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Experts Don't Buy Candidates' Gas Break Ideas

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The Associated Press

Published: May 2, 2008

WASHINGTON - Get rid of the federal gas tax - at least for the summer. Tax big oil to help the rest of us out. Get drilling in that Alaska refuge. Soaring gasoline prices are suddenly the nation's No. 1 crisis, and all the presidential candidates are offering cures.

Never mind that economists and energy experts see little value in such measures, at least in the short run. Or that even some top congressional leaders are raising eyebrows. It's election season, and presidential contenders and other politicians are jumping on the bandwagon.

The slew of proposals includes: a summertime suspension of federal gas taxes, backed by John McCain and Hillary Rodham Clinton; a windfall-profit tax on oil companies, supported by Clinton, Obama and many other Democrats; a cry for new refineries, nuclear power plants and drilling in the Alaska wilderness, sounded by President Bush and his GOP allies; calls by those in both parties to stop buying oil at $117 a barrel - only to pump it back into the ground for strategic reserves.

"I think we are in a political crazy time. Some of this stuff being proposed borders on the irresponsible," said Frank Verrastro, director of the energy and national security program at the Center for Strategic and International Studies.

Recycled Ideas

In particular, Verrastro said, the talk of suspending the federal 18.4-cents a gallon federal tax on gasoline and 24.4-cents a gallon tax on diesel fuel during the summer driving season "is just absurd. Economics 101 will tell you if you cut the price, you increase demand. That means you tighten the market. Then the price goes back up. It goes to oil companies."

House Speaker Nancy Pelosi, D-Calif., weighed in against the scheme Thursday, telling reporters that "there's no reason to believe that any moratorium on the gas tax would be passed on to the consumer."

New York Mayor Michael Bloomberg also opposed the plan as a "ridiculous idea." He argued that "the last thing we need to do is encourage people to drive." Many of today's bold ideas on energy are echoes of past proposals of earlier political seasons when gas prices were also rising or supplies were short. Although they may have enjoyed some popular appeal, they've mostly been rejected - only to be recycled again.

Experts suggest the reason gas prices are so high is not because of shortages, as happened in the Arab oil embargo of the 1970s, or the current lack of refinery capacity or especially greedy oil companies.

Instead, they cite ever-growing demand, especially in Asia and the Middle East. Also, oil is traded in dollars, so the dollar's long slide contributes directly to increases in global oil prices. Political instability in some oil-producing nations and financial speculators are also distorting market forces, further bidding up prices. The cost of finding new sources of oil also continues to soar.

The Proposals

Polls have shown that economic concerns, now primarily higher food and fuel costs, have replaced the Iraq war as the issue of greatest concern to voters. Also, just 27 percent of citizens approve of Bush's economic management, an Associated Press-Ipsos poll found. Regular unleaded gasoline averaged $3.60 a gallon last week.

The major proposals:

•A summer "tax holiday" between Memorial Day and Labor Day, first proposed by McCain. "Just give the American people a little break for the summer. Maybe they can go a little farther, maybe they can buy a better meal," says the Arizona Republican. He has also called for greater conservation, and more emphasis on nuclear power and alternative forms of energy.

•Clinton jumped aboard the McCain plan - and upped him one by proposing paying for an estimated $9 billion in lost tax revenue with a windfall profit tax on wealthy oil companies.

The New York Democrat launched a TV ad in next-up primary states Indiana and North Carolina that attacks Obama for saying "no" to the gas tax holiday. "Senator Obama won't provide relief, while Senator McCain won't pay for it," she said at a campaign stop in Indiana.

Obama decried the proposal as a gimmick not designed to ease Americans through driving season but to get McCain and Clinton "through an election," even though he supported a state-gas-tax repeal as a state senator in Illinois. He said it would, at best, save drivers 30 cents a day, or "less than you can buy a cup of coffee for at 7-Eleven."

•President Bush, who can't run again but sees his party's hopes of doing well in November as hinging on issues like energy, blamed Congress for failing to reduce gas prices. At a Rose Garden news conference this week, he dusted off old proposals to allow oil and gas exploration in the Arctic National Wildlife Refuge and to facilitate the building of more refineries and nuclear power plants. "These are very difficult economic times," he said. He said he would study the gas-tax holiday proposal, but didn't sound enthusiastic about it.

Democrats in the House and Senate are also separately working on energy packages designed to restrain gas prices, such as holding OPEC accountable for price fixing, cracking down on price gouging, and repealing subsidies to the most profitable oil companies.

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