Finally, a bone of contention between the Democratic candidates. Even more, one of them agrees with the Republican nominee. Unfortunately for Hillary Clinton and John McCain, suspending the federal tax on gasoline won't do much to stimulate the American economy. And unfortunately for Barack Obama, his intelligent argument against suspension won't win him any friends in the ever so important white middle class demographic. This is one of those issues where a leader needs to take an apparently unpopular stand on an issue for the sake of the economy.
Suspending the gasoline tax for the summer months will cost the federal government about $6-7 billion in revenue. The tax is projected to pull in $30bn in revenue for 2008. And most of this goes to the states in the form of capital for road construction and infrastructure improvement. While at the same time, suspending the tax will only net about $30 per person/family during the period of tax free gas. The question that Senator Obama and economists pose is this: is that $30 worth the suspension of infrastructure maintenance that may cost us even more money down the road? Roads and bridges that are left to decay won't cost us now, but cutting corners to provide people with $30 can cost us millions in future construction and repair costs. And remember, the nation's bridges have already been determined to be in very poor condition.
Senators Clinton and McCain believe that the government can offset the losses of revenue by imposing a profits windfall tax on oil companies. There one major problem with this is that not all of these taxes will go to infrastructure upkeep. Furthermore, there is no guarantee that this tax would pass muster in Congress or even a presidential veto. President Bush is a product of the petroleum industry and oil companies have a huge lobbying presence in Washington. What this seems to amount to by the two Senators is vote pandering. They are essentially trying to buy votes for $30 a head by proposing this. Its even possible that they know it will never pass; so being a proponent can give them a boost with voters and not really cost them any efficacy. Who knows.
The second problem with suspending the tax is that it will cause a positive feedback cycle. All of a sudden gas becomes cheaper and demand increases in a season where Americans like to travel by automobile. What does an increase in demand bring? Higher prices! Economists have suggested that the tax suspension might even increase the price of gasoline in the summer months because more people are encouraged to go the pump to save 18 cents per gallon. Then in the fall, when the tax is reinstated, we'd have to deal with higher prices with the tax! Even if the tax is relatively minuscule, it just looks more expensive and may cause consumers more concern.
It is also interesting to note that this proposal is advocated by Senator Clinton. She has played the populist card throughout the primary process by claiming to bring jobs back to industrial America. Now she is advocated a proposal that will cause her home state of New York to either suspend or cut 300,000 highway maintenance jobs. So we're not going to shift your jobs overseas, we're just going to cut a tax that feeds your families. At least gas will be cheaper! This has to be the height of hypocrisy. In addition to letting our infrastructure decay further, the federal government will cut 300,000 domestic employees in order to provide people $30.
The problem for Senator Obama is that this proposal looks good on paper to all the white middle class "bitter" voters that he has estranged. Senators Clinton and McCain may come out on top in this argument solely due to the fact that the affected populace feels like they are getting something. They will further the image of Obama as just another elitist Washingtonite who doesn't care about the common folk. Where, in fact, he understands that the proposal has no economic validity whatsoever and is just a deplorable attempt to buy votes. Its just an other bandaid on the gunshot wound that is our energy policy. But, appropriately, that is another story for another time.
Suspending the gasoline tax for the summer months will cost the federal government about $6-7 billion in revenue. The tax is projected to pull in $30bn in revenue for 2008. And most of this goes to the states in the form of capital for road construction and infrastructure improvement. While at the same time, suspending the tax will only net about $30 per person/family during the period of tax free gas. The question that Senator Obama and economists pose is this: is that $30 worth the suspension of infrastructure maintenance that may cost us even more money down the road? Roads and bridges that are left to decay won't cost us now, but cutting corners to provide people with $30 can cost us millions in future construction and repair costs. And remember, the nation's bridges have already been determined to be in very poor condition.
Senators Clinton and McCain believe that the government can offset the losses of revenue by imposing a profits windfall tax on oil companies. There one major problem with this is that not all of these taxes will go to infrastructure upkeep. Furthermore, there is no guarantee that this tax would pass muster in Congress or even a presidential veto. President Bush is a product of the petroleum industry and oil companies have a huge lobbying presence in Washington. What this seems to amount to by the two Senators is vote pandering. They are essentially trying to buy votes for $30 a head by proposing this. Its even possible that they know it will never pass; so being a proponent can give them a boost with voters and not really cost them any efficacy. Who knows.
The second problem with suspending the tax is that it will cause a positive feedback cycle. All of a sudden gas becomes cheaper and demand increases in a season where Americans like to travel by automobile. What does an increase in demand bring? Higher prices! Economists have suggested that the tax suspension might even increase the price of gasoline in the summer months because more people are encouraged to go the pump to save 18 cents per gallon. Then in the fall, when the tax is reinstated, we'd have to deal with higher prices with the tax! Even if the tax is relatively minuscule, it just looks more expensive and may cause consumers more concern.
It is also interesting to note that this proposal is advocated by Senator Clinton. She has played the populist card throughout the primary process by claiming to bring jobs back to industrial America. Now she is advocated a proposal that will cause her home state of New York to either suspend or cut 300,000 highway maintenance jobs. So we're not going to shift your jobs overseas, we're just going to cut a tax that feeds your families. At least gas will be cheaper! This has to be the height of hypocrisy. In addition to letting our infrastructure decay further, the federal government will cut 300,000 domestic employees in order to provide people $30.
The problem for Senator Obama is that this proposal looks good on paper to all the white middle class "bitter" voters that he has estranged. Senators Clinton and McCain may come out on top in this argument solely due to the fact that the affected populace feels like they are getting something. They will further the image of Obama as just another elitist Washingtonite who doesn't care about the common folk. Where, in fact, he understands that the proposal has no economic validity whatsoever and is just a deplorable attempt to buy votes. Its just an other bandaid on the gunshot wound that is our energy policy. But, appropriately, that is another story for another time.
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