McCain wants to temporarily suspend the federal gas tax during the summer is on the face of it not a bad idea. Many economists agree that gas prices will rise above the $4 level for much of the country during the summer… in that light while an 18.4 cent savings would be small it would still be welcome by many households across the country.
The down side is being touted in many parts of the media and in some respects I must agree with The New York Times on this one:
“The problem is that lowering gasoline prices at the pump would encourage more consumption. So in the long run, it would push prices up…..
Gasoline taxes in Europe, for example, can account for up to 70 percent of fuel prices. Of course, Europeans pay much higher gasoline prices, but the high tax levels have shielded drivers there from the wild price swings that American motorists have experienced in recent years.”
The main thing I take issue with here is that comparisons of US gas consumption with that of European countries is faulty at best. Consideration must be made for vast geographic differences, availability of public transportation, not to mention historic economic growth. Some (not I) could even make the argument that the European high energy costs may have had a restricting effect on these economies.
Now all that being said… I believe we should have had a high national gas tax for the last 20 years. I believed it when I was in high-school and college and was paying .98 or even .88 a gallon. Why we allowed gas to be this cheap is beyond me. Had we had a high ($2-$3) gas tax at this time or phased in over the booming 90′s we would now have the ability to have a significant impact on the economy instead of the paltry effect that the 18.4 cent/gal. tax repeal would have.
I think however that The New York Times and others are missing the point. The economy is in the crapper and energy prices are one of the largest factors. While the actual effect of lower gas prices on the economy will be negligible, since the price of gas directly affects the disposable income of the vast majority of households, the perceived effect will be much larger. In the end, consumer perception can have a much greater effect on the economy than even the price of energy, the national debt or interest rates.
