The Absurd Report

This presidential campaign season has produced a lot of discussion over the various candidates’ supposed knowledge of economics. The sad result is that none of them — Clinton, Obama, or McCain — seem to have a grasp of basic economics. That or they really know what they are talking about and are just pandering to those who may benefit from certain policies (despite how bad they are) or those who have a limited understanding of how markets work, which is always a possibility.

Clinton and McCain are supporting a temporary repeal of the federal gas tax (18.4 cents), which is bad tax policy for a variety of reasons. But Clinton is going a step further. She must have gone to the Sonny Perdue school of economics because she not only wants the gas tax repealed, but she is essentially supporting price controls by saying that she would force the price at the pump to fall by 18.4 cents, or else the Federal Trade Commission would come after station owners. Clinton is assuming that the price elasticity of demand for gasoline is perfectly inelastic. Yes, that’s the same Clinton who says we need a cap-and-trade system (an implicit tax on energy consumption) to reduce consumption of energy. But if demand is perfectly inelastic as she seems to be assuming in her gas tax relief proposal, then such a cap-and-trade provision wouldn’t save the planet at all. (That’s because a cap-and-trade provision assumes people respond to higher prices by reducing consumption. She assumes no response in the market for gasoline.)

Overall, from the past week on the campaign trail, we’ve been able to see that McCain seems to care little about the deficit compared to what his position once was. We’ve also seen Obama and Clinton argue that raising taxes on the wealthy and corporations will solve the world’s problems. All three say they care about “the middle class” whom the Democrats define as those making under $250,000 (what a joke). All support special provisions that would make the tax code more complicated and less efficient, while paying lip service by promising to simplify the tax code. It’s going to be one frustrating (and at the same time humorous) campaign season to hear what’s next from these three candidates. So far, there’s not much to praise.

Source: The Tax Foundation

Tags: Gas Prices, Hillary Clinton

Trackback URI | Comments RSS