The only thing worse than John McCain’s proposal for a gas-tax holiday is John McCain’s new proposal for a longer gas-tax holiday. John McCain sa
July 18, 2008

The only thing worse than John McCain’s proposal for a gas-tax holiday is John McCain’s new proposal for a longer gas-tax holiday.

John McCain said Thursday that his proposal to suspend the gas tax for three months this summer may need to be extended longer if high gas prices continue to take a toll on the economy.

“I think we ought to seriously look at whether we need to have it be longer or not depending on what the economy (does),” McCain said, standing beside the Grand River.

“I think we have to consider all options but the fact is we need a gas tax holiday. We need it, we need it, we need it very badly. The Americans that are hurt the most are low income Americans that are driving the oldest automobiles,” he said.

I just find it hard to believe we’re still talking about this obvious nonsense. McCain surely knows that his proposed holiday wouldn’t actually lower the price of gas. Indeed, if he genuinely believed otherwise, McCain would probably go to Capitol Hill — he is still a senator, by the way — introduce legislation, and push lawmakers and the White House to endorse his initiative.

I have to say, McCain is at his least attractive when he takes on the role of con man.

McCain wanted to eliminate the 18.4-cent a gallon federal gas tax over the summer (from Memorial Day to Labor Day). This would cost the Highway Trust Fund between $9 billion and $11 billion. McCain hasn’t said whether he’d just increase the deficit to make up the difference, or just let the transportation money disappear, costing thousands of jobs. Now he wants to make the holiday longer, costing more jobs and more billions of dollars.

And what would consumers get in return? Nothing. Putting aside the volatility in oil prices, and the fact that the cost of a glass of gas will probably go up over the summer regardless of federal taxes, Americans won’t actually be in a position to save any money if the gas tax is temporarily repealed. McCain may not be the sharpest crayon in the box, but he almost certainly realizes this.

He has to.

This is just common sense. As Paul Krugman explained in April:

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.

Got that? We can cut the tax, but the price wouldn’t go down. Oil company profits — which are already breathtaking — would go up, but there’d be no extra money in Americans’ pockets.

Thomas Friedman recently offered a similar critique, arguing that a gas-tax holiday is “a reminder to me that the biggest energy crisis we have in our country today is the energy to be serious.” Friedman added that the proposal “is so ridiculous, so unworthy of the people aspiring to lead our nation, it takes your breath away.”

This, regrettably, is McCain the Con Man. He’s selling snake oil, hoping desperately that voters won’t know the difference. That his proposal wouldn’t do anything to help American consumers, wouldn’t lower the price of gas, and would boost oil company profits seems entirely irrelevant. A confidence man in the middle of a scam can’t be bothered with reality — it only gets in the way of the deception.

On his proposal, McCain, at his most breathtakingly pathetic, concluded, “We need it, we need it, we need it very badly.”

Actually, what we need is a leader who not only tells us the truth, but is in touch with reality. John McCain has proven himself to be neither.

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