Krugman and not palying games with taxes.

I happen to agree with Obama on this. It would be nice to remove the tax for a few months, but it is at the expense of infrastructure projects.

Quote Alegre:

Paul Krugman.  Sigh... I absolutely ADORE this man!!!!

People who call him a Hillary shill are just taking the path of least resistance. Much easier to dismiss than accept good faith criticism. Hopefully this column will show Obama fans that Krugman's criticisms of Barack Obama have been in earnest. Frankly, everyone should be cringing at Hillary's call for a gas tax holiday, although it's more responsible than McCain's. Krugman is telling it like it is as he always does.

I said so when he said that Youngstown improved its economy during the 1990's and I'll say so now.

As a student I've read much of Paul Krugman's work -  We should trust him, heck and I even support Hillary.

I wonder why Krugman fails to mention that the price of gas is inelastic with regards to demand.  This is a fact and disproves his argument, actually.  Perhaps I'll write, asking him, and see if he responds. :)

i agree with Krugman on this....maybe he should give Hill a call and try and talk numbers with her aka tell her this is a bad idea.

Since I am using this term, for anyone who may not be familiar with it, here is the wikipedia take on it:

http://en.wikipedia.org/wiki/Elasticity_(economics)

Notice that the author uses gasoline specifically as a clear, textbook example.  It is important to understand this concept as there will no doubt be more diaries debating the gas-tax holiday.

The key fact that you need to know is this: the amount of gas we consume does not change much in response to changes in price, not in the short-term.  It takes a very large change in price, sustained over a long period of time, for consumption to fluctuate.  Therefore, any argument made to you that includes the assumption that demand will increase is simply not accurate.

I'm not sure what Krugman is thinking in this piece - perhaps he put it together in a hurry and was not thinking this through - I'm not sure.  But if you just put this through the prism of your own life experiences and common sense, it's easy to understand.

I commute to work every day.  I don't check the internet for gas prices, and choose to take a longer route if the price is down by a few pennies (which is what we're talking about here).  When I wake up on a Saturday morning, and feel like going to the mall, I don't check the web for the latest gas price and, seeing that it is up 5 cents, decide not to go.  In may I will be driving home to visit my family and attend my little sister's confirmation.  I won't cancel my trip based on whether this gas tax holiday is put into law or not.

Now, over the long run, things are different.  I might decide to buy a more fuel-efficient car, due to excessive gas prices.  I might start taking the train instead of driving to work.  Etc.  But that's long-run, not short-term.

So, a little common sense confirms what the economics text books tell you.

While I don't necessarily think a gas tax holiday is the solution, I think $25-$30 per family underestimates the actual savings. Don't forget, we don't just pay gas tax at the pump, we also pay it at the supermarket. This would save truckers a lot of money, and since they are responsible for transporting virtually all the goods we purchase, the effects could be much greater than these estimates. Truckers have really taken a huge economic hit due to high gas prices and probably think this is a great idea. (Of course, this will only help if there's some way to guarantee that the oil companies don't increase gas prices by the same amount.)

Krugman and Obama are right, and I wish my fellow Clinton supporters would stop trying to spin this gas holiday thing like it's a good idea, simply because Hillary's for it.

... "gas tax holiday."

First -- and this is particularly critical -- the funds collected from the gasoline tax go to infrastructure repairs in this country. And god knows we need to repair toads, bridges, sewers and more.

And as a study undertaken after Illinois tried the same stunt (and, yes, it's a stunt) found:

The Illinois Economic and Fiscal Commission estimated that the state lost $175 million in revenues during the six-month period. A subsequent study by the National Bureau of Economic Research showed that gas prices fell by 3 percent, meaning that only three fifths of the savings from reduced taxes was passed on to consumers.

Obama understands this now because he voted for this "holiday" when he was a state senator.

It's all show and it will take billions of dollars away from the infrastructure improvements (and accompanying jobs) that this country so desperately needs.

krugman's right from an economic pint of view; hillary's right from a political point of view. in economic theory (but probably not in practice, see above) the money will go in a circle. in sociopolitical theory, the blame for the increased gas prices when the tax holiday ends won't. the oil companies will be left holding the hot potato just before the new administrations starts its energy policy initiatives. think about it. there's a lot some people don't know about politics, but we can't start a new trainee class right now.

Good for Obama.  It's a dumb idea.

Good for Clinton - it's a half-good idea.  We should be windfall profit-taxing the sxxt out of big oil, and it should be retroactive for the last six years.

Although I am in support of a windfall profits tax, I understand that it will probably not have the desired effect of lowering the total cost of fuel. But, at least Clinton has offered a plan to provide relief to consumers. Other than saying consumers will only see savings of $25-30 every 3 months more or less, what is Obama's plan for consumer relief? By the way, Senator Obama may not understand that $25-30 dollars is a huge deal to some people.

because, this is not a permanent tax removal.  And how high are prices to go, with no ease, as we have seen, they just keep going up, people are hurting in just trying to commute to work, or drive for work, like Truckers, before something his done.

Hillary will not be President yet this summer to start making the policy changes to get this problem under control and she specifically said she will make sure the HELP for americans, does not hurt us by charging the Oil companies for a windfall profits tax to pay for what the people aren't.

The people that are hurting are the workers, not the affluent.

Obama is unelectable, so it doesn't really matter.

but I agree with Krugman.

Add: Just to be clear: I don't regard this as a major issue. It's a one-time thing, not a matter of principle, especially because everyone knows the gas-tax holiday isn't actually going to happen. Health care reform, on the other hand, could happen, and is very much a long-term issue -- so poisoning the well by in effect running against universality, as Obama has, is a much more serious breach.

Obama was right but for the wrong reason. The gas tax holiday doesn't put $25 in each person's pocket, it puts $25 in the oil companies pockets.

Yeah, Krugman is a genius and I agree with Obama.  I almost always agree with Krugman, but it's quite a day when I agree with Obama.

While I deeply respect Professor Krugman and he surely knows more about econ than I do, I think Hillary's right to take the position she's taking for a host of reasons:

1) Our economy is facing a downturn. Removing a disincentive from going out and spending is beneficial in the short term. It would probably do more than the tax rebate checks will, because it influences behavior.

2) No one is suggesting that a summer gas tax moratorium will solve the problem of our reliance upon foreign oil. Hillary Clinton has been adamant about building green infrastructure, which is why it was she (not Obama) who included green rebates in her economic stimulus proposal.

3) The increased gasoline consumption during the summer will be a boon for states (taxing gasoline regardless) who are already reeling from declining tax revenue. My home state, California, is looking at significant cutbacks in education. The boost in tax revenue will give states more leeway to solve their budget crises.

4) This a clever compromise. All of us know it won't do anything to change the long run behavior of oil prices-- but the Republicans will have a piecemeal solution (that won't work toward its intended goal), but we will have the benefit of having made the compromise, pointed to the results, and cleared the way for more substantial efforts such as removing the corn ethanol mandate, instituting a Strategic Energy Fund as Hillary wants to do, and invest in cellulosic energy and other non-food sources.

I agree. Senator Obama is correct.

THANK YOU for this diary. The SJ MERC also agrees:

Editorial: Gas-tax holiday a bad idea no matter who's pushing it
Mercury News Editorial
Article Launched: 04/29/2008 01:34:06 AM PDT

Last week, we took John McCain to task for proposing to suspend the federal gasoline tax for the summer. We called it a stupid idea that panders to voters.

Since then, Hillary Clinton has gotten behind the tax holiday, talking up her own version on the stump in North Carolina on Monday. It's still a stupid idea.

Like McCain, Clinton is fishing for votes by proposing bad public policy. But unlike McCain, she at least acknowledges the trade-offs of doing away with the 18-cent-a-gallon tax, which goes into the Highway Trust Fund to pay for road repairs and other vital projects.

Clinton says she'd impose a windfall profits tax on oil companies to replenish the fund. (McCain would use money from the general treasury - which of course wouldn't happen, given the huge federal deficit that doesn't even count spending on the war.)

Clinton is bashing her Democratic opponent, Barack Obama, because he "opposes giving consumers a break." But Obama's got it right. He says the tax holiday is a gimmick - particularly since there would be no assurance that oil companies would pass along savings to consumers.

The typical motorist might save $25 in gas tax during a summer, but have worse roads to drive on as a consequence. Dropping the tax would encourage more use of foreign oil and create more greenhouse gas emissions. Only in an election year could anyone suggest it's a good idea.