Sure, the lovely headline in today's NYT is "Democrats Divided Over Gas Tax Break." And the politics are confusing: on one side we have Clinton, McCain and plenty of Republican state lawmakers. On the other side, Obama, Republican Senator Cornyn from Texas, and even (it would seem) Bush.
But let's set aside the confusing political landscape of this, and examine the idea on its merits. For those too lazy to make the jump, I'll summarize: cutting the gas tax is a very bad idea.
One big problem with gas consumption is that it's very inelastic: consumers don't respond to price increases by reducing quantity much. In the long run, demand is at least more elastic than it is, say, in the next week: it's hard to change your behavior significantly that quickly. But there's also the supply side, and again oil is strange. In this case, supply is pretty much fixed in the short run: refinery capacity is maxed out, and the market contains as much gas as it will in the near future.
So price is determined by demand. Right now, demand has surged enough that prices have surged, since supply has not increased.
Along with this, we have one of the more useful lessons of economic theory: it doesn't matter who pays a tax. In the absence of really weird market characteristics or institutions, the burden of the tax is the same regardless. So you can charge a tax to buyers or sellers, and ultimately total price (sticker price + tax) will be the same either way.
How does this come in here? Because, as I mentioned above, price is being determined by demand, not supply, oil companies are making all sorts of profits and prices have little relation to actual costs of production. Since the market will bear this price, people will continue to pay it if we cut the gas tax. The only difference is that instead of getting $10 million this summer in tax revenue, we will hand that money to producers. Sure, Clinton proposes a windfall profits tax on oil companies to make some of that up, but this is all window dressing.
We need to keep hammering this for what it is: a direct donation from government coffers to oil industry profits, NOT a break for consumers. Obama gets this--it appears that even Bush and Cornyn get this. Why doesn't Clinton get it?
Why are Democrats "divided" on this at all?