In calling for a three-month suspension of the 18.4-cent federal gasoline tax, President Biden once again has come up with a gimmick rather than a policy. Or, to think of it another way, his announcement today on the gas tax shows again that his policy is to end fossil fuels.
That means he is insisting on implementing his radical, climate change ideology instead of defending American energy security, or, for that matter, American national security.
The tax holiday is just silly. It has no chance of passing Congress. It will not reduce gasoline prices. And it does nothing, of course, to help energy companies increase fracking, or pipelining, or refining. It does nothing.
At best, a gas tax suspension with a 4 percent discount on the price, even assuming all of it is passed on to consumers, would lower the average price to $4.82 from $5. Applying standard price theory, the cheaper price might actually increase gas demand. And then the price at the pump would go back up.
The trick here, which eludes the Bidens, is to increase the supply of gasoline. He won’t do that because it would violate his extremist greenie policies.
Of course, he’d rather just blame Vladimir Putin being in Ukraine or continue his incredible recent attacks on American oil companies. Here;s Mr. Biden today concocting a truly stupid argument about the energy crisis: “So for all those Republicans in Congress criticizing me today for high gas prices in America, are you now saying we were wrong to support Ukraine? Are you saying we were wrong to stand up to Putin? Are you saying that we would rather have lower gas prices in America and Putin’s iron fist in Europe?”
Of course, Mr. Biden’s energy problems are completely self-inflicted. Don't take my word for it. Here’s the Fed chairman, Jay Powell, after being asked whether the Ukraine war is driving inflation in America: “No. Inflation was high before, certainly before the war in Ukraine broke out.”
By the way, if the gas tax holiday actually got through Congress, which it won’t, it would defund the highway fund for road safety and other infrastructure by up to $20 billion. That money has to be replaced.
I’ll bet at some point the socialists in the Democratic Party will propose an excess profits tax, such as the one recommended by Senator Wyden and endorsed by President Biden, that would add 21 percent to the current corporate tax of 21 percent, for a grand total of 42 percent — which would stifle all manner of oil and gas production, employment, investment, and expansion. Exactly the reverse of what any sensible person would hope for.
These are not sensible people, though. Now, I think real tax cuts to mitigate the coming recession would be an excellent idea. Like making the Trump tax cuts permanent, or moving toward flat tax reform and simplification. Couple that with a major deregulatory push — not only on energy, but on all business and industry.
Today, Mr. Powell told Congress that the increase in Fed rates in all likelihood would lead to recession. The best way to counter that recession is to slash taxes and regulations. So while the Fed operates on the money supply, fiscal policy would create new incentives to work, invest, and grow the economy.
That’s the prosperity plan.
Mr. Biden of course is completely opposed to this supply-side mix, and that’s why we’re in so much trouble. The Fed wouldn’t have to reduce demand so much if Congress would take steps to increase supply. Let’s not make this any harder than it needs to be.
Yet Mr. Biden is making it very hard for working people, who can’t afford gas or groceries as they see their real wages dropping along with their retirement savings.
Incredibly, there’s even talk of a new “Build Back Smaller” reconciliation bill that would include sizable social spending, along with large tax hikes. That would guarantee more inflation and a deeper recession.
The same Democrats who in March 2021 voted in the inflation with their $2 trillion spending package would now vote in recession with a $1.5 trillion tax hike. Plus more spending.
It’s the greatest example of monetary mismanagement since Herbert Hoover and the Great Depression. Hang on just a little longer, though, because the cavalry’s coming.
Larry Kudlow was the Director of the National Economic Council under President Trump 2018-2021. His Fox Business show "Kudlow" airs at 4 p.m &. radio show airs on 770 ABC from 10:00 a.m. to 1:00 p.m.