Economists Slam Clinton, McCain Gas-Tax Cut

Oil companies would be winners in plan that fails 'Economics 101'
By Matt Cantor,  Newser User
Posted May 1, 2008 1:55 PM CDT
Sen. Hillary Rodham Clinton speaks about gas prices as sheet metal worker Jason Allan Wilfing puts $63 worth of gas into his pickup truck, Wednesday, April 30, 2008, in South Bend, Ind.    (AP Photo/Elise Amendola)
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(Newser) – Economists and a leading House Democrat are blasting the gas-tax cut proposed by both John McCain and Hillary Clinton, the Washington Post reports. Economists say most of the savings would flow right to the oil companies' bottom line, rather than into voters’ pockets. That's because the tax vacation would raise demand at a time that demand is already high—which would lead directly to even higher prices. 

“What you learn in Economics 101 is that if producers can't produce much more, when you cut the tax on that good, the tax is kept by the suppliers,” said one economist. It “wouldn’t be positive,” adds the House majority leader. “The oil companies would just raise their prices.” It would also cost the highway construction fund some $9 billion. But if the cut isn’t “brilliant economics," one political analyst notes, "unfortunately, it may be good politics.”