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Demagoguery

Hillary has jumped on the gas tax holiday along with John McCain.   Kevin Drum calls it pure demagoguery (he probably wouldn't have been so blunt about Hillary, but since he already derided McCain for the idea, he has the good grace to apply the same criticisms to Hillary:

I'd say there's approximately a zero percent chance that Hillary Clinton or John McCain actually believe this is good policy. It would increase oil company profits, it would make hardly a dent in the price of gasoline, it would encourage more summertime driving, and it would deprive states of money for transit projects. Their staff economists know this perfectly well, and so do they.

But they don't care. It's a way to engage in some good, healthy demagoguery, and if there's anything that the past couple of months have reinforced, it's the notion that demagoguery sells. Boy does it sell.

I tend to agree with Drum.  The gas tax, at least when applied to its original purpose of funding highways and roads, is one of the better taxes out there, doing a pretty good job of matching the costs of roads to the users of the roads.  However, I did make this point in Drum's comment section:

I am glad you see that an 18.4 cent gas price reduction is small compared to the total price and proposing such a reduction by government fiat is pure demagoguery. 

I would like to point out that most oil companies have a profit on a wholesale gallon of gas that is also about 18-20 cents.  The reason they make so much money is that they sell a lot of gallons of gas (plus many other petroleum products).  So is it similarly pure demagoguery to blame oil company profits for the price of gas, or to suggest government schemes (e.g. windfall profits tax) to reduce these profits?

By the way, Hillary is particularly hypocritical on this, because she has adopted the 80 by 50 CO2 target (80% reduction by 2050).  To meet this target, which I think would be an economic disaster, is not going to require an 18.4 cent gas tax, but something like a $10 a gallon gas tax, or more.  Since she has adopted her 80 by 50 target, her correct answer on gas taxes should not be to propose a holiday, but to say "suck it up, because taxes are going to go a hell of a lot higher."  McCain, who has also adopted a CO2 target, though a less stringent one, is in the same boat.

Update:  OK, the $10 per gallon tax is probably gross under-estimated.  The number is likely to have to be much higher than that, given that Europeans are already paying nearly $10 a gallon and are not even in the ballpark of these CO2 targets.

Cost of gasoline
(U.S. Dollars per Gallon)
Date___     Belgium  France  Germany  Italy  Netherlands  UK  _ US
4/20/98     3.43___  3.44__  3.25___  3.48_  3.56_______ 4.04  1.21
4/21/08     8.62___  8.34__  8.58___  8.32_  9.51_______ 8.17  3.73

HT:  Hall of Record

Posted on April 29, 2008 at 10:31 AM | Permalink

Comments

I'd say that 18.4 cents/gallon IS a significant dent in gas prices, and I don't see how this holiday will increase oil company profits, unless he means that people will buy more gas.

Posted by: Craig | Apr 29, 2008 10:55:42 AM

It's nothing but pandering. Even 20 cents a gallon is not much. Say you have a 20 gallon tank and you fill it up 10 times per month. Even someone with that prodigious gas consumption only saves $40 over the entire month, or $4 per tank. Is this really the difference between being able to put food on the table or being able to make that rent/mortgage payment and not being able to do so? I doubt it. Yet the pandering politicians pretend that if the oil companies didn't make any profits, we'd somehow be back in the days of $1.50 gas.

Posted by: Captain Obviousness | Apr 29, 2008 12:29:19 PM

"...it would encourage more summertime driving..."

Yes, that means people would buy more gas. -- John M Reynolds

Posted by: jmrSudbury | Apr 29, 2008 1:13:59 PM

What made Hillary's version loathsome than McCain's was her claim that she'd make up the lost revenues by taxing the oil companies, since they have too much money. Apparently there is such a thing as being too successful in Hillary's worldview. Somebody has some wealth and she's gonna redistribute it.

What this really means is that she has set herself up for a killer question regarding oil company profits in any future debates. Does she think it is wrong for a business to make the same amount per unit while greatly increasing units sold? Despite massive political and legislative impediments to that business increasing its operational capacity?

Posted by: epobirs | Apr 29, 2008 11:44:08 PM

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