Saturday, May 3, 2008

Dumb and Dumber

Usually, the empirical impact of a policy proposal on relative prices or incentives has at least some bearing on its efficacy. In the case of the Gas Tax Holiday proposed by Hillary Clinton, it doesn't. Simply put, this proposal is a lose-lose. Let me explain.

If you remove the tax on gasoline for the summer, the policy will either reduce the pump-price of gasoline, or it won't. If it does, then by all accounts it will benefit average users by $70, using the most generous estimates of the Clinton campaign (which she even admits to some extent defies the estimates of the "quote-unquote experts" – and that would be spread out over all three months of the holiday). But wouldn't this contradict the other goals of Ms. Clinton's platform? Wouldn't it (among other things) make us more dependent on foreign oil, make the terrorists richer, encourage people to continue driving at their current levels, increase emissions, and create a strain on the federal budget in a time of unprecedented deficits?

But, OK. Demand for oil is pretty inelastic. Maybe it won't affect the price at all. But wait, since the price would then be unaffected, wouldn't that raise share of the end-user price that the private suppliers get, increase the record profits of gas companies, increase the revenues of oil-rich regimes that support terror, have no impact on households, and still create a strain on the federal budget in a time of unprecedented deficits?

In the end, we all lose. Another reason not to vote for a desperate lying woman who thinks she is entitled to the nomination because she stuck by her philandering husband and doesn't even have an economist heading her economic policy team of advisers.

Happy holidays.