Why Obama, Part VIII: Gas Prices

May 6, 2008

I know it’s been a little while since I added another installment to my “Why Obama” series, so I figured that with all the talk here in the Chamber about those obscene gas prices lately it was as good a time as any to highlight the issue. 

There’s been quite a bit of debate over this (with good reason), and a lot of attention has been paid to the fact that Obama is departing from McCain and Clinton with regards to suspending the 18-cent federal gas tax for the summer.  I know that when I first heard about it, my initial reaction was that it was a gimmick and wouldn’t really save people that much.  Of course, I’m no economist, so…

Luckily, the economists have weighed in, as the Obama campaign posted on the “fact-check” portion of the website:

Washington Post Fact Checker: Temporary Illinois Gas Tax Holiday Showed that Economic Benefit Was Minimal and the Majority of Consumers Didn’t Feel They Were Paying Less. “The gas tax moratorium proved politically popular in Illinois, but economically questionable. The Illinois Economic and Fiscal Commission estimated that the state lost $175 million in revenues during the six-month period. A subsequent study by the National Bureau of Economic Research showed that gas prices fell by 3 percent, meaning that only three fifths of the savings from reduced taxes was passed on to consumers. “It turned out to have a pretty small effect,” said Joseph Doyle, an assistant economics professor at the Massachusetts Institute of Technology. “Consumers were slightly better off, but the benefits were spread very thinly, and the government was a lot worse off.” A poll by the Chicago Tribune showed that only 28 percent of motorists believed that they were actually paying less for gas as a result of the temporary suspension of the tax. Obama has changed his mind dramatically on the tax cut since voting for it back in 2000 in Illinois. On the campaign trail Monday in North Carolina, he described the proposal as a “short-term quick fix that we can say we did something even though we’re not really doing anything.” [Washington Post Fact Checker, 4/29/08]

Economists Agree: Most Savings from Gas Tax Holiday Are Passed on to Producers, Not Consumers. “James Hamilton, professor of Economics at the University of California-San Diego, said that most of the benefits from a temporary tax moratorium would likely go to producers rather than consumers. He said that states that suspend gas taxes are able to respond to rising demand more efficiently than the country as a whole, because gasoline supplies can be easily moved from one state to another. “Prices would certainly rise to the market-clearing level,” said Hamilton. “I would expect the price [of gas] to go back to very close to where it was before [the tax cut], in which case consumers would not see any benefit.” Another economist, Jeffrey Perloff, of UC-Berkeley, agreed that a federal tax moratorium would likely have less impact on consumer gas prices than a state moratorium. He said his models showed that a suspension of the 18.4-cent federal tax on gasoline would likely result in a temporary 9 to 12 cent reduction in the cost of a gallon of gas to the consumer, with the remainder of the reduction coming in wholesale prices.” [Washington Post Fact Checker, 4/29/08]

There’s a lot more there there, but the consensus is pretty universal.  In fact, when Clinton was pressed to name a single economist that has endorsed the “tax holiday”, her response was “I’m not going to put my lot in with economists,”, which is an answer that sounded like it came from George Bush.   It kinda begs the question as to who she is putting in her lot with, if it isn’t the experts.

The bottom line here is this is a phony gimmick; an easy thing to propose in light of the current situation as an attempt to buy some votes.   Obama’s position is grounded in reality.

What Obama should do right now is take this and pivot to a reminder to everyone that there are certain easy things we as Americans could do to relieve the financial burden of gas, as long as we’re talking about pennies on the gallon:

At this stage, I’d consider it a patriotic duty to make sure my air filter is clean and my tires are inflated.   hmmm…maybe I should be running a presidential campaign?

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  1. I agree with you that the gas tax pass is nothing but populist drivel.I’ll concede that the occupant of the Oval could and should provide leadership on conservation.
    I have to say though: Obama’s refusal to drill domestically ie increase supply and alleviate the market & OPEC fiddling leaves him on empty. His desire to tax the companies also leaves me saying he should spend even more time with some economists.

  2. I couldn’t BELIEVE Hillary when she said she didn’t care what the economists said.
    Alfie, if Barack green-lighted drilling in Alaska, we still wouldn’t see a drop of oil for ten years. The plan is, hopefully, to have drastically decreased our reliance on oil by then.

  3. BTW, CZ, how do I get my blog added to the Political Blog list? Does someone check my blog out first, or what do I have to do?

  4. A tax holiday would not drive down the price of gas since big oil and others down the pipe would take a cut for themselves since they already know the public is willing to pay the currant prices. This is called capitalism…

    I can’t believe Hillary fell in line with McCain on this. She looking to be his VP? Thank God Obama is able to think independently and not willing to play politics as usual.

  5. How can you equate any of this to “Why Obama” when you have failed to mention anything about Obama’s plan to decrease the price of gasoline. Or are empty promises on the subject good enough—like in 2006?

    Sure, you fact-checked to establish that McCain and Clinton are wrong, but you’ve told us nothing of what Obama intends to do about it to make him right.

    All you’ve told us is “what Obama should do.” We can play that game all day long. But what is he going to do?

    Maybe this one should be called “Why Obama?” Because if advising people to keep their tires properly inflated is the best we’re going to get, we can just elect Mario Andretti.

  6. Because if advising people to keep their tires properly inflated is the best we’re going to get, we can just elect Mario Andretti.

    LOL! Yeah, and if we elected Mario, even if he brought some big boobed whore, we damn sure would get a better 1st lady than that American-hating, entitled shrew Obama brings to the table.

  7. Where’s that promise of my lower gas price Nancy Pelosi & Hairless Reid promised in January of 2007 General?

    Now there’s a couple intellectual giants the libs bring to the table…

  8. I would like to see the gas tax repealed–since it is a tax on the poor. After all, taxes on necessities like gas hurt the poor most–which is supposed to be a concern for the Democrats–allegedly.

    Next, I want everyone to leave “BIG OIL” out of it–Big OIL DOES NOT SET THE PRICE OF GAS!! Oil prices, which directly affect gas prices, are set in the market–by traders–not by Exxon. If you want Big Oil to help–allow them to drill in the frozen Tundra in Alaska and other places so the supply will increase.

  9. Kurt-

    BTW, CZ, how do I get my blog added to the Political Blog list? Does someone check my blog out first, or what do I have to do?

    Kurt? Kip? Waging Peace? I could have sworn that you said that the Alliance was stupid awhile back.

    If I’m wrong, I apologize. But that was the assumption I was working with.

    Red Pill-

    How can you equate any of this to “Why Obama” when you have failed to mention anything about Obama’s plan to decrease the price of gasoline. Or are empty promises on the subject good enough—like in 2006?

    Well, I could say that this qualifies as a “why Obama” entry because of what he won’t do. I don’t see anything wrong with that. It’s a position that he knows won’t work no matter how enticing it sounds on the surface, because they tried it in his own state.

    And in the interests of full disclosure, I actually sent a message to the campaign via their contact form about my suggestion. Here was the automated reply;

    Dear Chen,

    Thank you for contacting Obama for America. The volume of messages we’re
    receiving has gone up since Barack’s victory in Iowa. While we cannot respond
    individually to over a thousand messages per day, the level of interest and
    thoughtfulness of the comments reflected in these communications are very
    gratifying. Your thoughts on our campaign and America’s future are greatly

    Individual citizens like you are the foundation of this campaign.

    Since his February 10 announcement speech in Springfield, Illinois, Barack has
    spoken consistently of working together to reclaim the meaning of citizenship,
    restore our sense of common purpose and rally the power of millions of voices to
    demand long overdue change. We hope you will explore our website,
    http://www.BarackObama.com, to view that speech in its entirety and learn more about
    Barack, his record and his plans.

    If you’re writing because you want change, we need you to help us fight for it.
    Please sign up here to volunteer:


    And you can get started from home right now. We’ve built a set of easy-to-use
    web tools that empower you to get further involved right now. Click
    My.BarackObama.com, where you can find events near you, connect with neighbors
    who support Barack, create your own blog, and do much, much more.

    And if you’re not sure you want to get involved, and are writing to express a
    concern or disagreement, we appreciate that as well. The open discussion we want
    to facilitate cannot take place without hearing from people expressing a wide
    range of views.

    Thank you again for writing.


    The Correspondence Team
    Obama for America

    Here are some more useful links to help you get started:

    Learn more about Barack’s policy positions: http://my.barackobama.com/acissues

    See Barack in person or attend a campaign event: view the Events section toward
    the bottom of the front page http://www.BarackObama.com.

    Invite Senator Obama or Michelle to an event: http://invite.barackobama.com

    Donate: http://my.barackobama.com/acdonate

    Buy Obama Gear: http://my.barackobama.com/acstore

    I guess I shouldn’t get my hopes up, but I had to try.

  10. @mklasing…but the gas tax is actually a”moral” tax. It taxes users and it’s monies are meant to be targeted at infrastructure. There are a number of taxes that should be tweaked or eliminated but the gas tax isn’t one of them. It’s like the cigarette tax. You smoke you pay and hopefully you die before you need the medicare/medicaid.

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