John McCain's gas-tax pander

So I guess John McCain has decided to write off the subway riders' (and bicyclists', and Prius drivers') vote. In a big economic speech this morning he said:

I propose that the federal government suspend all taxes on gasoline now paid by the American people -- from Memorial Day to Labor Day of this year. The effect will be an immediate economic stimulus -- taking a few dollars off the price of a tank of gas every time a family, a farmer, or trucker stops to fill up.

Politically, of course, it might be a good bet. Especially since it will never happen (just the logistics of getting Congress to pass the necessary legislation in time for Memorial Day strike me as more or less impossible). Also, state taxes make up the bulk of gas taxes--the federal gas tax is 18.4 cents a gallon, the average state tax is 28.6 cents.

But anyway, it sounds good. It would also stimulate the economy a little bit. (In light of my previous post, I should add: This is just my opinion. We don't really know.) Little bit truly is the operative phrase, though. According to the Bureau of Economic Analysis, federal excise taxes on gasoline bring in about $26 billion a year. Let's say $8 billion of that comes in during the summer months, when gasoline consumption is higher than during the rest of the year. (I get a much smaller number when I simply multiply summer gasoline consumption as reported by the Energy Information Administration times 18.4 cents a gallon, but I'll trust the BEA here.) That's $8 billion in stimulus, which comes out to 0.057% of annual GDP, or 0.23% of one quarter's GDP. So not entirely meaningless, but not really all that much, either.

And in exchange for that modest stimulus, McCain's gas tax holiday would of course increase the trade deficit (we import most of our oil, so more gasoline consumption means a bigger deficit), increase the federal budget deficit (although just by a little bit, of course), and send all the wrong signals to both drivers and Detroit about the need for more conservation and more fuel efficiency. Doesn't sound like such a good deal to me. But then again, what would I know? I take the subway.