My gas tax challenge still remains unanswered: Try to find any coherent economist willing to support Senator John McCain’s proposed gas tax holiday.
In May, George Stephanopoulos posed my challenge to Hillary Clinton, who famously responded that she was “not going to put my lot in with economists.” I didn’t like her response, but at least it was honest.
On Sunday, Stephanopoulos posed the challenge to McCain and elicited a truly bizarre response.
Stephanopoulos: Not a single economist in the country said it’d work.
McCain: Yes. And there’s no economist in the country that knows very well the low-income American who drives the furthest, in the oldest automobile, that sometimes can’t even afford to go to work.
McCain’s response — attack the economists — has now become a recurring theme of the campaign. I agree that we economists need to understand the lives of the folks we study. But my understanding of Average Joe is not going to help me better understand the impact vs. incidence of a gas tax. Empathy cannot change an elasticity.
And then Stephanopoulos continued, pushing the economic argument:
Stephanopoulos: But they all say that … the oil companies, the gas companies are going to absorb … any reduction.
McCain: … they say that. But one, it didn’t happen before, and two, we wouldn’t let it happen. We wouldn’t let it — Americans wouldn’t let them absorb that.
Stephanopoulos: How would you prevent that?
McCain: We would make them shamed into it. We, of course, know how to — American public opinion. And we would penalize them if necessary. But they wouldn’t. They would pass it on.
Stephanopoulos: Let me ask you about …
McCain: But let me just finally say, Americans need trust and confidence in their government.
McCain’s response — that tax incidence is a function of shame — is completely novel to me. Does shame really determine oil prices? If so, why aren’t the oil companies already feeling ashamed of high oil prices? I don’t get it.
And if shame doesn’t work, Mr. McCain would “penalize them.” Is he suggesting price controls? Or something else? Help me.
(Full transcript here. Hat tip: Free Exchange and Matt Yglesias, who provide further discussion.)
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McCain’s comments are asinine. A gas tax holiday is not going to help the “poor schmoe with the long commute and the old car” because it won’t amount to enough to make a difference. That poor person still won’t be able to drive to work, because the quarter he will have saved won’t buy much more gas than he already had.
Shame the oil companies?! Come on. If they aren’t shamed by the things they do on a daily basis, nothing is going to shame them.
Wake up, McCain. What are you going to do, spank them and send them to bed without dinner?
Outrageous. Not that Obama’s plans to tax “excessive” profits are much better…
I didn’t even realize this was still on the table. I couldn’t agree with John McCain less on this issue. . .however your response does have a certain elitist ring to it.
Oil companies must be somewhat concerned about public opinion and government intervention. From a follow the money perspective, they are now paying for advertising. There is an ad campaign about how they don’t make that much money and how much they reinvest.
The tax holiday still doesn’t make sense, but there might be something to public shame driving government intervention. Otherwise, why spend the money on ads?
“And if shame doesn’t work, Mr. McCain would “penalize them.” Is he suggesting price controls? Or something else? Help me.”
He’d tax them more, of course.
As an immigrant to and a new citizen of this country, I am constantly amazed by how the intelligent, high-achievers are constantly marginalized and belittled by using terms like “elitist”. I am at a loss to understand why achievement and expert opinion is so undervalued. Mr. McCain is simply doing what all politicians do – pander to the lowest common denominator by pointing out that the economists are not “like us”. Of course if it weren’t for the idiot voting class in flyover country that Mr. McCain is pandering to, Mr. Obama would be elected in a landslide. Yes–this is the kind of thinking that got Democrats into trouble in the first place, but….
We fear that which we do not understand.
Doesn’t a gas tax holiday “feeeeel” like the right thing to do?