frankschmitt.org:

Senators McCain and Clinton have proposed a “gas-tax holiday” this summer, which would eliminate the 18.4-cent-per-gallon federal tax on gasoline between Memorial Day and Labor Day.

If you squint and ignore the $10 billion hole it leaves in the federal highway budget (which McCain would fill by borrowing from taxpayers, and Clinton would take out of oil companies’ profits), at first this seems like a good idea: a gallon of gas would be about 18 cents cheaper, saving each hardworking American family a good $50 over the course of the summer.

Unfortunately, that’s not how these things work. Our hypothetical American family is never going to see those fifty dollars. Who will get them? Well let’s just say they aren’t exactly hurting for cash at the moment.

Imagine you’re an oil company. People are buying the stuff as fast as you can pump it out of the ground, at prices that are three times what they were a few years ago. And if Americans won’t buy at those prices, China and India are happy to.

Maybe you’re even a Big Oil company, like Exxon or Chevron, but that means you still only produce a few percent of the world’s oil. So you don’t have the clout to set the price of oil, although you can certainly benefit when it’s high. In any case you can’t immediately pump your product out of the ground any faster no matter how much people are willing to pay.

Now let’s say there’s a gas-tax holiday coming up, and gas is four bucks a gallon. If before Memorial day you charged $3.82 a gallon (for a pump price of $4.00 a gallon) and people still bought all the gas you could produce, how much do you suppose you can charge now the government isn’t taking an 18¢ cut? (Hint: $4.00)

If you think about it for more than two seconds, you’ll see that the holiday price is going to instantly rise to the pre-holiday level. And where will the difference go? Right into the pocketbooks of Big Oil. The Law of Unintended Consequences strikes again!

The end effect of McCain’s plan is to siphon money out of the federal government’s general revenue and hand it to Big Oil (meaning that sooner or later, taxpayers will have to pay for this subsidy).

The best thing we can say about Clinton’s plan is that it does nothing: her “Windfall Tax” on Big Oil would probably roughly make up for the extra money they would get during the tax holiday. But there are better ways to do nothing than to run around in a circle.

Of the major presidential candidates, only Obama has refused to pander to the American people by going along with this counterproductive proposal. Let’s hope Americans are smart enough to see why.

I’ve been dismayed lately to read about all of the pet-project pork surrounding corn ethanol as a fuel. Congress and the president like it because it’s politically popular in farm states. Automakers like it because on the one hand it doesn’t require any engineering effort, and on the other hand it artificially inflates their CAFE numbers*. And the public likes it because it gives them a warm, fuzzy sense that someone is doing something about global warming and our “oil addiction.”

The problem, of course, is that it doesn’t really do anything, short of raising food prices and “burning the last six inches of midwest topsoil in our cars”: The improvement from a CO₂ and energy perspective is somewhere between next-to-nothing and worse-than-nothing. Yet the corn ethanol industry receives bigger subsidies every year.

So the question is how can we curb carbon emissions without encouraging wasteful subsidies for feel-good non-solutions like ethanol and hydrogen? And how can we make it politically possible?

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