OMG, a policy difference between Barack and Hillary? Gasp!

Tsukasa Buddha

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Tsukasa Buddha
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With just days before the next set of Democratic primaries, the idea of a summer "gas tax holiday" is working its way to the economic forefront, and become a rare flashpoint of policy disagreement between Sens. Hillary Clinton and Barack Obama.

Clinton has suggested suspending the 18.4 cent-per-gallon tax on gasoline, while Obama has attacked the idea as political pandering. But the merits of the idea haven't received much evaluation on the stump.

To fund her plan, Clinton has suggested taxing oil companies (Sen. John McCain has also advocated a suspension of the gas tax, but without the same funding mechanism).
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Linky.

I think it sounds kinda gimmicky.

And then there are the economists who say that it would actually raise gas prices... yeah, I suck at economics, so I don't know if that's true.

Paul Krugman, a Hillary supporter, said:
Why doesn't cutting the gas tax this summer make sense? It's Econ 101 tax incidence theory: if the supply of a good is more or less unresponsive to the price, the price to consumers will always rise until the quantity demanded falls to match the quantity supplied. Cut taxes, and all that happens is that the pretax price rises by the same amount. The McCain gas tax plan is a giveaway to oil companies, disguised as a gift to consumers.

Is the supply of gasoline really fixed? For this coming summer, it is. Refineries normally run flat out in the summer, the season of peak driving. Any elasticity in the supply comes earlier in the year, when refiners decide how much to put in inventories. The McCain/Clinton gas tax proposal comes too late for that. So it's Econ 101: the tax cut really goes to the oil companies.

The Clinton twist is that she proposes paying for the revenue loss with an excess profits tax on oil companies. In one pocket, out the other. So it's pointless, not evil. But it is pointless, and disappointing.
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Again, I don't know much about economics, but I think this whole "Let's take their outrageous profits!" populist theme is a little silly.

I also think it is kinda ridiculous that they are claiming that they are going to help stop global warming and at the same time they are encouraging gas use. If they want to tax oil profits, use it to fund alternative energy.
 
Obama is unequivocally right on this one. Anyone want to take the bait?

Daredelvis
 
The problem with all this "lower gas price" debate is that the real answers are long term solutions that people won't feel for years and people are hurting now. They might like the long term idea but that's not going to be enough for some people. They want some solution or partial solution that they can see working immediately. The gas tax strategy will probably reduce the price a little in the short term but that's the wrong way to go imo.
 
Tax holidays are already in place for state sales taxes in some states. The idea that it must be "funded" is what is silly.

I don't see the problem with a gas tax holiday except that people will use more gas waiting in line to buy cheap gas that day in some cases.

Its a gimmick sure, but it sure is nice for the people who use it. Congress has stifled any attempt to drill more or refine more at every turn. There is no magic overnight cure for gas prices since somehow plentiful domestic supply became a partisan issue. We need a stable domestic supply at a reasonable price until the technology catches up.
 
They'd be better off ending the boutique fuel requiements and find a gas mix usable in all states. Illinois alone has 3 different fuels depending on where you're at. It creates artificial shortages for no good reason.
 
If Hillary wants to really lower gas prices, she can propose scrapping the disastrous ethanol mandates. Then she will enforce no more than two gasoline blends for the entire US. Then she can introduce her plan to extract our own oil from Alaska and off the US coastline, and there will be a planned phase out of all oil imports from our "friends" in Saudi Arabia and Venezuela. Then she will talk about how many new nuclear power generation facilities will be fast tracked in her first four years.

That's just for starters, but I really doubt she has a plan beyond blaming the oil companies.
 
it is a gimmick, but what do you expect from Hillary???

TAM:)
 
I am sure Obama has proposed his share of gimmicks also.
I just cannot see this idea that Obama is a "different Kind" of politician.
 
So if eliminating the gas tax would not result in a decrease in gas prices, is Krugman claiming that, say, doubling or tripling the gas tax would not result in an increase in gas prices?:eek:
 
Brainster said:
So if eliminating the gas tax would not result in a decrease in gas prices, is Krugman claiming that, say, doubling or tripling the gas tax would not result in an increase in gas prices?:eek:
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Krugman is saying that if there was a gas tax holiday, all the gas stations would up their price on that day to match what the price was with tax.

You know, like how on sales tax holidays, all the walmarts increase their prices on notebook paper and pencils to be the same as it was with tax for that one day.
 
What kallsop said plus what Brainster said.

Why are the taxpayers being forced to give subsidies to technologies that will take years to produce significant amounts of power, if ever (wind, solar), while new nuclear power plant construction is in cold storage? Even the tree-hugger community has pretty much gotten over their fear of nuclear.
 
Brainster said:
So if eliminating the gas tax would not result in a decrease in gas prices, is Krugman claiming that, say, doubling or tripling the gas tax would not result in an increase in gas prices?:eek:
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THINGS IN ECONOMICS ARE OFTEN NONLINEAR!

As Krugman said, the Economics 101 explanation is that the supply is largely inelastic because in the short run there's not much that can be done to increase how much oil is produced, and thus the equilibrium point doesn't change much when you remove the tax. But this is only a local inelasticity because decreasing how much oil is produced is pretty straightforward, and thus a significant increase in taxes would have a different effect.

(And yeah, Obama has certainly pandered in his day, but it is quite encouraging to see that he's not pandering right now when it would be so very easy for him to do so.)
 
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UserGoogol said:
THINGS IN ECONOMICS ARE OFTEN NONLINEAR!

As Krugman said, the Economics 101 explanation is that the supply is largely inelastic because in the short run there's not much that can be done to increase how much oil is produced. But this is only a local inelasticity because decreasing how much oil is produced is pretty straightforward, and thus a significant increase in taxes would have a different effect.
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Heh. Price and supply inelasticity only work one way. People will demand and use the same amount of gas no matter how much or how little it costs. Taxes don't influence consumer behavior.

[/sarcasm]
 
UserGoogol said:
THINGS IN ECONOMICS ARE OFTEN NONLINEAR!

As Krugman said, the Economics 101 explanation is that the supply is largely inelastic because in the short run there's not much that can be done to increase how much oil is produced, and thus the equilibrium point doesn't change much when you remove the tax. But this is only a local inelasticity because decreasing how much oil is produced is pretty straightforward, and thus a significant increase in taxes would have a different effect.
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But if supply remains constant, and demand remains constant (I doubt that an 18 cent drop in the cost is going to increase demand), then shouldn't the pre-tax price remain constant? I could see why the price would go up if the tax holiday were to significantly increase demand, but nobody really anticipates this, do they? It's not as if people have a gasoline budget for their summer vacation, and if the price decreases they will drive farther.
 
BPSCG said:
Heh. Price and supply inelasticity only work one way. People will demand and use the same amount of gas no matter how much or how little it costs. Taxes don't influence consumer behavior.

[/sarcasm]
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No. That's exactly what I didn't say. Because supply is effectively maxed out, price will rise and fall to the point where the amount of gas people are willing to buy is equal to that constant amount of gas. The whole reason why this is a bad idea is because taxes influence consumer behavior. If you removed taxes from the price and prices just stayed low, people would demand more gas. But there isn't more gas available, (in the short term. In the long term people might be able to build new refineries or find new places to drill, but a tax holiday won't provide the incentive to do that, since by the time they were up the holiday would be long over) so prices will go up until the amount of gas people demand equals the amount of gas people supply. Thus, the price-lowering effect of removing the tax goes away, or at least would be dampened somewhat. In fact, if people did demand the same amount of gas no matter how much it cost, this would be an effective idea.
 
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dudalb said:
I am sure Obama has proposed his share of gimmicks also.
I just cannot see this idea that Obama is a "different Kind" of politician.
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lol...I should have put up your response in my own post, as I knew it was coming...you are definitely reliable on that...

Yes, i am sure he has one or two...perhaps you would like to name them...

;)

TAM:)
 
BPSCG said:
What kallsop said plus what Brainster said.

Why are the taxpayers being forced to give subsidies to technologies that will take years to produce significant amounts of power, if ever (wind, solar), while new nuclear power plant construction is in cold storage? Even the tree-hugger community has pretty much gotten over their fear of nuclear.
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A little OT, but...

I don't personally think nuclear power is a left/right issue, is it???

I know personally I am pro-nuclear, and yet I am a social liberal, fiscal moderate (with left tendencies).


TAM:)
 
corplinx said:
Krugman is saying that if there was a gas tax holiday, all the gas stations would up their price on that day to match what the price was with tax.

You know, like how on sales tax holidays, all the walmarts increase their prices on notebook paper and pencils to be the same as it was with tax for that one day.
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One day holiday vs. three month holiday... Oil vs. notebooks... Yeah, that comparison works real good.

Daredelvis
 
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