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President Biden called on Congress on Wednesday to suspend the federal gas tax, saying it was crucial to reducing the pain Americans are experiencing at the pump. “I promise you I’m doing my best to reduce the cost of energy,” Biden said as images of oil pumps and gas stations flashed on the wall behind him.
But the idea of a gas tax holiday was met with immediate criticism – not only from members of both Capitol Hill parties, but even from many government officials who said in private that it would probably do little to significantly reduce gas prices. gas.
Senior Treasury officials have expressed doubts about the gas tax holiday, and at least two senior White House economists have also expressed reservations, according to two people familiar with the internal discussions, who spoke on condition of anonymity to reveal sensitive conversations.
Biden’s determination to move forward despite these internal concerns reflects his struggle to confront an economic landscape that, despite some signs of strength, is of deep concern to many voters. From declaring inflation “transitional” to describing the recession as “inevitable,” White House officials have strayed from one message to another.
They are also urgently embarking on policy moves to reduce American spending, although they have few obvious political tools to drastically reduce the price of gas. Even when Biden on Wednesday called on Congress to accept the tax holiday, called on states to suspend their own gas taxes and asked oil refineries to produce more fuel, he acknowledged the limitations of his political regulations.
“I fully understand that a gas tax vacation alone will not solve the problem,” Biden said. “But it will provide families with some immediate relief, just a little room to breathe, as we continue to work to reduce prices in the long run.”
How will the gas tax vacation work?
Biden has asked Congress to suspend a federal gas tax of 18.3 cents per gallon – and a diesel tax of 24.3 cents per gallon – for three months, a request that comes shortly before July 4, when millions of Americans are expected to travel for the holiday. The average price per gallon of gas reached nearly $ 4,955 per gallon nationwide on Wednesday, lower than its record high of more than $ 5 per gallon earlier this month, according to the AAA.
But the president’s request is likely to face stiff opposition on Capitol Hill, including from senior members of his own party, who have already made it clear that they oppose the suspension of the gas tax. It remains unclear what Biden plans to do, if anything else, to get lawmakers to support the policy.
Speaking to reporters on Wednesday, House of Representatives majority leader Steni H. Hoyer (D-Md.) Stressed that he was “sympathetic” to the president’s request and that lowering gas prices was a “good goal”. But Hoyer joined other Democrats, expressing concern that it may not “have the intended effect on the retail price”.
And he said that democratic leaders “do not know” whether they have the votes to continue it and have not yet counted.
“[Rep. Peter A.] DeFacio… [Speaker Nancy] Personally, Pelosi, we have all expressed reservations about this. But the president of the United States proposed it, “Hoyer later added. “We will look into it. We all agree that the price of the pump is hurting working Americans. “
But Biden faces the reality that the seemingly intractable problem of rising prices threatens to overshadow his agenda and any democratic political message. Many in the White House have concluded that the president must at least show that he understands the suffering of Americans and does everything possible to help, even if not everything works in the short term.
Some vulnerable Democrats celebrated Biden’s statement.
“Months ago, I introduced my bill to suspend the federal gas tax, and I never stopped working to relieve Georgia’s families at the pump,” tweeted Senator Rafael G. Warnock (D-Ga.), Who is facing severe battle for re-election in november on wednesday. “I am glad that the President supports this idea and finally listens to me and my colleagues to take this important step.
However, this is not a common opinion. Eswar Prasad, an economist at Cornell University, said senior Treasury Department officials have been clear in internal discussions that they believe Americans are likely to see only limited benefits from the gas tax holiday, even if Congress adopts one.
“The finance ministry is approaching this from an analytical point of view, and people there are realizing that the direct economic benefits to consumers are likely to be quite limited, while the budgetary implications would be significant,” said Prasad, a staffer at the International Monetary Agency. Fund, citing talks with many senior officials.
Finance Ministry officials have expressed concern to the White House that this is not the optimal strategy to tackle inflation and the political benefits are likely to be quite limited, Prasad said.
Speaking Wednesday, Biden said that if all his recommended actions were taken together – a halt to gas taxes from Congress and the United States and increased production from oil refineries – it could save Americans up to $ 1 a gallon per pump.
Speaking to reporters this week, Finance Minister Janet L. Yellen offered measured support for the idea and the idea that consumers will benefit when the gas tax is stopped.
“Several states in the United States have reduced their gas taxes, and I think the study shows that there is a relatively high transition when a state makes it to pump prices – not full, but relatively high,” Yellen said. “At the federal level, we have a lower gas tax than at the state level. The evidence is more mixed. “
She added: “Consumers are really suffering from higher gas prices. This was a burden on American households. And I think that while it’s not perfect, it’s something that needs to be considered. “
Members of both parties also expressed concern about the consequences of the gas tax suspension just months after Congress passed a bill of approximately $ 1.2 trillion to improve the nation’s infrastructure. Many federal road and highway programs are funded by a trust fund derived from fuel tax revenues.
“The suspension of the federal gas tax will not provide significant relief to the pump for American families, but it will drill a multibillion-dollar hole in the highway trust fund, jeopardizing funding for future infrastructure projects,” DeFasio (D-Ore) said. the senior member of the House of Representatives’ leading transport committee said in a statement before the White House announced its request.
Republicans, who generally support tax cuts of all kinds, rejected Biden’s proposal as a gimmick for election year.
“This ineffective trick will join President Biden’s other ineffective trick on gas prices: emptying the strategic oil reserve we need in the event of a real national security crisis,” the minority leader told the Senate. Senate Mitch McConnell (R-Ky.) Floor.
Republicans may also be reluctant to give Biden victory on an economic issue that is of deep concern to voters five months before the midterm congressional election.
But Robert Wolfe, a former chief executive of UBS Americas and Obama’s economic adviser, backed the move, including during last week’s White House meetings with senior officials. Wolff said he met with Ron Klein, chief of staff, Brian Deese, director of the National Economic Council, and Heather Bush, a member of the Council of Economic Advisers, to discuss the gas tax vacation, among other economic issues.
“There are so many tools to deal with increased gas increases,” Wolf said. “We did three things at once, which are really events like once a decade. We have a combination of the oil embargo of the 1970s, the Gulf War of the 1990s and the recession of 2008 to 2009. Gas prices have risen with all three, and we have them all at once. We really had the perfect storm. ”
Wolff added that concerns about budget deficits for infrastructure projects could be allayed.
“We have already invented trillions to alleviate covid and tens of billions for the war in Ukraine,” he said. “You want to tell me we can’t do something for the hard-working Americans at the gas station?”
Boushey, defending the policy on Twitter, cites a study from the University of Pennsylvania that found that consumers have benefited from states that have introduced a gas tax holiday, although the impact of the federal tax suspension will be more limited. “A federal gas tax holiday could help – especially if the states follow suit,” she wrote on Twitter, sharing an analysis from Penn Wharton’s budget model.
While a federal gas tax holiday could be popular with drivers and could give Biden a small political boost, economists also say it risks exacerbating the problem. Artificial price reductions send a signal to consumers to drive more, which can be a problem at a time when there is still a serious shortage of fuel.
“We want fewer people to use less petrol because there is a shortage of petrol, and that would only encourage more use,” said Mark Zandi, chief economist at Moody’s Analytics.
He said he was “involved in the problem they are trying to solve”, but that the gas tax holiday was “very much at a margin” in terms of lowering gas prices.
It is also unclear whether gas companies, which have been a regular target of Biden’s criticism over the past few months, will eat up their own profits simply because the president says they need to relieve pump users. Energy Minister Jennifer Granholm is due to meet with oil company executives on Thursday in search of solutions to increase gas prices, although Biden will not meet with executives in person.
Biden also tried to give the issue a moral assessment of …
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