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Wednesday, April 30, 2008

Gas Tax Holiday -- Holiday from Good Fiscal Sense

Headline of the week for Dems still deciding between Obama and Clinton:

Clinton-McCain gas tax holiday slammed as bad idea.

Reuters reports this morning that economists (who don't have to pander for votes) pretty consistently say cutting the gas tax doesn't do any good beyond sound bites. Says Harvard's Greg Mankiw:

"Score one for Obama," wrote Greg Mankiw, a former chairman of President George W. Bush's Council of Economic Advisers. "In light of the side effects associated with driving ... gasoline taxes should be higher than they are, not lower" [Alister Bull, Reuters, "Clinton-McCain gas tax holiday slammed as bad idea," Reuters via Yahoo News, 2008.04.30].

Says Eric Toder:

"You are just going to push up the price of gas by almost the size of the tax cut," said Eric Toder, a senior fellow at the Urban-Brookings Tax Policy Center in Washington [Reuters].

Says Tufts University's Gilbert Metcalf:

"I think it is a very bad idea," said Gilbert Metclaf, a economics professor at Tufts University currently working with the National Bureau of Economic Research."

If we want people to invest in energy-saving cars, we need some assurance that the higher price paid for these cars is going to pay off through fuel savings," he said. "It is a very short-sighted, counterproductive proposal" [Reuters].

Says Berkeley prof and former Clinton Labor Secretary Robert Reich:

Talk about a dumb idea. It will only encourage Americans to drive more, thereby increasing demand and causing gas prices to rise even higher. Driving more will also put more carbon dioxide into the atmosphere, which fuels global warming. And this will cost taxpayers some $10 billion. It's a cheap political gimmick that does nothing to stem the rising price of oil [Robert Reich, "Gas Tax Holiday Is a Dumb Idea," Marketplace Morning Report, 2008.04.30].

So how many economists does it take to prove Hillary Clinton and like-minded Republicans wrong?

As Obama makes perfectly clear, a gas tax holiday is pure politics. Saving money on gas starts at home. You want to spend less? Buy less.

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