Senator John McCain is getting too much heat for his recently
announced proposal to suspend the gas tax for the three summer
months between Memorial Day and Labor Day. The right is whacking
the plan’s economics, while the left is shaming it’s politics. Even
the Wall Street Journal labeled the idea “poll-driven
gimmickry.” But the idea has proven popular, with Senator Hillary
Clinton, a few New York State legislators, and some congressmen and
women picking up the baton.
If it’s so popular, then why the dismissal in the first place?
Well, because those who dismiss the plan are right — to some
extent. The tax suspension wouldn’t save a ton of money and, as
anyone can see in the way Sen. Clinton beat Sen. Obama over the
head with the idea, it is politics in its rawest form.
But Sen. McCain’s plan — not the Clinton
bait-and-switch-and-tax, which would also snag the oil companies’
profits — is an idea worthy of deliberation for two reasons: It
provides a little relief to hard-working Americans, and it more
importantly forces the government to do more with less.
The plan would allow motorists to keep anywhere from $40 to $70
of their own money over the summer, and, if successful, could even
lead to the gas tax’s abolishment.
As McCain’s senior economic advisor and former Congressional
Budget Office director Douglas Holtz-Eakin told me the other day,
“What the Senator is proposing with this idea is not a panacea to
the country’s economic woes, but a little break for the American
people. Too many Americans are on hard economic times, and a
breather this summer will help to ease things even a little
bit.”
The entire summer-long suspension is estimated to prevent the
government from collecting anywhere from $8 to $10 billion. Critics
charge that this money is already earmarked for the Federal Highway
Fund. But making it up isn’t the hard part; changing the mindset in
Washington as how best to make it up is. Fiscally responsible
adults from both parties know the money is there, it will just take
setting priorities and some simple accounting procedures to shift
the money from other areas to the fund, putting helping motorists
ahead of special interests and wasteful spending.
And taking away the government’s profits on our consumption
might not be so bad. As Phil Kerpen, policy director at the
Washington, D.C.-based free market group Americans for Prosperity,
puts it, McCain’s proposal deserves praise over Clinton’s “not for
what it is but what it isn’t — another monotonous attack on the
oil industry’s profits.” Kerpen continued, “The reality is that,
historically, tax revenues in the oil sector dwarf corporate
profits, meaning the real windfalls in the industry have gone to
government. Shining a spotlight on government’s role in increasing
prices is more productive than reactionary attacks and policies
that would include higher taxes and, thus, even higher prices.”
The criticisms of the plan often smack of elitism. The American
people seem to like the idea of paying less; it’s those who don’t
usually drive their own cars who don’t like it. Since the economic
trickle-down is insignificant at best, those elitists say, let’s
keep the tax in place because the government needs the money more
than we do. Some have gone so far as to tell lower-income families
— who are more likely to drive to their vacation destinations than
their middle- and higher-income counterparts — to sacrifice their
holidays this year.
The broader point of the plan should warm the cockles of fiscal
conservatives’ hearts. The government surely doesn’t need any extra
money, and there are plenty of instances where Washington doles out
funds which it has no business doing, such as to the Carter Center,
run by former President Jimmy Carter at Emory University, which has
received close to $20 million since 2001. Do we really need to be
funding photo-ops with Hamas?
Examples are aplenty. While working on Rudy Giuliani’s
presidential campaign this past year, we in the policy division
batted around ideas to dramatically shrink the size of government,
which the Mayor dreamed of doing. Such ideas were at first thought
of as anathema to the general public. (Sell Amtrak? Never!) But the
ideas are there in numbers and it was clear that government is
mired in wasteful spending and earmarks. Not all are bad, but many
are. And it will take a candidate with a strong record to sell this
message.
As McCain’s advisor Dr. Holtz-Eakin continued, the gas proposal
“cuts to the core of what the Senator believes, which is that this
money should stay where it belongs, with the taxpayer. It’s their
money — not the president’s, not Congress’s. And a President
McCain understands this, and will do what he can to change the
mindset of those in Washington.” Sen. McCain is a good messenger,
with his beliefs on government transparency and spending.
Anyone who took Econ 101 knows that this is not the greatest
economic idea, and will barely measure a blip on the radar screen
of life. But when a tax can be cut, it should. Throughout his
tenure in New York City, Mayor Giuliani instituted sales-tax
holiday weeks on clothing, under the theme “A Welcome Break from a
Burdensome Tax.” During those weeks, retail sales soared. As a
result, the New York City sales tax was abolished for most items
under a certain amount. Wouldn’t it be great if Sen. McCain’s
experiment found the same result for the federal gas tax?
