by Stewie, PolitiPorn Financial Markets Correspondent
Though McCain admits to having a tenuous grasp on the fundamentals of economics, his proposal to lift the federal gas tax during the summer driving season is particularly ill-conceived.
The federal government taxes each gallon of gasoline at a fixed 18.4 cent rate. No matter what fluctuations we see in the price of gas, the rate remains the same. When it was last raised the federal tax represented almost 17% of the price of gasoline. Today the tax rate is slightly more than 5%.
Moreover, in an age when anything labeled a “tax” is seen as the worst kind of evil, the fuel excise tax is really not much of a “tax” at all. The money collected on fuel is spent on road construction. From a practical perspective the gasoline excise tax is a user fee for the roads. It is much more administrable and preferable to the alternative, which would be to turn all federally funded roads into a version of the Garden State Parkway in which you pay small tolls every few miles.
The added advantage to the excise tax system is that it charges more to people who put more strain on the system. Owners of large, heavy, and/or inefficient vehicles pay more for their use of the roads. Moreover, the excise tax as it is currently levied is far too low to match the economic reality of what vehicle use costs.
Pop Quiz:
If we increase the excise tax by 25 cents, after an initial adjustment period gas prices should:
A. Rise by 25 cents
B. Fall by 25 cents
C. Rise by 12.5 cents
D. Stay the same
If we reduce the excise tax by 18.4 cents, after an initial adjustment period gas prices should:
A. Rise by 18.4 cents
B. Fall by 18.4 cents
C. Fall by 9.2 cents
D. Stay the same
If you answered A and B, respectively, feel free to apply for a job with the McCain Campaign as an economic advisor. If you answered C to both, please submit a comment explaining what mind altering substance you are using. If you answered D to both, congratulations.
But wait, how can this be? Oil companies have been selling us on the idea that fuel prices are set by the market, so that there is no need to investigate the possibility of price gouging. Nothing to see here, move on.
If their claim is true and the price is set by the market, then that price is determined inclusive of tax. When times are good, and oil prices are such that there is no question that any form of production is profitable removing the tax will not affect the price since $3.50 per gallon (on average) has been determined to be where supply meets demand. Remove the tax and after an initial period this equilibrium will return, add more tax and the same will happen in the opposite direction. Adding or removing the tax would only play a part in the price if there were marginally profitable sources of oil that would either be exploited or left untapped depending on the profit margin.
At the end of the day it comes down to a question of who is best served by getting the 18.4 cents. On the one hand you have the highway system that has been neglected to a point where a Minneapolis bridge recently collapsed. On the other hand you have the oil industry, and for anyone who doesn’t have a problem with this money lining the pockets of the oil executives you might be concerned that the money will also wind up in the hands of the socialist president of Venezuela, Hugo Chavez as well as the other leaders of the other OPEC nations.
This will be the fourth attempt for Obama to knock Clinton out of the race. He’s been incapable of doing so, which demonstrates his lack of feasibility as a candidate.
There are good reasons why the superdelegates should ignore the Obama Campaigns cries for all Superdelegates to swing for Obama and instead endorse Mrs Clinton
http://clintonista.wordpress.com/2008/04/21/why-clinton-is-more-likely-to-beat-mccain-in-november/
@Clintonista - you’re confusing Obama’s ability to knock the Hillster out of the race with the Hillster’s inability to comprehend the writing on the wall. Her new campaign slogan should be “Hillary Clinton - Blind Ambition 2008!”
“He’s been incapable of doing so, which demonstrates his lack of feasibility as a candidate.”
You know when you go to law school and they teach you about all the argument fallacy types? (straw man, etc.)
Isn’t this like one of those?
Not so much a straw man argument, more a tautology in opinion - Obama isn’t a feasible candidate because he’s not a feasible candidate.
I just got dizzy re-reading Clintonista’s post.
Is there an over/under on the first time McCain uses the term “Fuzzy Washington Math”?
@Duke - sorry, but as you were writing that comment, Johnny Boy said it 10 times. I guess all bets are off.