Stupid tax policy? Count me in!

The New York Times published a piece by Bryan Caplan supporting the Clinton/McCain gas tax holiday. He concedes that the savings will be realized by oil companies rather than drivers; in fact that is his main reason for advocating it. The holiday will placate the ignorant voting public, he writes. For only $9 billion, the government can get Joe Sixpack off their backs and not do any real harm.

The government's response to the '70s gas crisis was counterproductive, says Caplan, so we should be happy with a policy that doesn't really do any good (or harm) but appeases the misguided public. This kind of cynical public policy really shows how stupid Washington thinks the public is. While I'm increasingly convinced that the average American really is that poorly informed, my inclination is to try to remedy that ignorance (silly liberal that I am). Caplan seems positively excited about wasting billions of dollars accommodating the public's ignorance.

Caplan then moves on to the most disturbing part of his argument: we owe the oil companies big time for what we did to them in the last gas crisis. I shit you not. Caplan says that the obvious solution is to let Big Oil invest those profits in expanding capacity. The free market got us into this mess, and it will get us out, he says. Unfortunately, there is no reason to expect that oil companies are going to expand their capacity to produce gasoline. Big Oil posted record profits throughout 2007 and continues to enjoy generous federal subsidies, but still has not seen fit to build more refineries. In fact, numerous government studies have found that gas companies have worked to restrict supply and maximize profits since the 1970s. Large companies have used their market power to drive smaller companies out of business, further restricting supply.

There is no impetus under the free market to expand refining capacity. Yet again we see how ridiculous it is to talk about the free market as if it's Winston Wolf coming in to dispose of the blood-stained Cadillac of a gas crisis. The long-term solution is to invest in alternative energy sources; we could expand our refinery capacity in the middle term, but that will not account for the rising price of crude oil. The sooner we kick the oil habit, the better. Handing Big Oil another tax cut isn't benefiting anyone but Big Oil.

Menendez disses economists

It seems that everyone from the Clinton campaign and all of their surrogates now disavow the field of economics. Defending the campaign's embarrassing gas tax proposal, Sen. Bob Menendez of New Jersey expressed his newfound disdain for anyone who understands how taxes work. Asked by an anchor on CNBC this morning to name one economist who supports the proposal, Menendez replied, "Thank God that we don't have economists, necessarily, making public policy." Never mind that a lot of economists do make public policy.

I want to point out one more time that the opposition to the tax holiday is not motivated by contempt for the poor. It is motivated by the fact that the scheme won't work. It isn't going to do anything to help poor people; the potential savings under the plan are minuscule, and the harm it would do is considerable. Clinton and her retinue are smart enough to know how this works. The whole proposal is predicated on the assumption that the public is too dumb to understand what's going on.

I have no problem voting for someone who thinks highly of their own intelligence; in fact an intellectual president is precisely what this country needs. But Clinton and her camp have demonstrated the height of anti-intellectualism. With any luck, Clinton will be forced out of the race soon and the left in this country can start dealing with facts again.

Clinton disses economists

In an interview yesterday with George Stephanopoulos, Sen. Hillary Clinton defended her proposal to suspend the federal gas tax this summer by dismissing the opinions of economists, who universally agree that the idea is bogus. You can see the video here- she says at 3:55, "I'm not going to throw my lot in with economists,"as though they were some cult that would ruin her electability if she were associated with them. She insists that her policy will work if we just do it right. Barack Obama knows better; he voted for a gas tax holiday when he was in the Illinois State Senate. It was a dumb idea then as now; it didn't work and, like an adult, Obama admits his mistake.

Obama derides the tax holiday as a measure which will save the average consumer $30, or the price of half a tank of gas. Even that is generous. The price of gasoline is at a national average of $3.60 a gallon because that is what the market will bear right now. If we lifted the 18.4-cent federal gas tax, companies could sell the same volume at the same price and pocket the extra $9 billion which the tax is projected to collect this summer. If Sen. Dick Durbin (D-IL) knows what he's talking about, oil refineries in America are operating at 85% capacity right now. To me, that says that oil companies have projected what amount of gasoline is going to maximize their profits, and that's the amount they're going to put on the market. Lifting the federal tax is no incentive for them to lower prices and forgo a larger potential profit.

So far as I have heard, the unanimous opinion of economists is that there is no chance the tax holiday will work. Faced with the opposition of people who know what they are talking about, Clinton went into full-blown W-style denial. In her interview with Stephanopoulos, Clinton justified her flat-earthism by complaining about the Bush administration's pro-corporate elitism. She is disturbed by their disdain for the average person, but she embraces their disdain for facts. She contends that our government has relied on "elite opinion" which cares nothing about the little guy. I have to wonder whether or not the elites she is talking about include the economists who have long agreed that "trickle-down economics" does nothing to help the poor or the scientists who have warned with increasing urgency about the danger global warming poses for the world's poor. She can talk all she wants about helping the less fortunate, but if she plans on continuing the White House aversion to facts, she's not going to do anyone any good.

What really surprised my about this whole episode was how quickly Clinton threw Paul Krugman under the bus. Krugman, a New York Times columnist, Clinton supporter, and economist, argued last week that the tax holiday is a ludicrous proposal, though he focused more on Sen. John McCain's support for it and soft-pedaled his criticism of Clinton. When Stephanopoulos pointed out Krugman's dissent, it elicited a wickedly supercilious dismissal.

Clinton's no-facts-necessary style is most disappointing in view of the larger themes of her campaign, which bear a stultifying resemblance to the imagery and tactics employed by Republicans in recent years. It's dangerous for Clinton to cast Obama as an elitist who is out of touch with working-class voters and as weak on national security. Along with the lack-of-experience argument, these are the lines McCain would advance against her in the general election if she won the nomination. As things stand, she's making his case for him. Obama may not be great, but at least he will be somewhat different from the disaster we have now. And at least he has some grounding in reality.