Shame Economics


Many analysts believe that the incidence of the gas tax falls mostly on oil companies rather than on gasoline consumers and that, therefore, a "gas tax holiday" as proposed by John McCain would do much more to increase the profitability of oil firms than to help out average Americans. Michael Cohen notes that when McCain was asked about this he gave a notably unimpressive answer not disputing the analysis, but instead underscoring that he really has no capacity to discuss domestic policy:

STEPHANOPOULOS: Not a single economist in the country said it’d work.

MCCAIN: Yes. And there’s no economist in the country that knows very well the low-income American who drives the furthest, in the oldest automobile, that sometimes can’t even afford to go to work.

STEPHANOPOULOS: But they all say that . . . the oil companies, the gas companies are going to absorb … any reduction.

MCCAIN: … they say that. But one, it didn’t happen before, and two, we wouldn’t let it happen. We wouldn’t let it — Americans wouldn’t let them absorb that.

STEPHANOPOULOS: How would you prevent that?

MCCAIN: We would make them shamed into it. We, of course, know how to — American public opinion. And we would penalize them, if necessary. But they wouldn’t. They would pass it on.

Yes, that's right, McCain will combine a tax cut with a program to shame oil companies into cutting prices.

Meanwhile, though it's true that lower income people generally spend a higher proportion of their income on gasoline, the claim McCain is making here about poorer people having higher absolute levels of gasoline consumption is wrong. Cars are pretty expensive (obviously) and consequently the carless is a disproportionately poor group. Beyond that, a relatively low-income family is more likely to be getting by with one car whereas a well-off family will have two cars for the grownups plus one for every driving age kid.

But all that aside, McCain's total non-response to this critique of one of the main elements of his energy policy is really staggering.

Photo by Flickr user North Bay Wanderer used under a Creative Commons license