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. Ray G says:

    McCain hasn’t been asked “yet” because the GOP race is pretty boring right now if you haven’t noticed.

    Since Obama is taking the more standard route for the Left – no tax-breaks for any reason – good or bad – Hill gets the questions.

    But Obama should be fielding some questions as well.

    Does he really believe that 3 months without those extra taxes is going to cause our bridges and roadways to crumble?

    Really? He believes that?

    Politicians of all stripes of course major in crises manufacturing, but his is a very weak response.

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  2. John Jay says:

    If a gas tax holiday made sense the dozens of other times it’s been discussed when, say, gas suddenly ‘rose’ to $2, should we not logically not only kill the gas tax but also provide a $1.50/gallon rebate? We can borrow the money, like every other tax-cutting scheme.

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  3. david G says:

    Sorry Rob, #1, but Ia going to offend you. there are in fact enough people who will see the elimination of the gas tax for three months as a wonderful incentive to vote or not vote for someone. Anytime you can promise to put money, no matter how much or how little, into people’s pockets you are winning votes, because the average voter only sees the dollar signs. I have this debate with people all the time, that they are being penny wise and pound foolish when they don’t think about the future and what a tax cut means for the overall health of the economy etc etc. The American voter,on the whole does not seem to look at the big picture and if you think about the social issues that become the focus of elections while the really important issues, war, the economy health care, education, etc. take a back seat, you will see the political expediency of offering people money as a way to get elected.

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  4. Ethan L says:

    Does anyone actually listen to Krugman? He recently commented on Galbraith calling him an intellectual lightweight that “true” economists don’t take seriously. But, does anyone take Krugman seriously? All the tripe he writes advocates instituting Communist style regulation on everything and everyone. How an economist can believe that the inefficiency’s caused by heavy handed regulation can lead to anything but declines in risk taking and inefficient capital allocation is beyond me.

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  5. AaronS says:

    #19 Kebko…

    Here’s another thought….

    This summer, if gas prices remain high, we might rightly expect there to be less travel, less tourism, less motel stays, increased plane fares, etc. All conspiring to hurt the economy from that direction.

    That is, yes, I see the reasoning behind NOT removing the gas-tax. But I would much rather suspend the tax and put money in the pockets of the businesses that depend on travel (to some extent) AND even money in Exxon’s pockets, that just give it to Exxon and the government. If the choice is between Exxon and the Government OR Exxon and the People, give me the people every time.

    Economists are like expert witnesses…you can find support for just about any position you take–maybe even a Nobel prize winner.

    Let’s see, gold standard vs. no gold standard.

    Welfare vs. No Welfare.

    Supply Side vs. Demand Side

    Free Markets vs. Influenced Markets

    And on and on.

    Now, I enjoy the work of “Freakonomics,” and I’m not saying that economics is not without great value. I’m just saying that just as in buying stocks, you can find sound reasoning for just about whatever position you take.

    Would you settle for a Diet Coke?

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  6. Amicus says:

    The short and mid term elasticity of demand for gas is zero.

    A decrease in the tax will not change the amount demanded.

    An increase in the tax will not change the amount demanded.

    The Pigou Club people would have to propose taxes probably well over $2/gallon just to start to get any meaningful cross-price elasticity.

    Of course, their “manifesto” doesn’t bother to include any estimate of what would be required to make their theory operative.

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  7. JW says:

    “Think of it as an economic placebo. Placebos work, and they work better the more expensive they are.”

    Sorry Jim,

    But this a case where the placebo effect could have damaging results. The problem is that gas is so high because we keep buying it no matter how high the price has gone up. Now, the economy of scales is starting to kick in to the point where people have to decide between gas and food, gas and utility bills, etc. This should be the point where people stop using so much gas and start finding other ways (e.g. public transportation, car pooling, etc.). But because of this pointless, pandering exercise McCain and Clinton are trying, people are being offered a false choice immediately versus making the hard choice inevitably. Gas prices will continue to increase w/o the gas tax to match the gas tax anyway. Where is the incentive for the oil companies to play ball with the McCain and Clinton?

    Reducing the tax only gives oil companies more room to increase the cost. Like it not the government will not tell Oil companies to stop increasing the cost of gas. The tax goes away and is replaced with more expensive gas. So where are the savings? Going right to the oil companies. Instead of putting a band aid over a massive wound. We need to get off of our dependence to oil period. Invest in electric cars, improve mass transportation across the country, force the car companies to build more fuel efficient cars now, not 10 years from now.

    But that takes time and a whole lot of overturning the status quo. Politicians are generally about quick hit solutions. And this solution is a bad one no matter how good it seems on the surface.

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  8. Mayor Quimby says:

    If you elect me I’ll make sure everyone gets a free gas can, that way you can buy gas now while it is cheaper and hoard it for later.

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