Biden considers a gas tax holiday and gas cards. According to CNN, “President Joe Biden said Monday he hopes to decide soon whether to support a temporary pause in the federal gasoline tax. … Biden said he is also weighing whether to back sending Americans gas rebate cards: ‘That’s part of what we’re considering, that’s part of the whole operation,’ he said.” Kill me now with this B.S. Ugh! I get it! Morons of America are demanding Biden do something. Clearly, his political and Democrats’ political futures (and the future of America) depend on easing inflation, which in and of itself is a sad commentary on the expectations of America’s masses derived from their utter stupidity — a society that wrongly blames (see here, for example) the president for economic vicissitudes as if he has a “make the economy bad” button sitting on the Resolute desk that he presses just for fun.
I am not sure where to begin with this analysis. I guess let’s tackle the tax holiday idea first — why it’s a bad idea and probably won’t work the way people think it will. Obstensively, suspending the federal gas tax would immediately shave off 18.3 cents from gas prices everywhere, but I promise that’s not going to happen. Look, people. Before implementing a tax holiday, gas companies already know what consumers are willing to pay for a gallon of fuel, so there is no reason ExxonMobile, BP, Shell, and the like can’t merely force prices back up. Do not think that the cost of gas is purely competitive. It is not. Gas prices are relatively inelastic in this oligopoly market. In other words, no matter the price, the demand for gas remains fairly consistent, and the few firms that control gas production know this well! Oh sure, perhaps on the margins, people use fuel more judiciously when prices are high, but in general, not so much. So, don’t think gas companies won’t try to push gas prices to a level they know consumers coped with previously. Gas companies are price makers and gas consumers are price takers in this market.
Moreover, it’s just as likely that consumers would negate the savings by increasing their demand. In short, suspending the gas tax is subsidizing the demand for gas (by lowering the price), which is precisely the opposite of what should be done during inflationary periods. Instead of hesitating to make that day trip to the zoo or park, now the perceived savings in gas expenses may allow the family to say, why not?
In fact, don’t take my word for it. Wharton published a study based on actual gas holiday data from Maryland, Georgia, and Connecticut, which found a pass-through savings of about 70 percent. That is to say, 70 percent of the gas tax abatement trickled down to the consumer. And one final point: In terms of absolute dollars saved, another Wharton study estimates a savings of $17 – $67 per capita depending on the state over nine months. Wow! In short, this gas tax holiday is not going to be the financial windfall I think people expect. And let’s not forget the lost revenue from suspending the gas tax and the cries from RepubliKKKlans declaring, “Democrats want to increase your taxes” as the holiday expires.
As for the gas cards, that’s a bit easier to project. Handing out gas cards is purely increasing demand, which is absolutely going to increase gas prices or any other prices, assuming people spend it on gas or something else. It is basically pushing more money into the system, which is the definition of inflation: Too many dollars chasing too few goods.
If all that stupid America wants is for Biden to appear to be doing something or understanding their pain, then I guess either one of these gimmicks will work, thereby reinforcing the shallowness of the voter without providing any substantive economic relief. Honestly, the only way to get past this period of inflation is to put the breaks on demand — which apparently Americans abhor — or wait for supply to catch up with demand. And we all know waiting is another thing that Americans abhor. But hey! Welcome to stupid America!