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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In my opinion there is a large difference between what McCain thinks is the right thing to do, and what the average, poorer American wants to hear. What he has said, although highly unrealistic in my mind, is him jumping on the bandwagon of the mass amounts of people blaming the oil and gas companies for inflated prices.
As an employee of an oil/gas company in Canada, I can almost garantee that you cannot shame these firms into doing what government wants (oil and gas hates government and will fight them over the dumbest issues, and even more-so for serious issues), and any penalizing fee that the governemnt wants to give will also be absorbed, or charged back to the consumer in some hidden way so that the firms dont get punished much at all
Why must the alternative to McCain be Obama?
Ugh.
Levitt/Dubner ’08
That comment of Hillary’s is what made me switch to being an Obama supporter.
And now he’s going on to this nonsense of blaming speculators for the high price of oil. Sigh.
I think a presidential candidate should be expected to hold a more intelligible conversation than that.
Ohmigod JM, stop while you’re behind. I used to like him a few years ago…it’s a gosh darned shame. But not the same kind of shame that drives down oil prices. Apparently that requires a country full of pouty lips and wagging fingers. That’ll show ‘em.
The “economists don’t understand poor people” response is a terrible and recurring attack on economists, as if economists aren’t basing their decisions off the optimal societal outcome in the first place. Dissenters love that attack because it avoids the question of whether the policy will work (however it’s worded in such a way that assumes it does) or not and denounces an entire profession of people with whom the attacker disagrees. I have much more to say about how stupid and annoying it is, but ultimately it is simply a logical fallacy called “begging the question.”
Wow… There are some times when shame works. When it comes to corporate GIANTS, such as the oil and tobacco industries, I think not. They are too big to care about the little ones. People have been trying it with big tobacco for years!
About his “trust and confidence in government” comment though. We’re not going to get there until we have someone we can believe. Personally, I like facts/logic things along that line, they convince me to think a certain way. When McCain offers up complete disregard for what facts/logic tell us in this kind of situation, he’s not helping us gain “trust and confidence”…
Robert Hall supports the tax holiday