I was at a party the other night and I suggested that from a purely political perspective, it seems to me that going into this fall’s election President Bush should propose a suspension of the federal gas tax for 6 months or a year. It seems to me that this does two things for him. First, the federal gas tax is 18.4 cents per gallon, so suspending the tax would create immediate price relief at the pumps, just as the summer vacation season is beginning (and adjusting of course for the highly inelastic short-term supply and demand curves for gasoline). Second, it allows the Republicans to make a statement on the tax issue. Third, perhaps some states will follow suit and suspend their own gas tax levies. Surely this would play in places like Pennsylvania and other places with close political races. According to a recent Gallup Poll, high gas prices was recorded as the third most important problem confronting the country, well behind Iraq, slightly behind immigration, and tied with healthcare and congressional corruption.
The only downside I can see would be that Republicans would take flack from environmentalists and elite opinion for not encouraging short-term conservation. But these groups aren’t in play anyway. Moreover, if it is clearly styled as short-term relief, over which demand and supply are highly inelastic, then it shouldn’t affect long-term gasoline use anyway.
Focusing purely on the short-term political questions, can anyone think of any reason why President Bush would not want to propose this and have the Republicans roll it through Congress? Is there something I’m missing here?