Tuesday, May 6, 2008

Asked on Sunday to name a single economist who supported her call to suspend the 18.4-cents-per-gallon federal gas tax during the summer, Senator Hillary Rodham Clinton replied on ABC News’ “This Week”: “I’m not going to put my lot in with economists.”

And yet she wants Americans to send her to the White House, where she has promised, among other things, that she would pursue economic policies that would increase the incomes of middle-class and working-class Americans; solve the long-term Social Security and Medicare funding problems; return “fiscal sanity” to Washington by addressing the looming budget crisis; overturn more than 60 years of bipartisan free-trade policies pursued by presidents of both parties; address soaring health care costs; and, last but not least, secure energy independence for America. Should a consensus, bipartisan view of economists inside and outside her administration conflict with a policy she wants to pursue, are we to believe that she will reflexively decline “to put my lot in with economists”? Evidently so, especially if there are short-term political opportunities to exploit. That is precisely what Mrs. Clinton has been doing while campaigning in North Carolina and Indiana, which are holding crucial primaries today. To his credit, Barack Obama, who as a state senator once favored a gas-tax holiday in Illinois but now admits it was a mistake, opposes the idea.

Rarely do liberal and conservative economists agree as strongly as they do in their opposition to suspending the federal gas tax during the summer, when supply is essentially fixed and price is effectively determined by demand. Indeed, Harvard economist Greg Mankiw, who served as chairman of President George W. Bush’s Council of Economic Advisers, titled a recent post on his blog: “Pigs fly!” The headline referred to the fact that Mr. Mankiw and Paul Krugman, the Princeton economist who doubles as a liberal New York Times columnist, agreed that suspending the gas tax is bad policy. Leonard Burman, the co-director of the nonpartisan Tax Policy Center, later emailed Mr. Mankiw: “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 we couldn’t find anyone to argue the other side (that the gas-tax holiday made sense).’”

John McCain, the presumptive Republican presidential nominee who should know better, was the first presidential candidate to endorse the gas-tax holiday for the summer driving season. Reportedly, the idea originated with a political pollster, not among Mr. McCain’s economic advisers. What a surprise.

As pandering goes, the gas-tax suspension is small potatoes. It would save motorists about $10 per month this summer — if the savings are fully realized by the consumer, which is doubtful. Suspending the tax would temporarily lower the price, which would boost demand. Because gasoline supplies are fixed during the summer months when refineries are already running flat out, the increased demand would raise the price; and the beneficiaries would be the oil companies, not consumers. The market-clearing price would likely approximate the level that included the tax.

Despite the fact that her recently introduced legislation to establish a windfall-profits tax on oil companies has zero chance of being enacted this year, Mrs. Clinton insists that such fantasy revenues would pay for the temporary suspension. (Never mind that she has already promised that windfall-profits revenue would be used to finance her alternative-fuels proposal.) Besides, in the unlikely event that the suspension did generate the intended savings for consumers, wouldn’t the gas-tax holiday increase the consumption of gasoline and reduce the demand for fuel-efficient vehicles, countering the global-warming policies embraced by Mr. McCain and Mrs. Clinton?

Too bad all three presidential candidates vehemently oppose drilling in the Arctic National Wildlife Refuge (ANWR), which would have added a million barrels of oil a day by now if President Clinton had not vetoed ANWR legislation in 1995. While they would not solve America’s energy problem by themselves, ANWR output and the exploitation of offshore oil and gas would do far more to help consumers than a temporary suspension of the gas tax. Paradoxically for Mrs. Clinton and her supporters expecting a free lunch, suspending the gas tax would simply increase the profits of the oil companies. By then, however, she will already have reaped their primary votes. And wasn’t that the point? What’s Mr. McCain’s excuse?

Copyright © 2022 The Washington Times, LLC. Click here for reprint permission.

Please read our comment policy before commenting.

Click to Read More and View Comments

Click to Hide