Pump up the Volume

The Washington Post points to a "slew of economists" critical of the Clinton and McCain proposals to impose a gas tax holiday throughout the summer

However, the economist can't seem to agree on the why. Some claim that the gas tax suspension does little to change the bottom line while others say that increasing demand we drive prices higher and worsen global warming. 

Obama belittles the savings as only  "30 cents a day, which is less than you can buy a cup of coffee for at 7-Eleven." Or in Obama's case, you would need to save for over two weeks to afford just one venti latte.

Harvard economist N. Gregory Mankiw:

"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.

The Brooking Institution's Leonard Burman:

"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."

House Whip Steny Hoyer:

"The oil companies would just raise their prices."

The non-attributed economists, according to The Post:

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.

Here's the problem. Mankiw, Burman, and Hoyer have all said there will not be any savings either due to corporate greed or natural economic forces. Where is the increased demand coming from then? You simply cannot say there will be increased demand without recognizing a drop in prices.

The core of their argument and seemingly Obama's is that higher gas prices are good. Now that's as bad politics as Clinton's argument is good politics. 

However, Obama isn't to be left behind in the pander derby.

Obama is proposing to reduce the cost of driving by suspending purchases for the country's Strategic Petroleum Reserve.

This would lower the cost of gas by increasing the supply of oil. But wait? Wouldn't lowering gas prices increase the demand just like removing the sales tax? Wouldn't that in turn put more co2 into the atmosphere. Wouldn't it also jeopardize oil stocks if needed in the future? This is not pandering?

Obama is also a firm supporter of ethanol which is popular in the midwest but has been driving up food costs as more land is dedicated to ethanol production than food production. So with ethanol we continue to see high fuel prices and high food prices.