I’m glad to see a number of news stories this week featuring quotes of economists who are arguing against a temporary repeal of the federal gas tax. For example:
The trouble with the plan, they say, is that oil prices are rising because of low supplies, and companies will continue to charge the average $3.60 a gallon and just pocket the money that would have gone to federal taxes.
. . .
Supplies are “being cleared at the current price,” said Donald Parsons, an economics professor at George Washington University in Washington. “If you take away the tax, you’ll have the same number of consumers willing to buy the gas at the same total price.”
That’s correct. The fundamental problem driving up gas prices is that the supply of oil is not growing to meet demand. Temporarily lowering the price will not fix that problem. It’s akin to putting a band aid on a broken arm.
Nonetheless, Senator’s McCain and Clinton continue to pander and mislead on the campaign trail. Consider this whopper:
“I believe it would be important to get every member of Congress on record,” Clinton told supporters at a rally in southern Indiana. “Do they stand with the hard-pressed Americans who are trying to pay their gas bills at the gas station or do they once again stand with the oil companies?
“I want to know where people stand and I want them to tell us, are they with us or against us when it comes to taking on the oil companies?” she added.
Huh? In what sense can you argue that repealing a tax on gas (and thus increasing demand for the product) is taking on the oil companies. That doesn’t even make sense. I believe Ms. Clinton has proposed a tax on oil companies to make up for the tax at the pump, and perhaps that’s what she means. If so, that misses the point entirely. Oil companies will simply pass the cost along to consumers. As long as demand continues and there is no new supply, oil companies can keep raising prices.
And therein lies the real problem.