“Senator Obama doesn’t want us to take down the gas tax this summer and Senator McCain wants us to, but he doesn’t want to pay for it. I believe we should impose an excess profits tax on the oil companies. They have record profits that they frankly are just sitting there counting because they are not doing anything new to earn it; they are just taking advantage of what is going on.Is the tax holiday pandering? You bet. But the gas tax holiday is the right kind of pandering because it targets the oil companies as the party that should really be carrying the burden of gas taxes. That's why the Hillary camp thinks her proposal is such a big winner despite the media consensus that she's wrong.
“We ought to say: Wait a minute, we’d rather have the oil companies pay the gas tax than the drivers of North Carolina, especially the truck drivers, or the farmers, or other people who have to commute long distances.”
Too bad Hillary didn't connect the pandering gesture with more ideas on how the balance between corporate power and the lower 99% of the American population could be corrected. I'd like to hear some proposals on using federal leverage to curb exorbitant CEO salaries, re-establish product safety regulation, push corporate America to be more environmentally conscious, and revise NAFTA to make it easier for governments to regulate business.
Hillary should be pandering on those issues as well.
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2 comments:
Ric, this is just plainly wrong. Conventional models would assume that about 50% of the gas tax repeal would accrue to oil companies, as they would have no incentive to lower prices beyond whatever it takes to clear supply. They are able to clear supply at current prices, so there is a distinct possibility that gas prices would not drop a penny, that the entire benefit of the tax repeal would flow toward oil companies themselves.
If you tax windfall profits in a revenue neutral way, there's no reason to think that gas prices would fall at all, and the policy would be completely neutral to all parties -- consumers, oil companies, and tax revenues. Clinton's policy is simple wheel spinning, completely empty pandering.
The Brookings-Urban Tax Policy Center has produced some very solid analysis of the economics here.
Politically, though, there's a good chance that the gas tax suspension would go through without total replacement from a windfall profits tax. The GOP has been remarkably successful at stopping tax increases on oil companies in the past; realistically, there's a good chance they could completely or partially stop Clinton's offering as well. In which case, you run the risk of McCain lite, which is a simple handout to oil companies -- they keep their prices the same, make more profit, then have to give a bit of the surplus back to Washington.
In any case, it's really rather terrible policy.
Dean Baker has also written some very good analysis on the issue.
Hi Dave,
We may be looking at apples and oranges here.
From my perspective, the main issue with Hillary's proposal isn't gas prices. It's corporate wealth and power. As a result, the chief value of her proposal is that it targets oil companies. Rolling back corporate power should be a Democratic priority. Why not start now?
Like Hillary Clinton, I disagree with the economic analysis I've been seeing. Economic analysis seems to assume that gas prices are determined solely by the relation between supply and demand. This is a mistake. There are various kinds of political influences over supply (OPEC, environmental concerns, etc.). Likewise, the oil companies enjoy an oligopolistic position in the market. Consequently, any adjustment or lack of adjustment in prices as a result of a gas tax holiday would be a political decision on the part of the oil companies. My bet is that they would ensure that prices fell as a result of any gas tax legislation.
The second mistake made by Hillary's critics is to over-estimate the elasticity of demand for gas. Critics assume that all driving is discretionary like people are always on vacation. But many jobs (Hillary mentions trucking and farming herself) are gas and oil intensive. So are commuting, shopping (given the location of stores), and child hauling. With rising gas taxes, these kinds of necessary activities have become a lot more expensive and that expense is probably one factor slowing down general economic activity.
A summer gas holiday wouldn't lead to "increased gas consumption" because prices would still be well over $3.00 a gallon. But it would give customers a bit of a break while they adjust their routines (at the margins) to account for higher prices.
The main point about Hillary's version of a gas tax holiday is that it's the first potential wedge in a general effort to roll back corporate privilege. That alone makes her proposal "pandering I can support." But it also seems like marginally beneficial social policy and thus a fair target for this kind of political pandering as well. To be honest, I wish the Democrats were doing more with it.
A final benefit of Hillary's proposal is that it took McCain's totally B.S. gas tax proposal out of the news. That makes Hillary's proposal a very effective political manuever.
She deserves credit for that as well.
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