What Tax Holiday?
Dean Baker argues that John McCain's "gas-tax holiday" proposal wouldn't actually lower gas prices—it would just allow oil companies to charge more at the pump:
According to the oil industry, they have their refineries running flat out, producing all the gas they can. This means that the price is determined on the demand side. We have a fixed amount of gas entering the market, the question is simply what price clears the market. In this context, if we reduce or eliminate the gas tax, the price doesn't change, the lower tax will simply allow Exxon and other oil companies to keep more profits (unless of course they were lying about running their refineries at capacity).
Of course, Congress could require that retail gas prices fall by the full amount of the tax, but that would just create shortages. Either way, it's a bad idea. (Not to mention the fact that suspending the gas tax puts the highway trust fund in an even deeper hole. But, hey, it's not as if bridges in this country are collapsing or anything...) --Bradford Plumer
For more info on gas prices and how they work, click here: http://auto.howstuffworks.com/gas-price.htm It's not quite what you'd expect. And, then again, it is: Crude oil inventories have the single biggest effect on gas prices, and the United States depends heavily on foreign oil supplies. In January 2006, the United States imported over 9.1 million barrels per day....The single largest entity impacting the world's oil supplies is the Organization of the Petroleum Exporting Countries (OPEC), a consortium of 12 countries: Algeria, Angola, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Together, these 12 nations are responsible for 40 percent of the world's oil production and hold two-thirds of the world's oil reserves. America, we have a problem, and it ain't the tax. It is our dependence on foreign oil from some countries with whom we wouldn't otherwise want to be on any list. Forget the 18 cents, for god's sake and let's see the big picture, shall we? Or will we just stay in Iraq for 100 more years to "ensure democracy?"
McCain also argued that in not making Bush's tax cuts permanent, Clinton and Obama would be effectively causing the greatest tax increase since World War II. That's interesting logic, especially from a man who in the same breath proposed freezing discretionary spending at any non-military or veteran agency. So by his logic, isn't that a massive *cut* in investment in our kids, schools, roads? Please.
And in news that will surprise no one, the two things McCain did not mention in this bold economic plan were the monstrous federal deficit and the cost of the war in Iraq.