Thomas Friedman Calls Out Clinton and McCain on Gas Tax Proposal

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.


April 30, 2008

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.

No, no, no, we’ll just get the money by taxing Big Oil, says Mrs. Clinton. Even if you could do that, what a terrible way to spend precious tax dollars — burning it up on the way to the beach rather than on innovation?

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.

Are you sitting down?

Few Americans know it, but for almost a year now, Congress has been bickering over whether and how to renew the investment tax credit to stimulate investment in solar energy and the production tax credit to encourage investment in wind energy. The bickering has been so poisonous that when Congress passed the 2007 energy bill last December, it failed to extend any stimulus for wind and solar energy production. Oil and gas kept all their credits, but those for wind and solar have been left to expire this December. I am not making this up. At a time when we should be throwing everything into clean power innovation, we are squabbling over pennies.

These credits are critical because they ensure that if oil prices slip back down again — which often happens — investments in wind and solar would still be profitable. That’s how you launch a new energy technology and help it achieve scale, so it can compete without subsidies.

The Democrats wanted the wind and solar credits to be paid for by taking away tax credits from the oil industry. President Bush said he would veto that. Neither side would back down, and Mr. Bush — showing not one iota of leadership — refused to get all the adults together in a room and work out a compromise. Stalemate. Meanwhile, Germany has a 20-year solar incentive program; Japan 12 years. Ours, at best, run two years.

“It’s a disaster,” says Michael Polsky, founder of Invenergy, one of the biggest wind-power developers in America. “Wind is a very capital-intensive industry, and financial institutions are not ready to take ‘Congressional risk.’ They say if you don’t get the [production tax credit] we will not lend you the money to buy more turbines and build projects.”

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.”

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.

Clinton-McCain Gas Tax Creates Windfall for Oil Companies

This is what happens when you sell out to the people who think that they are entitled to keep transferring wealth from the citizens of our country into their own pockets. They get popular figures to espouse programs that sound good but merely dig us deeper into economic abyss.

Fortunately, there are enough people paying attention that the public can be properly educated.

Clinton Gas-Tax Proposal Criticized
Economists Share Obama’s View
By Alec MacGillis and Steven Mufson
Washington Post Staff Writers
Thursday, May 1, 2008; A01


A growing chorus — including a top congressional Democrat — labeled Sen. Hillary Rodham Clinton‘s proposal for suspending the federal gasoline tax ineffective and shortsighted yesterday, even as she continued to paint Sen. Barack Obama as insensitive to drivers’ woes for not endorsing the plan.

The Democrats‘ clash on the issue has emerged as a flash point in the week before the presidential primaries in Indiana and North Carolina and is emblematic of the broader contrast that the candidates have presented: Clinton says she would make immediate bread-and-butter fixes for struggling Americans, while Obama portrays himself as a truth-teller who would bring a new kind of politics to Washington and produce more lasting change.

Backing up Obama’s position against Clinton’s proposal to suspend the 18.4-cent-per-gallon tax for the summer is a slew of economists who argue that the proposal, first offered by Sen. John McCain, the presumptive GOP nominee, would be counterproductive. They argue that cutting the tax would drive up demand for gas at a time when the supply is tight, which would mean that the price at the pump would drop by much less than 18 cents per gallon.

The tax suspension would, as a result, cut into the highway trust fund that the tax supports, a loss of about $9 billion over the summer, but also result in fatter profit margins for oil companies. Clinton says she would replace the lost revenue by raising taxes on the oil industry.

Harvard professor N. Gregory Mankiw, who has written a best-selling textbook on economics, said what he teaches is different from what Clinton and McCain are saying about gas taxes. “What you learn in Economics 101 is that if producers can’t produce much more, when you cut the tax on that good the tax is kept . . . by the suppliers and is not passed on to consumers,” he said.

Clinton has an ad running in North Carolina and Indiana that attacks Obama for his opposition to lifting the tax. Yesterday, she added visuals to her pitch by joining a sheet-metal worker on his ride to work, stopping with him at a gas station to fill up the pickup truck he was driving as her motorcade’s SUVs idled nearby.

“I’m willing to give you a little more relief on a short-term basis,” Clinton said. In Apex, N.C., her husband chimed in by telling voters, according to ABC News: “There’s a difference between the two candidates here. Her opponent says, ‘Well, she’s just pandering to voters.’ That’s not true. Look, folks, there are people out here who are choosing every week now between driving to work and having enough food for their kids, between driving to work and paying their medicine bills.”

Obama, who as a state senator supported temporarily suspending the Illinois gas tax in 2000, cast Clinton’s proposal as a ploy that would, according to an estimate by the Congressional Budget Office, save the average family about $30 for the summer — or, he said yesterday, “30 cents a day, which is less than you can buy a cup of coffee for at 7-Eleven.” He began running a 60-second ad showing a clip of him responding to what he calls the “Clinton-McCain proposal” at a rally.

“That’s typical of how Washington works. There’s a problem, everybody’s upset about gas prices — let’s find some short-term quick fix, that we can say we did something even though we’re not really doing anything,” he says in the ad. “We cannot deliver on a better energy policy unless we change how business is done in Washington. . . . That’s what you need from a president — someone who’s going to tell you the truth.”

Obama is proposing to reduce the cost of driving by suspending purchases for the country’s Strategic Petroleum Reserve. Over the long term he would also tax windfall oil profits and cap carbon emissions to provide rebates for low-income Americans and money to invest in renewable-energy research.

He supports ethanol, which is a boon to his state’s corn growers but has driven up food prices.

Leonard Burman, director of the Tax Policy Center of the Urban Institute and the Brookings Institution, said the laws of the market argue against a tax suspension. “Every summer, the refiners are running full out. If the price fell, people would want to drive more and there would be shortages,” he said. “It’s a basic economic principle that if the supply is fixed, the price is going to be determined by demand.”

Joining in the criticism was House Majority Leader Steny H. Hoyer (D-Md.), who said that the Democratic leadership of Congress has no intention of pursuing the summer tax suspension that Clinton touted. The move “would not be positive,” he said. “The oil companies would just raise their prices.”

Clinton stresses that she, unlike McCain, would push for a windfall-profits tax on oil companies to offset any benefit to them and replace the revenue loss to the highway trust fund. Burman called this “utterly incoherent,” saying that a windfall-profits tax would over the long term only exacerbate the supply problems caused by lifting the gas tax, because it would discourage the exploration for and development of new sources of petroleum. “So a policy intended to lower prices, but which won’t do that, will be offset with a policy that’s likely to raise prices over the long term,” he said.

Environmentalists noted that suspending the gas tax also would undermine efforts to curb global warming because it would increase the use of gasoline, a fossil fuel that contributes to climate change. It would also reduce incentives for buying fuel-efficient vehicles and developing alternative fuels. Relying on a windfall-profits tax to replenish the highway fund would leave less to invest in renewable energy, which is what Clinton had previously said a windfall tax would go toward.

More generally, they said, stoking ire about the cost of gas undermines efforts to build a case for limiting carbon emissions, which could raise prices at the pump. “It sends a confusing message,” said Kevin Knoblauch, president of the Union of Concerned Scientists. “What’s more helpful is if [politicians] help consumers understand that this isn’t about near-term gas prices, it’s about a comprehensive and smart approach to energy policies.”

That leaves the question, though, of whether the proposal will score points on the campaign trail. In Kokomo, Ind., last week, Kathy Spier said the rising cost of gas is to blame for the 50 percent drop-off in sales at her three exotic lingerie stores. “They don’t have extra money to spend on frivolous things,” she said.

Political consultant Carter Eskew, a former Al Gore adviser, said that if he were advising Obama, he would have said: “If you want to oppose this . . . you’re going to have to spend a lot of time and energy explaining.

“I don’t think it’s brilliant economics; unfortunately, it may be good politics. The smart people say ‘It’s stupid,’ and the people who aren’t as schooled say ‘At least it will do something for me,’ ” he said. “I don’t know that anyone connects the dots: that there have been a series of politically expedient decisions . . . that have added up to an economic picture that is not at all rosy and in fact fairly disastrous.”

Staff writers Perry Bacon Jr. in North Carolina, Peter Slevin in Indiana and Jonathan Weisman in Washington contributed to this report.


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Clinton Gas Tax is Vapor

Gas prices are up for several reasons, the primary one being that the oil companies are squeezing every last penny of profit out before the inaugeration of the new, presumably Democratic President and a congress that is heavily weighted Democratic. 

  • THERE IS NO CLINTON PLAN OR PROPOSAL: Any Gas Tax “proposal” submitted by a Presidential candidate is straight pandering. Clinton is not President, there is no strong Democratic congress, and she has not neither the existing executive power nor any proposed bill on the floor of the Senate to reduce Gas Prices or Gas Taxes. She knows it will never happen and hopes that voters won’t figure that out.
  • Her suggestion that the plan would go into effect this summer is a blatant lie. 
  • Her suggestion that she would pay for it with a windfall profits tax on oil companies is also made to the voters of Indiana but not to the Senate where it could be considered. Of course it won’t pass as long as oil money continues to flow into the DC lobbyists and the Senators and Congressman they own. 
  • Obama’s answer is reality — no recourse without reforming Washington. Clinton’s view is that Indiana voters are more interested in sound bites than good sense. I hope she is wrong.
  • OBAMA SAYS IT IS NOT PRUDENT TO EVEN MENTION IT AND ALL ECONOMISTS AGREE WITH HIM:Even if Clinton’s Plan was eventually adopted, it would not take effect until over one year from now. It can’t take effect this summer because she isn’t President and she has proposed the tax holiday to the people but not to Congress where it could happen. 
  • What would happen is that one year from now, when Gas prices are $6 per gallon, and it costs $90 to fill your tank some ten times over the summer ($900!!), you might save $30 over the summer. AND that $30 would be taken out of the infrastructure money for repairing roads, bridges and tunnels, reducing employment. 
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