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McCain wants a gas tax "holiday." It's a no-brainer, right?
Posted by Jerome a Paris on April 15, 2008 - 7:44pm in The Oil Drum: Europe
Atrocious policies but devious politics from McCain:
McCain Proposes Break in Gas Taxes
PITTSBURGH (AP) — John McCain wants the federal government to free people from paying gasoline taxes this summer and ensure that college students can secure loans this fall, a pair of proposals aimed at stemming pain from the country's troubled economy.
(...)
To help people weather the downturn immediately, McCain was calling for Congress to institute a "gas-tax holiday" by suspending the 18.4 cent federal gas tax and 24.4 cent diesel tax from Memorial Day to Labor Day. He also renewed his call for the United States to stop adding to the Strategic Petroleum Reserve and thus lessen to some extent the worldwide demand for oil.
Let me make the following bets...(under the fold...)
- that proposal is going to be very popular, given how people are unhappy with gas prices;
- it is going to embarrass Democrats, who know it's an atrocious idea, and who are going to either be accused of wanting to tax poor Americans, or to not know what they want;
- it's going to reinforce McCain's reputation as a maverick with bold ideas ('hey, why didn't we think of this before'?);
- this is going to be supported by Bush, divide the Democrats, and get pushed through Congress in record time, and be applied;
- the price savings from this proposal will be cancelled by the increase in oil prices (some of which will be triggered by the temporary boost to US demand caused by the downward blip in prices it will cause) ;
- rather than saying it was a bad idea, McCain will double up and propose to eliminate the tax all year long (repeat and rince - just before the election).
As I said: devious politics. But atrocious policies, given that higher oil prices come from the tension between growing demand and tight supplies. Pushing prices down boosts demand (even if only a little), thus worsening that tension - which can only push oil prices higher.
The end result is that the small fraction of the gas price that was going to Washington will no longer do so, increasing deficits, and making it harder to fund things like public transportation, renewable energies or energy efficiency programmes that would actually have an impact on oil prices. And meanwhile, the amounts going to Tehran, Caracas, Moscow or Riyadh will only increase...
But hey, I'm always told that a gas tax increase is a political suicide, so this tax "holiday" is a no-brainer, right?
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Jerome - the no brainer of course is the magical power of increasing gas taxes:
• Reduce oil consumption and pollution
• Reduce US reliance upon imported energy
• Increase tax revenues and reduce budget deficit
• Reduce trade deficit
• Stimulate engineering excellence and energy efficiency
But all this takes courage and leadership which seem to have been trademarks of the 20th century that somehow didn't come over to the 21st.
I drove to Edinburgh on Sunday with a friend in his Audi A5 estate 1.8 turbo diesel. On the highway with cruise control set to 70 mph we were doing between 50 and 60 mpg (statute miles per imperial gallon). And this is a big comfortable powerful car....
Vorsprung durch Technik
I think it shows some of the weaknesses of the US political system where the legislative and executive branch are separated. Both branches claim credit when things go right but are quick to point the finger when it goes wrong. Ultimately it leads to wedge politics which is what McCain is engaging in.
John Howard in Australia was a master of this sort of sneaky politics. McCains job is made easier by the Democratic party tearing itself apart over Clinton and Obama and it shows weak leadsership as the best that the American system can produce.
The most important thing that any US government can do today is to balance the budget (and then aim for substantial surpluses). It seems that neither of the parties really have any interest in that. The American public doesn't seem that interested either so I guess you will get the government you deserve.
The mixing of executive and legislative powers is characteristic of Absolutisitc regimes. In Europe the US is regarded has not possessing a strong enough power separation, with the nation's leader holding executive and some legislative powers.
Luis,
The entire Westminster system is built on the mixing of legislative and executive power.If by Absolutistic you mean that they can actually get things doen then I agree. Governments should not just be about popularity contests and sometimes hard decisions need to be made and implemented by governments. My point about McCains ludicrous idea is that he can only get away with it because he will never have to implement it. A Prime Minister in any Westminster Parliament, or even the alternative gaovernment simply couldn't float such stupid ideas without being blasted in parliament. The crazy US system elects the most popular personality who then hand picks an unelected cabinet. I can see merit in both systems but the parlous state of the Federal budget is a disaster that neither branch wants to own. McCAins comments show he just doesn't really get the program either. The rest of the world doesn't know whether to laugh or cry at America when the best they can throw up is clowns like McCain to be the next president.
And if the USA had equivalent modern turbodiesels for sale, maybe we'd learn to like them too. American car companies probably don't even know how to build them, and the Euro companies don't import them.
There's another impact from this idea - the federal gas tax is the principle source of transportation funding in the USA. The gas tax has been declining in real terms for many years. Transportation interests have been complaining loudly about under-spending on asphalt. McCain's plan means even less for roads.
See http://www.transportationfortomorrow.org/.
Everything is connected.
Maybe it's a sneaky plan to reduce oil consumption by ensuring that roads are in such terrible condition that driving becomes a pain?
18 cents!!! 18 effin cents!!!
Woo Hoo! Time to put that deposit down on that big pickup truck!
not.
18 cents is a lot of money. It almost adds up to a single McCoin.
Of which some portion will be immediately diverted into profits at the rack for long suffering (maybe six months?) refineries, a few more pennies to margin for long-suffering major producers (based on recent Congressional testimony) and yes straight into the pockets of long suffering sovereign producers due immediate higher demand in the massive US road transport fuel market(Pemex supplies a third of Mexico's government budget) with a little bit left over to expand things like deepwater drilling budgets (Halliburton just had to get some). If only the independent retailer could get a little piece of the action, then they wouldn't need to charge us two bucks for a cup of coffee. What's that per gallon?
If all this nonsense sounds familiar, maybe we should start calling the Senator from Arizona John McCheney?
We should raise the Federal Tax to $.80.
... for starters. Cut income taxes by a proportional amount. Increase the gas tax in later years as it begins to reduce gas consumption.
Rather than cut income taxes, provide a gas tax rebate for low income persons, including those who do not drive at all.
You can't link income tax to fuel tax, they are separate issues. America will need to tax its fuel but perhaps it should start at the impor terminal and make that more expensive first.
I'm a bonafide Peak Oiler with a naturally dour outlook but you just depressed the crap out of me. I'm horribly afraid you are 100 pct right OH NO!
What must the Europeans be thinking about now? The U.S. is held in low enough esteem as it is,especially regarding its high consumption of energy. If there is any way further to go down, Mac Ane has managed it.
McCain is a total bimbo.
What must the Europeans be thinking about now?
McCain seems not to be far from European politicians. Here in Bavaria Herr Huber recently proposed to raise tax rebates for drivers, known as the 'Entfernungspauschale'. He was widely scoffed by the media for this blatant populist approach which does not take into account how all this should be funded.
In Germany there was a substantial change in tax laws when 2007 tax rebates for drivers were virtually abolished. Since then only commuting distances of more than 20 kilometres are deductible for reasons of 'hardship'. There is a complaint against this rearrangement pending with our highest court.
What the Europeans are thinking doesn't matter since most of your IOUs are held by the Japanese and Chinese. They can see increasing problems and are also in between a rock and hard place, keep hold of the IOUs and watch them fall in value or sell them off and speed up the fall. And, do they buy any more so that Americans can continue buying all that "stuff" from them?
The last thing the US needs is cheaper fuel and more pork barrels:-(
From Tom Whipple's weekly Peak Oil Review, as posted at Energy Bulletin:
Quote of the Week
"As world oil production reaches its apex and begins its inevitable decline, it will have a radical impact on everyday American life. It will take bold political leadership and awareness on the part of individual citizens to craft a full-scale, creative response…I am convinced that the American people will tighten their belts if a president forges a national strategy to stretch the life of our oil reserves and to adjust to a long-range plan of energy conservation.”
—Stewart (and Lee) Udall, former Secretary of the Interior, in his Letter to his Grandchildren
I guess McCain's not that president...
heads up...
http://www.fuelgaugereport.com/
is currently showing US regular gasoline at $3.386 and diesel at $4.119 and its only April!
There are about 6 weeks till the peak prices are hit, going by the last two summers. I cannot see anything bad enough happening in the US economy fast enough to stop this happening again this year.
How can you not be a doomer when a person running for US president comes up with this nonsense as a "solution"? There will be zero mitigation of peak oil, zero efforts to do anything until declines in world exports are irrefutable. The only question I have is how long it will take from that point until the availability of oil, its products and also electricity is nil. 10 - 15 years I am hoping :)
What's with the jump in 8/10/2007? Surely, by that point, the price should be dropping down to winter levels. But it plateaus for two months and then rises! Anyone know what caused this?
That was caused by the rapid devaluation of the dollar. The price of a euro rose from $1.35 to $1.60 in a very short period of time. If you double those numbers, you get $2.70 and $3.20. That is about how much gas has risen since 8/2007. Now it is rising even faster because we're entering the higher price season.
All of these price increases were caused primarily by the federal reserve inflating the money supply. The fed had to increase the money supply because stagnant oil production was beginning to drag down economic growth. Of course, whenever economic growth stagnates, the fed always prints a bunch of money so that there can at least be "paper growth" to appease wall street. The fed just printed a whole bunch more money last month, so I would expect the price of oil to hit $130 by July. (It takes 3 or 4 months for the new money to circulate through the economy.)
So we get something like this:
Oil price increases -> US Economy stagnates -> Fed prints money -> Dollar devalues -> Oil price increases -> Repeat until oil runs out.
Any guesses where the US gasoline price might end up this summer?
Absurdities.
There's a positive side to this, the tax on diesel will be balanced with gasoline. Having a tax on diesel higher than gasoline is even more absurd than having none.
There's another negative side to this nonsense that is important to understand: when during the summer the common man in the street gets higher prices at the pump inspire of these tax breaks he'll get very suspicious.
Up to 2003 oil products prices were set by executive decision in Portugal. This caused a series of political embarrassments, the government would get a very negative image every time a price rise had to take place (especially after 2000 when the first upward movements in the barrel price).
When Barroso took office, one of the first things he made was to liberalize the oil products market by setting fixed tax rates. Shortly after crude oil prices shot up and the electors were left wondering. There is today a comon feeling among ordinary people that the oil products market liberalization was bad for them.
As final comment I would like to note that such a Liberal move comes from a supposedly Conservative party. It shows how deeply impregnated is the Liberal ideology in the political landscape of today.
I was listening the other day to a local radio talk show (Ronn Owen KGO if you must know) taking calls about McCain's gas tax proposal.
Members of the public called in to explain how the "money" saved on gas will enable consumers to drive to Wal Marts and buy goods made cheaply in China, thereby helping "The Economy".
"Yeaaaah, buttt," exclaimed the radio host, "where will government get the MoNey lost from the tax decrease?"
The discussion was so framed in Freakonomic mind fraud that I couldn't bear to listen anymore. No one was bringing physical measures into the discussion like growing_population multiplied by 2_SUVs_in_every_garage multiplied by finite_suck_rate from thin straws stuck into finite_Earth equals sucked up situation.
It was all about "The Economy".
_________________________
It felt like I had time warped into that movie, "Idiocracy"
Let's all drink the Brawno, It's got electrolytes
P.S. New York Times editor Krugman has a short piece on Peak Oil:
____________________________________
Of course, the swarming masses of our Idiocracy (a.k.a. the McBethname and Obama-nation, also known as the Hillocracy) don't do New York Times. Blaming "foreign oil" is funner. Doh.
The Republican party will nominate a bigger moron that George W. Bush. I didn't think it was possible. If McCain is elected President expect Bush to look like a genius by comparison. The powers that be need these numb sculls to do thier bidding and sell the status quo to the sheeple.
Well at least McCain listens to Lieberman and correctifies his mis-speak-affications.
Sunni? Shiite? What's the difference? Let's call the whole thing love.
It's too late to sell the status quo anymore in the U.S.
Every passing day shows us the status quo is gone.
Our lives will only be marginally better (ie. hardly at all) if we pass on McIdiot and elect the Hope Monster or the Hillary.
Dave,
That depends on who "us" is.
You and I? No problem. We're born again Peakists.
But consider a person of McCain's generation. Their minds are irreversibly molded into seeing the world one, and only one way. It's black and white. It's always the good "us" against the evil "them". The evil "them" understand only one thing, the point behind our flying bullets. The good "us" on the other hand are open minded and willing to negotiate but only after the evil "them" have totally surrendered and been eradicated.
Consider someone of Hillarity's age (oh oh that includes me). They have seen nothing but prosperous times. Man had gone to the moon, had done all these wondrous things if only he puts his mind to it. Surely "we" can do another good ole' Manhattan Project, Apollo Project, or other massive silver bullet project and "fix" this energy mess we're in. All it takes is a village and a few well meaning moms.
The loose change shaker (Obama) is probably no smarter or dumber than the other two. But his mind is young and flexible. Maybe he can "get it" before it is beyond way too late. One can hang on to the audacity of a little hope, can't one? :-)
The one good thing that might be said about this is that it starves the federal highway trust fund. No money to widen 6-lane urban expressways to 8 or 10 or 12 lanes. No money to build new expressways out to exurbia. No money to keep transcontinental highways in top condition so freight can keep on speeding along on trucks instead of trains. Given what we know about the inevitable future of transportation and the direction it needs to be pushed, that is all money that shouldn't be spent anyway.
I don't think that those would be the consequeces that McCain had in mind, but then again, unintended consequences tend to be the rule rather than the exception when it comes to politics and public policy.
Remember that the conservatives' plan was to drown the federal government in debt so reduced spending would follow. And how did that work out? We don't need taxes to continue to spend out of control, and that includes highways if need be.
Until China pulls the plug, we will keep on spending regardless of what happens to taxes.
This is the purest GOP ideology. There isn't a problem in the world that can't be solved with a tax cut. Even the so called terrorist threat motivated Bush to call for a tax cut at precisely the time when Americans would have accepted a serious tax increase. 18 cents comes to 7.56 bbl and oil prices have risen twice that much in just 3 1/2 months.
I was having a conversation earlier this evening about how Mc Cain's tax break will likely inflict more harm than good. Two years ago, in response to rising energy costs, our provincial government removed the sales tax on fuel oil and electricity, thereby forfeiting tens of millions of dollars in revenue that could have been used to help folks reduce their energy use and not, as in this case, stimulate even more demand. This assistance could have been targeted to those most in need but, instead, the province chose to bestow the greatest rewards on the most extravagant consumers of energy, typically those who can well afford to pay their own way.
I suggested that if our government was hell-bent on removing the sales tax on something, if only so that they could claim to be doing something to help the citizens of this province, it should have been energy saving products such as insulation and weather stripping, high efficiency heating systems and Energy Star appliances. That would have done far more good, both for the individual recipients of this assistance and for the province as a whole but, instead, our political masters demonstrated to us once again that optics trumps common sense everytime.
Cheers,
Paul