Democrats ponder gas tax holiday to stem inflation
The old news: Rising gas prices have some Democrats worried they will get wiped out in the November elections. The new wrinkle to the old news: Democrats propose a federal gas tax holiday to fight rising gas prices.
According to the Washington Post:
The White House and top Democratic lawmakers are beginning to weigh a new push for a federal gas tax holiday, potentially pausing fees at the pump as part of a broader campaign to combat rising prices.
The early deliberations come days after a group of vulnerable Senate Democrats introduced a bill that would suspend the gas tax of roughly 18 cents per gallon for the rest of the year, which party lawmakers are expected to discuss at a lunch Tuesday. Asked about the proposal, the White House signaled that “all options are on the table,” as the administration tries to ease the growing financial burdens facing Americans during a period of high inflation.
For now, the White House has not offered any official, explicit endorsement of the policy. Behind the scenes, top aides have debated whether it would provide meaningful relief — or ultimately serve to benefit the producers of gas more than the consumers of it. Some senior officials also fear the policy might be difficult to end later, since no politician would want to be seen as raising prices, according to two people familiar with the matter who spoke on the condition of anonymity to describe the discussions.
On the flip side, there’s no more powerful campaign ad against the party in power than a gas price sign.
Not that everyone is on board with a gas tax holiday. The reason? Global warming, of course:
Larry Summers, a former treasury secretary and top White House economist under prior Democratic administrations, called the idea of a gas tax holiday “short-sighted, ineffective, goofy, and gimmicky.” A high-profile critic of the Biden administration on the issue of inflation, Summers said the policy’s impact is at best unclear because it may boost demand in other parts of the economy.
“It’s terrible policy at a moment we’ve labeled climate change as an existential threat,” Summers added.
Perhaps it is a terrible policy – but not for climate change reasons. Tax holidays, in general, really are gimmicks that do little more than encourage greater consumption of particular goods, for as long as the tax break lasts.
And remember: prices are signals. Rising prices should encourage more oil exploration and production, even as they encourage people to shift to more fuel efficient cars. Distorting taxes, for political gain, will only make oil and gas markets more confused, and voters a lot angrier.
But when gas prices are rising, even the weakest economic ideas can look like a lifesaver. Right up until Election Day, when voters will decide if it was a good idea, or a cheap gimmick.