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New York (CNN Business)In the spring of 2008, every bit gas prices were barreling towards tape highs, presidential candidates John McCain and Hillary Clinton threw their weight backside a gas revenue enhancement holiday.

Time to come president Barack Obama, past contrast, dismissed the thought every bit a political "gimmick" designed purely to win votes. "The easiest thing in the globe for a political leader to do is tell you exactly what you lot want to hear," Obama said in April 2008.

Flash forwards 14 years. Obama's quondam vice president is now pushing for a gas tax holiday to ease the strain of record-high gas prices. President Joe Biden wants a 3-month pause on the 18.three-cent-per-gallon federal tax.

If it gets through Congress, a gas tax holiday would deliver swift — albeit minor — relief to consumers past lowering retail gasoline prices by as much as eighteen cents a gallon.

A gas tax holiday would exist politically popular. It would too allow the White House to show that Biden is taking tangible action to accost ane of the biggest headaches facing families.

Americans are grappling with a 41% fasten in gas prices since Russia's invasion of Ukraine in late February. Record-high gas prices have contributed to the worst inflation in 40 years, forcing the Federal Reserve to raise interest rates so aggressively that markets are in turmoil and recession risks are ascension.

Yet suspending the gas tax would involve trade-offs that serve to validate why Obama and others accept bashed such a move every bit a gimmick — and why it may not get through Congress.

It won't solve the underlying problem

First, a gas tax holiday would do nothing to fix the supply shock driving up prices, not just for gasoline but diesel and jet fuel, too.

Secondly, information technology would push need in the wrong management. At a minimum, artificially lowering prices would back up buying gasoline, underlining the aphorism that the best cure for high prices is loftier prices.

"The gamble is that at a time when the supply-and-need residuum that sets prices is already extremely out of residual, it would enable more than Americans to hit the road," said Patrick DeHaan, director of petroleum analysis at GasBuddy.

Suspending the gas taxation also would effectively encourage the apply of gasoline — running counter to the Biden administration's aggressive climate goals that phone call for moving away from fossil fuels.

"Barack Obama was right. A gas tax holiday was a bad idea in 2008 and it'south a bad thought today," Senator Bernie Sanders wrote on Twitter in March.

Like other progressives, Sanders instead threw his weight backside a windfall turn a profit revenue enhancement on the oil-and-gas industry, a potentially-popular move that carries its own set of risks.

Calculation to aggrandizement?

Mark Zandi, principal economist at Moody'south Analytics, told CNN in a telephone interview that a gas taxation holiday would not be helpful and could even exist inflationary, forcing the Fed to raise rates more than aggressively.

"I'm not a fan. You want people to drive less and use less gas. This works against that objective," he said. "It'south not well-targeted."

Zandi also expressed business that free energy companies may not pass along the entire savings from a gas tax vacation.

The Moody's economist served as an economical adviser to McCain during the 2008 race when the Arizona Republican endorsed a gas tax vacation.

"I probably lost that battle," Zandi said.

Another trouble with a gas taxation vacation today: Revenue raised from this levy helps finance the Highway Trust Fund, which is already short on funding. The federal gas taxation hasn't been increased since 1993, when gas was selling for just over $1 a gallon.

Unless those funds are replaced from other sources, suspending the gas tax would sap resources for building and repairing highways at a time when the price tag on those projects is going upward due to soaring costs for construction materials and labor.

Energy Secretarial assistant Jennifer Granholm best-selling this issue over the weekend, telling Dana Bash on CNN's "Country of the Union" that one challenge of suspending the gas revenue enhancement is that it "funds the roads."

Gary Cohn, a longtime Democrat who served every bit a top economical official in the Trump White House, told CNN Tuesday he's concerned well-nigh how a gas tax holiday would diminish funding for infrastructure — a key policy focus of the Biden administration.

"The unintended consequences of getting rid of the tax are enormous," said Cohn, who is at present vice chairman at IBM. "The gas tax thought, although it looks similar it solves the problem today, it actually creates, I remember, more than problems down the road."

'Cocky-defeating'

Marc Goldwein, senior policy manager at the Committee for a Responsible Budget, said a gas tax vacation would exist a "fault," in part because pushing up demand would lift prices.

"Information technology would be partially self-defeating, not that meaningful for prices at the pump and plush for the federal government," Goldwein said.

Economist Larry Summers, a former adviser to Obama and Treasury Secretary under President Neb Clinton, similarly told NBC's "Run across the Press" last weekend that a gas tax vacation is "kind of a gimmick."

And yet Biden officials say the president is seriously weighing it every bit an option.

Treasury Secretarial assistant Janet Yellen said last weekend a gas tax holiday is "certainly worth considering."

If Biden and Congress exercise go this road, they will confront a trouble down the road when the revenue enhancement vacation expires. "It's going to be very unpopular when prices snap support by eighteen cents a gallon," GasBuddy's DeHaan said.

And that raises the specter of a temporary gas revenue enhancement pause morphing into a permanent holiday.

Source: https://www.cnn.com/2022/06/21/business/gas-tax-holiday-biden/index.html

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