Letters to the Editor
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Frost must be a Clinton Buddy
Everyone else who knows says that the Gas Tax Holiday will not help.
Yet this man, whoever he is, is supporting the Gas Tax Holiday.
Bullshit!
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"I think it is safe to say that we stand firm in agreement that this is a bad, bad idea."
CITED ECONOMIST IN THE SALON ARTICLE, WILLIAM J POLLEY, SAYS:
"The Wall Street Journal's Real Time Economics blog says that my comments (specifically the last sentence above) are "probably the strongest show of support available". That may be. Though I meant it to be a bit of "damning through faint praise." My criteria for good public policy is that it be well out of the neighborhood of "pointless." Still, I'll bet others would agree that the consumer might benefit a few cents, but I think it is safe to say that we stand firm in agreement that this is a bad, bad idea."
"I think it is safe to say that we stand firm in agreement that this is a bad, bad idea."
http://www.williampolley.com/blog/archives/2008/05/gas_tax_holiday.html
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State and Federal
gas taxes are apples and oranges.
The state gas tax is a local event, and the oil companies' system was not designed to react to local events. Therefore, the gas prices did not rise and did not eclipse the savings at the pump.
However, a federal gas tax is a national event, and the oil companies are readily positioned to react nationally, raising gas prices that swallow up the savings before it gets to the pump.
While local gas tax relief can be felt as relief, national gas tax "relief" is only a siphon of our tax money from national infrastructure into the pockets of the oil and gas companies.
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heywood
Sure. Whatever you say.
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@red_gti2000 A question then, about the free market
If I remember correctly, you view yourself as a more libertarian kind of guy. Right now, the Market is signalling a rise in petroleum products. In fact, it has been for awhile. Shouldn't we react by altering our lifestyle, instead of trying to alter the price of gas?
This seems to me a perfect example of market forces leading to local production, and increased conversation. It's also a perfect example of market forces leading to government intervention.
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ethics_professor: Tom Payne Sighting?
You mean Jeff? I thought the same. Did payne actually get voted off the Island?
Maybe Salon should keep a list of last seasons winners along with a fragment of the droggrel that got them banned.
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3 things
1. the uncollected gas taxes would NOT be passed along to the pump. These companies are not in the business of charity.
2. The hypothetical "windfall tax" to offset the revenue loss has no chance in hell of becoming law. So the revenue losses would not be offset. They'd just get swallowed by our increasing debt, which weakens the dollar, which weakens the economy, etc.
3. Even if I were wrong about #2, there's no way the oil companies wouldn't pass that tax along to the pump, thereby increasing gas prices.
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Fester
That's what I'm saying. I wondered what happened and became curious when I saw one post last night. I checked some of the "new" letters; the cadence, word choice, and sentiment are the same.
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Conflation Inflation
Your analysis conflates monetary benefits with psychological benefits, but the whole point of distinguishing psychological benefits is that they are separate from monetary benefits.
Sorry, I don't see much pyschological benefit from a program that doesn't work and has bad side effects. In fact, I see backlash when it doesn't deliver. And the majority of most people's state of mind is connected to events in the real world, like monetary benefits.
It's hard to see how this feeble initiative can generate any sense of anticipation of relief like you are inferring. There is a reason a lot of people don't like it.
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@ethics_professor
Well, Jefferson was more of statesman, and less of a bomb thrower than Payne. Let's see if the new persona posts accordingly.
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Let's say..
for every $1 in the cut taxes, $.60 makes it back to the voters, while $.40 goes to oil companies in the form of higher prices hidden by the cut in taxes.
Of course, for every $1 in cut taxes, the deficit increases by, well, $1. Does anybody seriously think that the ratio under which this debt would be repaid would be anywhere near 60% consumers, 40% oil companies?
That's why it's called pandering. Pretty much all tax cut proposals are pandering, unless they are tied directly to some measure that will either replace the lost revenue or will directly reduce spending. If you're not doing that, then you are simply borrowing more money.
For some reason, a lot of political hay has been made in the past 30 years by pandering politicians. That's fine and dandy, but let's not pretend that this is a serious political solution.
I have a different proposal: let's fund a cut of taxes by no longer spending hundreds of billions of dollars to fight a pointless war in Iraq.
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Fester
We can only hope so. I can think of a few others who could use a time out if that's the result. P.S. Thanks for your recent support.
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Some criticisms
The following are four points Frost says Obama is making and the reasons I believe Frost's criticisms are wrong.
1. Obama claims the gas tax cut won't help consumers.
First of all, who does Frost want to help? He tries to make us feel sorry for poor people who spend an inordinate portion of their income on gasoline, but if you cut the price of gasoline then you help people proportionally to the amount of gasoline they buy, which means most of the benefit goes to people at the upper end of the income distribution. If you want to help poor people, you should make "being poor" a qualification for the benefit. This is the same kind of argument as Bush saying that his tax cuts "helped the economy" -- they did, but if his actual goal was to help the economy, then he could have had the same effect for a quarter of the cost.
Next, Frost tries to figure out what kind of price effect the tax cut will have. He assumes that the overall United States market for gasoline is comparable to the Illinois market, which is quite a stretch. Illinois has an elastic supply compared to neighboring states, while the country as a whole has a fixed supply because 90% of gasoline is refined domestically. So if only 60% of the Illinois tax cuts were passed through to consumers, the prospects for a nation-wide tax cut can't be very good.
2. Obama claims the gas tax cut is an opportunity for oil companies to raise prices.
Frost links to a piece of analysis by the government energy information administration and seems to misrepresent it. Frost claims that gasoline inventories are "very high". What the link actually says is that gas inventories are a bit above the mean for this time of year, and falling sharply as refineries cut production because margins on gasoline are at relative lows. Crude oil prices are so high that gasoline markets won't support prices that are much above refining costs -- this actually bolsters Frost's argument, because it means than gasoline supply is more elastic than usual. But with prices so high, I expect that demand is significantly more elastic as well. So in the end it's hard to say whether oil companies will get almost all of the benefits, or simply most of the benefits -- note that the optimistic economist Frost triumphantly cites predicts that consumers will get a whopping 25% of the benefit.
3. This is an inducement to drive more
Frost quotes a study that says the short-term price elasticity of demand for gasoline is 26%. assuming this is true, a 5% tax break for 3 months would increase gasoline consumption by 400 million gallons and boost global carbon dioxide emissions by nearly a tenth of a percent. (This is assuming the tax cut actually affects prices, of course.) I think Frost is being a little indulgent to say that this equates to "little if any long-term effect," but clearly it could be worse.
As other letters have mentioned, the political effects of the gas tax holiday are scary -- the entire premise of the tax cut scheme re-enforces the notions that gasoline should be cheap, that we're entitled to consume as much of it as we want, and that the government should only tax "greedy companies" and should leave wasteful consumers alone. This is counter-productive to any and all future climate-change legislation.
4. This gas tax holiday may drain highway funding.
We absolutely need to impose new taxes on oil companies. If we tax oil, coal, and natural-gas producers directly, based on the carbon intensity of the fuels they sell, then in a single move we can put a price on 95% of (domestic) carbon emissions in a fair and transparent way. This will seamlessly induce every single decision-maker in the country to choose less-carbon-intensive products and services, and we could of course give the proceeds back to disadvantaged individuals. It's going to be orders of magnitude more difficult and time consuming to enact strange new taxes on the oil industry than to cut an existing tax on gasoline. So it's pretty disingenuous for Clinton to act like this is an easy deus ex machina way to pay for things.