Holiday roads
When politicians talk about cutting taxes, ears across the country prick up -- and the combination of escalating gas prices and relief proposals from presidential candidates has consumers paying attention this spring.
Fewer listen to economists, but when it comes to the gas-tax holiday, the fiscal experts have much more credibility on the issue than the experts in political expediency.
Pitched by Hillary Clinton and John McCain, a summertime waiver of the federal tax -- 18.4 cents a gallon for gasoline and 24.4 cents a gallon for diesel -- certainly could have a dramatic effect in the short term.
The problem is, that effect likely will be negative -- and provide marginal savings for the average consumer.
On Sunday, a group of nearly 250 economists -- including five Nobel Prize winners -- posted an open letter opposing the gas-tax holiday.
"This is not a partisan issue," they wrote. "It's a matter of good public policy."
In the letter, they asserted waiving the tax would:
* Generate large profits for oil companies.
* Encourage people to keep buying costly imported oil and do nothing to encourage conservation.
* Provide very little relief to families feeling squeezed.
* Threaten to increase the deficit and reduce the amount of money going into the highway trust fund that maintains our infrastructure.
Meddling with that trust fund will have a ripple effect across the economy.
According to highway officials, the gas-tax holiday has the potential to put people out of work -- contractors and other highway workers who make good money giving Americans good roads.
Cut the revenue and the number of road projects will fall. Cut the number of projects and the number of workers falls. Cut the number of well-paid workers and the economy falls farther into the danger zone.
The tax, which underwent its last significant increase in 1993 during the Clinton administration, generated $24.4 billion in revenue in 2006. Remove the busiest driving season from that equation and federal revenues will be cut by an estimated $9 billion.
There's plenty of other fat in the federal budget in need of trimming, and the savings brought about by a gas-tax holiday would be minimal.
Let's assume you drive your 20-mile-per-gallon SUV an astounding 1,000 miles each and every week this summer. You will save $36 a month; $110 over the life of the gas-tax holiday.
Put in more realistic terms, if you live in Plainville and work in Hays, your commute in a 20-mile-per-gallon pickup would be cheaper by an underwhelming $14 over the three-month life of the gas-tax holiday.
It's barely a Band-Aid -- especially considering many who are the most ardent supporters of the holiday take the position that the imminent economic stimulus checks coming from the federal government are meaningless gestures. And the entire conversation most likely is moot; there's little chance a holiday passes Congress and gets Bush's signature.
This brings us back to the real problem. Demand for oil is growing faster than ever in China and India, hogging a commodity Americans used to get cheap. Those days are finished. Cheap gas will never return. It's time for our leaders to focus upon real solutions: alternative energy investment, encouraging new technology, and finding and using more domestic oil.
Editorial by Ron Fields
