Obama ad hits Clinton on gas tax again

Obama's campaign presses its advantage on gas tax holiday proposals, and accuses Clinton of political pandering, but is Obama doing some pandering of his own?

By Alex Koppelman
May 2, 2008 7:50PM (UTC)
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Barack Obama's campaign has just released another ad on the subject of proposals for a summer holiday from the federal gas tax. In this ad, which you can watch below, the campaign points out once again that experts just about unanimously think the proposal -- which Hillary Clinton supports -- would do Americans little if any good, and might actually do some harm.

In the ad, which is running in Indiana, a narrator tells viewers, "USA Today calls her three-month gas tax holiday 'political pandering.' It's an election year-gimmick, saving Hoosiers just pennies a day."


The ad also pushes Obama's proposals for dealing with high gas prices: "Take on price gouging by oil companies. Tax their windfall profits. Invest in alternative energy. Give working families a permanent, thousand-dollar tax cut to help with rising costs."

Obama's absolutely right to hit Clinton on this. But it's worth noting that one of his proposals, to take on price gouging, is essentially an act of pandering as well. Obama is hardly alone in this -- it's a great issue for members of Congress, who get to pretend they're standing up to Big Oil and deflect from the fact that they're not really doing much at all about prices. But price gouging has little to do with the current increase in gas prices, and Obama's talk about it is still pandering. Just ask Austan Goolsbee, a senior economic advisor to the Obama campaign. In 2005, Goolsbee wrote an article for Slate about allegations of price gouging following Hurricane Katrina. In that article, Goolsbee wrote:

Any reasonable definition of gouging must distinguish it from price increases that would exist in a competitive market ... Gas prices aren't rising in Los Angeles or New York because drivers are desperate to get somewhere with potable water. They are rising because supply has become extraordinarily tight and people want to keep driving as much as they were before ...

Somehow, hunts for gas gougers always seem to start at the wrong time. A classic economic study of the gasoline market (by Severin Borenstein and Richard Gilbert of the University of California at Berkeley and A. Colin Cameron of the University of California at Davis) looked at the extent to which retail gas prices respond to changes in crude oil prices and wholesale gasoline prices. They found that the immediate retail price increases essentially reflected the increasing cost of oil and wholesale gas. There was little evidence of increased profits on the heels of increased wholesale prices, like the hike that followed Katrina. Instead, the study showed that gouging, if it occurs, typically begins when the stations' costs start to come down again. The stations in the study took about twice as long to cut prices when their costs decreased as they had to raise them on the way up. It was after a crisis ended that their profit margins shot up ... In the meantime, economists will continue to cringe each time they hear an attorney general rant against "unconscionable" gas prices.

The Obama ad:


Alex Koppelman

Alex Koppelman is a staff writer for Salon.

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