Gas Tax Craziness

Nobody likes paying the exorbitant price at the pump and both John McCain and Hillary Clinton are trying to cash-in politically on Americans’ cash-out experience when they fill up. They have proposed a tax holiday from the federal gas tax for the summer. Clinton offers a windfall profits tax on oil companies to pay for it. McCain, who needs to consolidate his base and cannot raise taxes in any way, shape or form, simply adds the cost to the federal budget deficit. Barack Obama rightly got hammered for condescending remarks he made about the bitterness of rural voters in Pennsylvania. But he has resisted the temptation to that particular form of condescension known as the pander. Clinton’s and McCain’s proposals for a gas tax holiday are a classic pander, a feel-good policy that does nothing to address the underlying issue. More significantly, Obama is betting that voters are smart enough to see through the other candidates’ pander. P.T. Barnum said, "Nobody ever went broke underestimating the intelligence of the American people," and perhaps Barack’s bet will not pay off. He gets high marks for placing the bet anyway. The problem with the gas tax holiday is not only that it distracts from Washington’s persistent, bipartisan inability to craft a comprehensive national energy policy (no small thing that), but that there is no guarantee it would lower prices. "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 the customers," Harvard economist N. Gregory Mankiw told the Washington Post. A slew of other economists have likewise ridiculed the gas tax holiday idea. Clinton is trying to argue that Obama is out of touch and his argument that America needs a long-term solution not a short-term fix demonstrates an aloofness to the daily struggles of average Americans. That mud may stick, it might not. Indiana and, even more so, North Carolina, are not the economic basket cases that Ohio and Pennsylvania are. In a smart analysis on Politico.com, Joel Kotkin notes that Indiana’s "18.5 percent job growth rate since 1990 stands well below Wisconsin’s healthy 28.5 percent, but well above Ohio’s 11.1 percent, not to mention the phenomenal 32.8 percent growth in the other May 6 battleground, North Carolina." Obama won Wisconsin, lost Ohio, and is leading in North Carolina. It is refreshing after days and weeks focused on Rev. Wright and snipers in Bosnia to focus on a real policy difference, and a policy difference that illustrates different approaches to government. Pandering sometimes works in an election, but if this really is a "change election," they should register their mandate for change by refusing the gas-tax holiday as the kind of feel-good politics without substance that got us in this mess in the first place. Michael Sean Winters
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