Easy: Free bicycles for everyone!

It is nice to see that someone (besides me, with my futile comment posts) is recognizing that McCain and Clinton lack economic literacy. Gasoline supply is inelastic in the short run, while demand is elastic. The market has to clear. If the consumption of gasoline is not curtailed through the price mechanism, it would have to be curtailed with rationing, 70s-style gas lines, or something else. Cutting the tax will not change the market-clearing pump price. The proposed tax holiday would amount to nothing more than a transfer from the federal treasury to the sellers of gasoline.

Krugman hinted in one sentence at the end of his column yesterday that he understands this, but why does the media let such blatant ignorance go mostly unchallenged?

A cut in the gas tax would unlikely be reflected in a reduction in pump prices.  Case in point: here in NC we have some of the highest gas taxes in the southeast.  South Carolina the among the lowest in the SE.  While in SC this weekend, the price spread between NC prices and SC prices was 1-2c.  Considering SC has a 35c gas tax and NC has 48c/gal the price difference isn't being passed to consumers in SC.

And I'm talking about prices between Raleigh and Wilmington (~$3.56/gal on Friday, no large differences the entire way), and as soon as we crossed into the SC, the prices were ~$3.54/gal.  Some savings.  We traveled well into the state and saw the same $3.54 price.

I believe other economists have made the same observation, a cut in the gas tax at the pump would unlikely be passed on to consumers. The roads sure would take a hit in terms of upkeep though.

More proof that Obama has more substance than either of them by a long shot.  Phony gestures that replace real work, real thought - he refuses to pander - he asks us all to look at the bigger picture.

Ask not.

stgla. a bike is my main form of transportation, they can be a pain in the ass. flat tires, my seat just broke, shopping is a bitch, and when it rains you are stuck. but on the positive side, I have spent $0.00 on gas for the past 6 months.

and, of course, tnmats and titanio are dead right about the issue.

There have been times in the last few weeks when I started to doubt my support for Obama.  But his no-compromises disowning of Wright's outrageous comments, and this perfectly sensible and blunt analysis of the gas tax holiday shenanigans proposed by his opponents, reassure me I wasn't wrong when I listened to him way back in November in Iowa.

As for the holiday itself: neither the world, nor the US government, owe the United States' citizenry cheap gasoline.  People can and will drive less when, or find more efficient cars, when the price starts to bite.  Yes, in the short to medium term they will have to continue to drive to work, but there are carpools (one a day a week in a pool of 4 would save more than the holiday), and unless people everywhere else are very different than the ones I know, there are lots of other trips that can be easily avoided with a little old fashioned planning ahead.

Blackton... fenders are a necessity for bike commuters.

Yeah, this point has been hammered home at TPM cafe. It took people a while to understand that it actually is a tax break FOR THE OIL COMPANIES and won't save consumers anything at all. Clinton, to her credit will just tax them some more to make up for it, in the end not helping consumers but getting credit for it...McCain just gives it away while our roads and bridges crumble.

Policy is harder because this is actually what needs to happen to stimulate alternative energy solutions, and Obama knows it. Alas, the low income folks will be hammered. I've said it before, and it would be political suicide to suggest it, but a carbon tax, with either vouchers or a gas tax rebate for low income earners would get us over this hump. In the end, gas prices are here to stay, and complaining about them is like complaining about the wind.

"Another thought: a tax credit for people who live in small towns and work over 30 miles away."

Wuhoh Noam, you just went off the rails!:)

Last thing we need is policies that incentivize long commutes. There's this whole earthly hottening thing going on. Errr....planetary crisping? I can't remember what it is, but Dan Quayle is all about it with some sort of DVD that won a Tony.

What about some level of tax credit for people who own a vehicle for work -- tradespeople, truckers who own their vehicles, that sort of thing. These are the people who are most adversely affected by rising gas prices. They're also the core of the politically independent working class. You can advertise such a targeted tax cut as helping working Americans who depend on their trucks but not giving a tax break to Lexus-driving commuters who don't need it.

Instead of a rural commuter tax incentive, how about a controlled sprawl incentive that includes rural commuter rail hubs - linked to Josh's Enviro posting regarding some sprawl being necessary.  Chicago already does some of this with their suburbs.  Metra runs as far out as 70 mi, to Harvard IL  which is quite rural (I don't live there, but relatives do and can get quite quickly to downtown Chicago if need be).  It's potentially greener and money saving in terms of road and vehicle maintenance.

A rational policy would be to temporarily INCREASE the federal gas tax and use the proceeds to fund mass-transit subsidies or vouchers for the working poor. The tax increase would -- in the short run --  be borne by the sellers, not the buyers of gasoline. This would be a much simpler and economically rational than Clinton's windfall profits tax on oil companies.

The funny part about the Krugman article is he still can't bring himself to be positive about Obama:  Krugman still has to swing at Obama for not supporting straight up universal health care.

I see why Obama needs a policy solution for political reasons, but it's hard to imagine that anything other than a gimmick could be put in place soon enough to take effect by the summer. So if there is no easy policy remedy, is there a way to make his case more persuasive?

I always find it powerful when he calls upon his fellow Americans to sacrifice. His proposal to exchange civil service for financial aid, for instance, seemed to be extremely popular with the young voters who would be most affected by it.

What about a "don't drive unless you have to" campaign--an appeal to civic duty and common good? Call upon us to lower gas prices by lowering demand? A kind of voluntary ration? We are at war, after all.

I don't think Americans would go for it purely for environmental reasons since environmentalists seem to always get dismissed as sanctimonious nature lovers. But if you could make gas thrift patriotic--doing your part for your fellow Americans, I wonder. I feel like the country is hungry for substantive expressions of patriotism after so many years of cosmetic ones. A call to conserve would contrast starkly with Bush's post-9/11 call to consume.

There are no short term solutions to the gas problem. Just pandering.

It seems to me that all of the best solutions involve local governments or regional authorites and better planning.

And if the states could work with those municipalities to make smarter roads/smarter road/transit improvements, then people would save a bunch on gas in the mid to long term.

In the short term, it's all pandering,. Frankly - the government should write people another check for $300 and put "For gas" on the memo line. What the heck is the difference?

Or we could give people cheaper healthcare and provide healthcare to those who don't have it. And then we can put an asterick next to the header plan. And down near the bottom of the page we can put another asterick and write, "Use the savings accrued from this plan to pay for gas".

At the end of the day, it's all a wealth transfer from the government to the people. It's all the same. Some things are just more gimmicky (like a gas tax holiday).

Nippers:

I'd find Obama's case very persuasive if he ran TV ads and sent out direct mail quoting Paul Krugman mocking the gas tax idea. In fact, I'd laugh my ass off as Krugman went through physical contortions.

Nippers,

Jimmy Carter did pretty much what you're suggesting and got demolished for it.  Obama could probably make a better pitch than Carter did, but it's a tough sell.

AlanSP,

At least in summertime, Obama wouldn't have to talk about sweaters. Or wear one. Maybe he could make conservation sexy and fun. Campaign in his swimsuit.

But truth is, I put little stock in my proposal, or in any attempt to market virtue. I'm with Garrett Hardin who in "The Tragedy of the Commons" argued that the only way to change behavior on a large scale was to "legislate conscience."

Make feeding the meter optional and there will be less parking. The problem is, when it comes to fuel economy, gas prices are the meter.

Rhub: there is already an incentive aimed at peole who buy trucks for work, and its being abused by folks buying highly expenwsive SUVs alas. It lets them dodge excise tax, but the idea is the same, how do you filter it? And what about the poor who can no longer afford to commute?

Titan: Sort of my idea. Alas, anyone actually proposing a tax increase would be committing political suicide. On of the few Dem victories (although it didn't feel like it) was the sunset on the Bush tax cuts, because they aren't 'increasing' taxes...

In the end, gas vouchers may be the only way, give them to people who made less than 50k on their taxes (since everyone just filed) but how do you keep that from becoming permenant, and how do you pay for it?

I think Obama should turn the tables on McBush and HRC and ask them: if the gas tax is dropped, where will the money come from for road repairs and construction?   Tie their votes authorizing Bush's needless war in Iraq to lack of funds for US infrastructure.  Again show how irresponsible those two are.

Personally, I'd prefer to pay a few dollars more at the pump than have to pay hundreds of dollars a year in suspension and tire/wheel repair costs.  One demolished tire replacement due to a big pothole would wipe

out any "savings" from no gas tax.  Some trade off.

dbhuff, I thought Bush's SUV tax credit expired a couple of years ago. Is it still in effect?

Anyway, my idea was not meant as a serious policy solution, but rather as an attempt to craft the most useful, least harmful election-year pander. It really isn't that hard to imagine simple tests that could differentiate between the electrical-equipment-filled SUV my electrician neighbor drives and the SUV my accountant neighbor commutes 10 miles a day in.

For a serious proposal, how about significant tax credits for replacing current vehicles with a vehicle that gets at least 7 or 10 more mpg? You could allow used-vehicle purchases to qualify to help the less wealthy working class to increase fuel mileage and cut gas consumption without having to buy an expensive new car. They just need to find a more fuel-efficient used car, which for a lot of people wouldn't be hard at all.

"Krugman, a vociferous Hillary supporter, says that any gas tax holiday would be a payout to the oil companies and not help consumers one bit. Now, remember who takes money from oil lobbyists? This is how they get repaid.  Paid for by BarackObama 2008, I approved the content of this ad"

tnmats, Hillary does "pay for" her gas tax holiday by imposing a "windfall tax" on big oil companies. Which is sort of like shifting the sales tax from the retail price of a sweater to the wholesale price of the sweater and expecting the sweater to cost less at the cash register.

If you take 18 cents off the price of a gallon of gas at the pump and charge that 18 cents to the company that puts the gas in the pump, how can the price possibly go down? Hillary's plan relies on the oil companies to say, "Well, that's OK, we don't need all this profit, so here, have a price cut," which if they were inclined to do, they would already have done so. McCain's plan might be stupid and counterproductive, but at least it might actually achieve its stated goal. Hillary's plan doesn't even have that virtue. If you want to replace the revenue lost from a gas tax holiday, you have to tax something other than gas and oil to make up the difference.

So to be consistent, Hillary should have proposed raising taxes on solar and wind energy and hybrid-car batteries.

Rhub: yep, it expired, my point was to show its real hard to sort the needy from the freeloaders...  I think the tests are a lot harder to implement (yes, it is obvious to an inspector, but where do the inspectors come from?) And 7-10 mpg better than what, my 10 year old trucks actual mileage or what it was once listed at?  In fact, I am not worried about tradespeople and truckers, assuming they are on a level playing field, they will just increase their prices. (Yes they complain right now, but that because they HAVENT raised prices yet, but they will), I worry more about the poor who have no recourse and have to, say, move from a 20 minute commute to a 3 hour bus ride... (You may laugh at the comparison, but thats the difference I experienced in LA when I lived there.)

First, Obama deserves credit for not pandering on the gas tax holiday.  

Second, ALL of the candidates deserve and NEED condemnation for their energy policy.  The fact is that we need *higher* oil prices and/or higher and tighter CAFE limits or else our economy will not grow longterm.  The challenge is 1) doing this in a non-regressive way so that lower/middle income people don't bear the brunt and 2) selling it to the public.

You want America to decline?  Keep chattering about gas tax holidays and the Reverend Wright and even Iraq pull-out dates.  The intelligensia has to talk up sound longterm policy, the way they did with deficit reduction (though it took Ross Perot to ultimately popularize it...with charts no less!).  We need Paul Tsongas, Obama to date is a Tsongas pretender.  And if you say it can't be done, that it's a political nonstarter, why are we wasting time with this election?  We could be talking baseball.

Rhub, read the Krugman article referenced. McCain's idea will have NO EFFECT on gas prices because the supply is constrained. Refineries are running flat out. So the price is the market clearing price irrespective of any cost issues. McCains plan would have the effect of giving the gas companies an additional 0.18 per gal profit...as if they needed it. Hillary's plan at least isn't a big payout to the oil companies...it is just a circle j**k...  

Lymon, actually both HRC and BO have proposed higher CAFE standards, increase investment in alternative energy, etc.   McCain to his credit isn't repeating the canard that drilling in ANWR would have kept prices lower, but his energy policy is 'let the market handle it' and 'give everyone a gas tax holiday'...pathetic I agree.

Regressivity is a problem, but politically there isn't a solution. The biggest bang for the buck comes from affecting low income behavior. I liked the idea of a carbon tax with a carbon tax rebate at the end of the year, based on income. Since the carbon tax would encourage behavior changes at all levels, more at the lower, but the tax would be rebated to the lowest income, they would still be incented to change behavior but not with such a dramatic financial impact. Alas, it would be political suicide to suggest this.

lymon1,

Agreed. The magic wand of pain-free "green collar jobs" ain't going to cut it. And the policies needed are clear. The hard part is selling them. Just look at what happened to Bloomberg's congestion pricing plan. The same arguments were used against it (regressive taxation) as are being used in support of the gas tax holiday.

I want to believe it can be done. Maybe Obama should get on the phone to Al Gore and ask him to do for gas prices what Perot did for deficit reduction. Frankly, I'm not sure Gore's vague, feel-good We commercials are doing much of anything. Those pictures of meadows and windmills and blue skies recall ads for allergy medicine or laundry detergent. But a campaign against cheap gas--that would be useful and easier for Gore to take on than it would be for a politician running for office.

But I also think Obama's opposition to the gas tax holiday is both commendable and politically savvy. I'd sure as hell rather chatter about this than Rev. Wright.

Yeah. I vote that everyone chill out and read HRC/BO's detailed energy plans. They're basically a liberal wish list.

Looks like the slamming of gas tax is going into MSM, this is good news for Obama...

news.yahoo.com/.../usa_politics_gastax_economists_dc_1

The article gets some particulars wrong, but in general makes Obama look good.

amazing how none of the rabid Hillary supporters show their face here on this thread. imagine, a whole thread based on sensible policy with no condescension.

dbhuff -- I do like Obama's carbon tax (I've given it a hat tip in other, though long-ago, posts).  The CAFE limits proposed though aren't nearly enough and are really just lip service -- neither candidate has talked them up at all.  If we weren't at war and literally funding our enemies it would only be a "very important issue" but since we are, it's unbelievably crucial.  And I think voters are smart enough to get this if a candidate stays "on message."  Consider this: a gas tax that is rebated at the end of the year (with laws preventing companies from advancing loans based on the credits the way they do with tax rebates), enough to make gas, say, $5/gal.  Those who need to drive for work are still going to (and there can be assistance for such drivers who are in the lower income) -- they'll get the money back at the end of the year and can budget accordingly.  But most people will drive less right away and/or buy fuel efficient cars and use the money later for other things.  

Nippers -- good call -- I think the war can be used as a better selling point, followed by "the economy your kids will inherit."  I think people "get this."  And the Dems have to be willing to give up on ANWAR if for no other reason that it makes them look like they are putting wildlife over people, even if it's true the effect on oil prices is marginal and won't be seen for years.  

VC -- they're a combination of tokenism and feel-good-technology-ism.  Let one of these candidates pledge a benchmark or they won't run for re-election and I'll believe them.  Paul Tsongas and Ross Perot talked about energy taxes in a recession (Obama's carbon tax is a backdoor soupcon of that, but hey, credit where it's due) -- that's the missing staight talk here.  

lymon, I agree about ANWR (no second A there). For a long time I believed it could function as a kind of untapped reserve for true emergencies, but I am too tired of it being a political football. If it were tapped then Republicans would have zero talking points except clamoring for even more tax breaks for oil companies, which is a tough call in any environment.

Lymon, I think we basically agree. I believe CAFE really doesn't work long term (the auto companies figured out how to sell a lot of hummers with them in place) so financial incentives are better. Unfortunately negative incentives work better than positive ones. So lets see, Obama didn't pander and you gave him credit, he likes the carbon tax and you do too... are you leaning? ;-)

Like all sudden changes in economic reality, what's needed is something to deal with the pain of capital expenditures unfortunately made just before the reality changed. So all those SUVs that people wish they didn't buy last year. A carbon tax rebate phasing out over 4-5 years is probably right... Home heating systems, insulation, etc. could all be compensated with this rebate...

On an even more fundamental level, can we please stop using taxes as a tool of public policy, and return to using taxes solely as a means of raising funds needed for governmental activity? The very idea of any sort of tax break, raise, holidy or other manipulation intended to promote or discourage something that is properly done legislatively is wasteful, beaurocratic, and offensive. This is particularly true coming from a "conservative" like McCain, but still so for Democrats. If you want to work on these issues, attack them at their source, not by diddling around making the tax code and tax structure even more Byzantine than it already is and increasing the hardship on the working class people who actually have to figure out how to implement and/or use the newest change.

Good for Obama for calling B.S. on this, though I have yet to see that he really grasps the fundamental dynamics behind all of this, or is willing to dig deep enough to address the root forces here. Being willing to call B.S. doesn't make you more of an expert, just less gullible and/or corrupt.

Holy fossil fuels, they did away with the comment delay! Testing with fingers crossed....

Trying to curtail gas consumption is a strategy that will hand the election to the GOP and nullify every advantage we have.

Give our working class a break, for once. Increase supply and drive prices down. Start drilling in ANWR and off the coasts, now, while we wait for alternative fuels to become affordable.

Reading this Tom Friedman column that the Obama campaign is circulating you realize again how the politics

Has the world (or at least McCain and Clinton) forgotten about that bridge collapse in Minneapolis?  It wasn't that long ago when we were being reminded just how decrepit and run-down so much of the US's transportation infrastructure.  Now these two want to cut off one of the primary sources of funding for such infrastructure improvements for three months?  Sheesh.  Gas taxes ought to be going up strictly to address these rebuilding needs (hat tip to literatehobo).

(OK, so Clinton wants to replace it with oil company money...that's been addressed well enough many times above.)

Barack Obama: "This isn't an idea designed to get you through the summer. It's designed to get them through an election." As it turns out, though, most pundits agree.

tep,

But working class commuters don't drive up oil prices in the summer. People taking vacations do. The trick is to discourage road trips in Winnebagos while not punishing those workers (e.g., truckers) whose living is seriously impacted by rising gas prices. As Obama and others have pointed out, for most Americans, we're talking about $30 or so over the course of the summer. It's more a matter of perception than reality.

And drilling in ANWR, whatever the merits and demerits, isn't going to lower the price at the pump before November, anyway.

Paul Krugman grudgingly acknowledges that Barack Obama is absolutely correct to oppose the sham gas-tax

Tep -- normally I'd agree, but the nation is at crisis point when it comes to energy.  Between our outdated infrastructure and illegal-immigrant-population-boom and aging/selfish baby boomers we risk permanently hobbling our economy and redefining (downwards) the average standard of living for the next generation.  I'm all for ANWAR and willing to make a short term environmental sacrifice (e.g., loosen summer air quality regs or subsidize refinery expansion -- kinda obscene given these oil company profits but maybe you trade that in leiu of putting a windfall profits tax on them) in exchange for longterm environmental relief.  

Will making SUV too expensive for a lot of people really cost the Dems the election, especially if they agree to give up ANWAR?  Are voters really that dumb that they can't see what's going on no matter how strongly we make the case?  Is this election really just who can pander less to special interests than the other candidate?  If so, I'm not sure why we should get so worked up about any of this -- the deficit is going to keep any grandiose plans under wraps for a long time, nobody is immediately pulling troops from Iraq or staying indefinitely regardless of what they say on the campaign trail and if the Supreme Court overturns Roe v. Wade it will be the biggest boon to local Dem politicians since I don't know what.  

blackton --sorry, I did notice your spelling correction -- hard to teach this old dog new tricks.

Obama is "absolutely right on the merits"?  Obama, who has voted for the idea before, is against it now simply because HRC and McCain are for it. McCain has said "of course" the gas tax break isn't a solution, calling it a "nice little break for Americans.  That's all it was, but of course, Obamaphiles jump all over it as if it were a major policy proposal to end oil dependence.

And the gas tax has anything to do with infrastructure is laughable.  For decades fuel tax revenues have been diverted to earmarks if not impounded outright.  The estimate is that even to begin to repair the nation's infrastructure will require 2-3 trillion, yes, trillion dollars.  Neither HRC's nor McCain's proposal will matter in that issue one way or another.  What will matter is an end to the rampant earmarks and pork of Congress, which McCain wants to end, that will free the highway funds needed for infrastructure.

McCain is wrong on many issues -- after all, he's a Repug -- but on this he's right and rightly sensible.  Obama, whose excuse is that he's campaigning, and Sheiber and credulous Obamaphiles, who have no excuse, will use any indiotic pretext, like this one, to move Wright off the front page.

Maybe it would be a good thing if McCain did get his "Gas Tax Holiday". Remember, it's a temporary tax relief that has to be reinstated in late September. That's just before the election and gas prices will have gone right up to were they were before the tax break. Now McCain gets to foist another seventeen cents per gallon on everyone. And everyone can then remember that this was his brilliant idea.

Wow, what breathtakingly WRONG analysis jm.  Whether or not it's enough, gas tax revenue goes to infrastructure.  To cut it off for three summer months--prime repair time...highway suicide.

Mike, I take your point about the folly of over-estimating the American voter. I think a lot of voters