McCain: Here’s my dumb idea for the gas problem
During the summer, McCain proposes that the $0.18 per gallon tax be dropped. Now, lets just forget how much this will cost and how many government programs will suffer.
The federal gasoline tax represents a flat fee of 18.4 cents a gallon nationwide. With gasoline currently averaging $3.39 a gallon, the tax represents a mere 5 percent of today’s pump price. While that’s not trivial, consider that gasoline prices have more than doubled since 2004.
The problem is that lowering gasoline prices at the pump would encourage more consumption. So in the long run, it would push prices up.
Here’s what will happen. As above, the price drops, then, as consumption increases, the price rises. At the end of the summer, the tax is returned so the price rises another $0.18. Everyone complains, the oil companies say “Hey, it isn’t out fault the price is so high. They brought the tax back.” Neglecting to remember that they raised prices all summer.
So, in effect, this plan will really allow the oil companies to raise prices without the bad PR.
McCain, please, leave economics to people smarter than you.
Sphere: Related Content