t help people out much economically. But it won’t likely cause much harm either, and at least it’s a nod that the two candidates proposing it get it that people are feeling the pinch.

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  7. Mike says:

    Now that Clinton has said she won’t bother listening to economists, I wonder if Paul Krugman (another NY Times columnist) will rethink his support of Clinton. His column regularly bashes Obama as wrong or echoing the Republican line, and just as regularly lauds Clinton. Will this change his stance? Somehow I doubt it, he’s in too deep.

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  8. Josh says:

    @ Jim #12

    I think that is the point. I am fully aware the gas tax holiday is practically meaningless. But I haven’t seen anything from the Obama camp with a better alternative. I’d rather see a candidate trying than doing nothing.

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