I've got to say- I called it. I'm in a microeconomics class this semester in college, first economics course I've ever taken; but the moment I saw the first news story about John McCain's tax cuts, I knew something was fishy about the whole idea. Though I support Obama, it was before McCain and Clinton were both for it, and Obama was against, that I brought it up in the class and said that I thought it was a huge mistake.
Quotes and video below.
Clinton-McCain gas tax holiday slammed as bad idea
Economists said that since refineries cannot increase their supply of gasoline in the space of a few summer months, lower prices will just boost demand and the benefits will flow to oil companies, not consumers.
"You are just going to push up the price of gas by almost the size of the tax cut," said Eric Toder, a senior fellow at the Urban-Brookings Tax Policy Center in Washington.
Economics 101: reduce/remove tax: demand increases, supply decreases, and price increases. Gas is a fairly inelastic good (people will still use it despite a high price), which is why oil companies can do pretty much what they want with it.
Obama criticized the plan as pure politics and said the only way to lower the price of gas is to use less oil.
"It would last for three months and it would save you on average half a tank of gas, $25 to $30. That's what Senator Clinton and Senator McCain are proposing to deal with the gas crisis," he said on Tuesday in Winston-Salem, North Carolina.
"This isn't an idea designed to get you through the summer, it's an idea designed to get them through an election."
Which is the other reason I love Obama. Such utter ignorant policies have to be called out, and I had this exact conversation with people the other day.
"Score one for Obama," wrote Greg Mankiw, a former chairman of President George W. Bush's Council of Economic Advisers. "In light of the side effects associated with driving ... gasoline taxes should be higher than they are, not lower."