Wednesday, April 30, 2008

Several Economists and Pundits Slam "Clinton-McCain" Gas Tax Holiday

Reuters and CNN report that several respected economists find the proposal by John McCain and Hillary Clinton to suspend the gas tax for the summer a very bad idea--and that only Barack Obama grasps that the best way to reduce the price of oil is to use less of it.

The economists, from a spectrum of political backgrounds, include: Greg Mankiw, a former chairman of President Bush’s Council of Economic Advisers; Eric Toder, a senior fellow at the Urban-Brookings Tax Policy Center in Washington; Gilbert Metclaf, a economics professor at Tufts University currently working with the National Bureau of Economic Research; and even New York Times columnist Paul Krugman, an economics professor at Princeton and a regular Clinton advisor, who has also questioned her hostility to NAFTA and CAFTA.

Summing up the economists' unanimous opinion on the gas tax holiday, Krugman wrote in his blog yesterday: “It’s Econ 101: the tax cut really goes to the oil companies.”

New York Times syndicated columnist Thomas Friedman, who has written repeatedly and extensively on the dire state of U.S. energy policy, also heaps sarcasm on the idea in a column today entitled "Dumb as We Wanna Be:

"It is great to see that we finally have some national unity on energy policy. Unfortunately, the unifying idea is so ridiculous, so unworthy of the people aspiring to lead our nation, it takes your breath away. Hillary Clinton has decided to line up with John McCain in pushing to suspend the federal excise tax on gasoline, 18.4 cents a gallon, for this summer’s travel season. This is not an energy policy. This is money laundering: we borrow money from China and ship it to Saudi Arabia and take a little cut for ourselves as it goes through our gas tanks. What a way to build our country.

"When the summer is over, we will have increased our debt to China, increased our transfer of wealth to Saudi Arabia and increased our contribution to global warming for our kids to inherit." He continues:

"The McCain-Clinton gas holiday proposal is a perfect example of what energy expert Peter Schwartz of Global Business Network describes as the true American energy policy today: 'Maximize demand, minimize supply and buy the rest from the people who hate us the most.'

"Good for Barack Obama for resisting this shameful pandering.

"But here’s what’s scary: our problem is so much worse than you think. We have no energy strategy. If you are going to use tax policy to shape energy strategy then you want to raise taxes on the things you want to discourage--gasoline consumption and gas-guzzling cars--and you want to lower taxes on the things you want to encourage--new, renewable energy technologies. We are doing just the opposite."

The opposite includes failure by the administration and Congress to provide incentives to viable alternatives like wind and solar power--while Shell and Exxon Mobile announce record profits. Friedman quotes another expert:

"It is also alarming, says Rhone Resch, the president of the Solar Energy Industries Association, that the U.S. has reached a point 'where the priorities of Congress could become so distorted by politics' that it would turn its back on the next great global industry--clean power--'but that’s exactly what is happening.' If the wind and solar credits expire, said Resch, the impact in just 2009 would be more than 100,000 jobs either lost or not created in these industries, and $20 billion worth of investments that won’t be made.

"While all the presidential candidates were railing about lost manufacturing jobs in Ohio, no one noticed that America’s premier solar company, First Solar, from Toledo, Ohio, was opening its newest factory in the former East Germany--540 high-paying engineering jobs --because Germany has created a booming solar market and America has not.

"In 1997, said Resch, America was the leader in solar energy technology, with 40 percent of global solar production. 'Last year, we were less than 8 percent, and even most of that was manufacturing for overseas markets.'"

Friedman concludes: "The McCain-Clinton proposal is a reminder to me that the biggest energy crisis we have in our country today is the energy to be serious--the energy to do big things in a sustained, focused and intelligent way. We are in the midst of a national political brownout."

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