The Gas Tax... revisited again

Okay, this diary is not really about the gas tax, or Sen. Clinton's proposed gas tax holiday which did not find support from a single mainstream economist.  This diary is about a larger issue: when do we listen to economist, and when do we reject their advice ?

Economic theories are all about maximizing societal benefits (such as GNP, per capita GDP, growth rates, housing starts etc.) using sound economic/fiscal policies etc.  Generally, disparites in income/asset distributions do not concern economists too much ~ some disparity in income and asset distribution is desirable, because that disparity is the reward for hard work; and we cannot promote growth without rewarding hard work.  Thus, while some economists also worry about extreme economic disparities, they agree that economic disparity is a smaller concern than overall growth.

This is where, I believe, we should reject the economists advice.  Let us consider the emerging food crisis as an example.

According to a 2006 study, about 850 million people go hungry every day.  Out of this, 35 million live in the US... this number includes 22 million adults (1 in 10 of all adults) and 13 million children (1 in 6 of all children in the US).  The numbers are even more disturbing for black (21%) and hispanic (19%) households, and households led by single women.

Think about this: 1 in 6 children goes to bed hungry .  In the US... the leader of the free world, where household assets top 70 trillion!!  1 in 6 !!

What should be the proper response to this problem ? It is a problem that has festered for many years.  After all, a war on poverty was felt appropriate in the 1960s.

According to economic theories, the problem would not be worth any effort ~ after all, the GDP has been expanding at about a 3% rate... a rate which outpaces inflation and population growth.  Thus, the average quality of life has been increasing steadily.  Thus, society is making steady progress towards a goal where there would be no hunger.  Thus, we should not do anything to alter the present course ~ with sound economic policies, and with sound fiscal policies, combined with appropriate technological innovations, we can eliminate hunger... in about 50 years.

Do we want to wait 50 years ?  

The gas tax populism was an effort to alleviate some of the suffering today.  I know that not every penny of the proposed tax holiday would be passed on to the consumer (I recall reading that the best estimates said that the oil companies would pocket about 30%).  I know that it rewards consumption, and is bad for global warming.  

But are we really that heartless that we will argue all those points, and ask even more children to go hungry ?

Because, I am fairly certain, that with the increase in the gas prices, more people are foregoing even more meals.

Including in the US !!

Tags: Food security, gas tax (all tags)



Re: The Gas Tax... revisited again

We could always, you know, take money from the Iraq war and use it in the manner you advocate. A gas tax holiday won't save people enough money to feed children, and if children are starving I highly doubt that it's because someone is paying a lot for gas.

Also, economists have a much better idea of how things like tax rebates and tax cuts work than you or I, I tend to trust them over some absurd assertion that high gas prices = starving children.

by You are an idiot 2008-05-19 02:51PM | 0 recs
Re: The Gas Tax... revisited again

If the Gas Tax could have any effect on starvation and rising food costs, why on earth would you recommend only a 3 months holiday?  This is where Clinton latest talking point go so far off-course to show the blatant sham that it is.  She is now ties it to a Windfall Profits Tax - which makes no sense in strategy, schedule, or policy.  The Gas Tax Holiday stands absolutely no chance to be passed if tied to a Windfall Profits Tax - doing so only dooms it to fail in the time frame that she claims is so urgently needed.  So when is this "holiday"? Apparently next summer, not this one.

The Windfall Profits Tax is something most democrats endorse, especially Obama.  This is an area where we thought the two had identical policies, but apparently not.  Now it appears Clinton's version of this tax is simply temporary - a 3 month window where we exchange it for the Gas Tax.  It would be one thing if she was advocating a permanent shift, but then she would no longer be talking about a 3 month holiday.  

by Piuma 2008-05-19 03:07PM | 0 recs
Re: The Gas Tax... revisited again

I would recommend it for a whole lot more than 3 months...

by SevenStrings 2008-05-19 03:30PM | 0 recs
Re: The Gas Tax... revisited again

The problem with the gas tax was not that it was economic populism.  The problem with the gas tax was that it was a useless gesture that would save the average driver only about $30 over the entire summer.  That's $7.50 per month.  Twenty-five cents per day.  Even the poorest in our country would be little helped by $30 over four months.

Further, a good many of our poorest citizens don't own cars.  They rely on walking, public transportation, or getting rides with friends and family.  The gas tax break wouldn't put another penny in their pocket.

We do need to address poverty in this country.  It's a staggering and unconscionable moral problem.  But the gas tax break isn't and never was the way to go about it.  It's a meaningless political gesture, and nothing more.

We need a leader who will invest intelligently in our country's future, not simply throw money at a worthless whim.  That is how we will deal with poverty in our time.

by BishopRook 2008-05-19 03:17PM | 0 recs
Re: The Gas Tax... revisited again

$30 is worth 5 solid meals!  Not something to sneeze at, if you are going hungry.. even one meal is heaven when you are hungry !!

by SevenStrings 2008-05-19 03:32PM | 0 recs
Actually for one person $30

could range closer to 10 individual meals depending on where you live, frozen broccoli can be found for less than $1/pound (that can make up part of 3 meals), sandwich meat is $3 a pound (decent stuff like turkey). and can last for 6 meals.  Bread can be found for $1.50 a loaf and can last for 10 meals.  Of course I shop in a relatively low cost area.

by Student Guy 2008-05-19 03:48PM | 0 recs
Re: Actually for one person $30

This $30 is being spread out over four months.  A loaf of bread here, a pound of sandwich meat there, does not a month's meals make.  It wouldn't even put a dent in most grocery bills.

You won't find very many families who own two cars and are going hungry.  In fact it's more likely that one car is supporting an entire family.  So you don't have to look at how long $30 will feed one person, you have to look at how long it's going to feed 3-4 people.

And this still ignores the vast number of people who don't own a car or drive at all because they can't afford it in the first place.

We can do much, MUCH better for poor people in this country than temporarily reducing people's gas bill by about 5%.

by BishopRook 2008-05-19 04:01PM | 0 recs
I know

look at my comment down thread, I wasw just pointing out that SevenStrings might have a higher than normal cost of food as he lives in high coast area of the country.

by Student Guy 2008-05-19 05:05PM | 0 recs
Hey SG

You must know a lot of small farmers in northern Iowa or MN... there must be quite a few hungry kids out there ?

by SevenStrings 2008-05-19 04:17PM | 0 recs
Actually right now

is decent times for farmers (if they own the land they farm which a lot of the small ones do, the big ones are the ones who rent a lot).  The high food prices are due to in part high commodity prices which gives farmers (and the rural economy as a whole) more money in their pocket.

Adjusting for inflation, last year was the best net income year for my parents since 1978.

The people who are in trouble in the rural areas are the people who live in town and work service jobs either in the small towns town or in the regional hubs.

by Student Guy 2008-05-19 04:59PM | 0 recs
Two things

If we want to reduce hunger in this country, we need to address unemployement and underemployment.  I don't want to get into immigration policy except to say that poor and minorities are the most adversely affected by inadequate immigration policy.

Even without addressing that issue, we could go a long ways just by increasing the amount of foodstamps a person is eligible to receive.  The current amounts are beyond paltry.  

Also, in the olden days, food stamps could only be used to buy domestic product.  I believe that was phased out although I think it was the right idea.

by Sychotic1 2008-05-19 03:21PM | 0 recs
I mentioned before

but I think we need to raise the gas tax (also on diesel) by about 500% (up to over a dollar), we then would give flat rebates to everyone below the 65th percentile for income in their county.  This rebate would be calculated out to be about 85% of the revenue from the increased tax with the rest of it going to transit (includes road/bridges/buses/trains) repair/construction.  A special rebate would be given to semi truckers that would reduce the tax to a 200% increase.

About your general point, I would say that we listen to economists when they know the most about a subject.  Paul Krugman had a blog post up about how economists know a lot about how the gas tax will impact the economy and can say definite things about it.

They are less definite about health care reform (I agree with Krugman here), and seem wobbly on the income gap (I am in your camp about this).

by Student Guy 2008-05-19 03:45PM | 0 recs
Re: I mentioned before

Diesel/gasoline subsidies for the poor are a wonderful idea, in my opinion... I grew up on them.

I am afraid, however, that this subsidy idea is even less popular than the gas tax holiday =)

by SevenStrings 2008-05-19 04:19PM | 0 recs
That is true

but this rebate goes out to a majority of the country so theoretically it should be a smashing success.  However support of an idea like this would be a political death sentence for any politican.  However a side benefit from it would be to push towards more fuel efficent vehicles to maximize the effect of the subsidy and it would slowly wear out due to people using less gas, in other words it is a  temporary solution to the gas crunch (in that it lowers demand) and it helps out those who wouldn't be able to afford the brunt of the policy.

by Student Guy 2008-05-19 05:03PM | 0 recs
Re: The Gas Tax... revisited again

The problem is by eliminating the tax, demand would go up and prices would immediately go up, raising prices to pre-tax elimination levels.

by mefeck 2008-05-19 03:58PM | 0 recs
Re: The Gas Tax... revisited again

That's not accurate.  Demand for gas is relatively inelastic, meaning it's affected very little by price.

At the same time, reducing the gas tax would probably lead to exactly zero reduction in the price of gas.  The price of gas at the pump has nothing to do with its cost to market.  The retail price of gas is dependent purely on supply and demand.

The way to reduce gas prices in the medium term is to increase supply or decrease demand.  Supply can be increased by building more refinery capacity; demand can be decreased by convincing more people to use public transportation or carpool, or by increasing the average fuel efficiency of cars on the road.

by BishopRook 2008-05-19 04:08PM | 0 recs
People, Let's Stop The War

An estimated $3 trillion dollars will be spent on the Bush/McCain Iraq war. That would feed a lot of hungry people.

by edg1 2008-05-19 06:30PM | 0 recs


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