Mark is entirely correct in criticizing the press treatment of the McCain Gas Tax Holiday. The McCain and Clinton gas tax holiday proposals for this summer were entirely symbolic because they were never going to be enacted or even voted on. McCain should be receiving as much criticism as Senator Clinton did, and he isn’t.
But in fact the McCain proposal is much worse than Senator Clinton’s. At least she had the creative thought of taxing back from the major oil companies what she gave back at the refinery, making the highway trust fund whole. This clever pander would probably have been a complete wash to the consumer, but it would have protected the fisc and prevented the foregone revenue from flowing to OPEC (or Exxon Mobil). McCain is content with the dumb pander, unconstrained by any concern for what the taxes are used for or how markets work.
Footnote 1 With petroleum industry specialists saying that the full current price of crude has not been passed on to the consumer (except perhaps in California), refiner margins have apparently been squeezed and its not an open and shut case the degree to which the foregone tax would be kept by refiners, passed on to consumers, or passed back to crude suppliers. (My hunch is that it would have gone to the crude suppliers so long as the price of crude was going up).
Footnote 2 Note that the increased deficit from McCain’s foregone revenue would not count as Keynesian stimulus to the extent the money ended up overseas either in higher crude prices paid to sovereign suppliers or the share of profits going to foreign owners of major oil companies.
Footnote 3 Presumably, the main effect on consumption behavior, if any, would not be via the small price difference (see Mark’s argument #3) but via the psychology of a “holiday” which would suggest that high prices were temporary and thus not worth adjusting to by changes in habits, vehicle stock, commuting mode, residential location, etc. This postponed adjustment is the most pernicious aspect of Sen. Clinton’s more sophisticated approach in a world in which we need to move to lower fuel consumption because of climate change.