Attention Sen. McCain: Moderation in the Pursuit of Tax and Spending Cuts is No Virtue

Reporters are lighting up my voice mail and inbox with queries about what I make of Sen. John McCain’s call today for suspending SPR fill orders and the federal gasoline tax from Memorial Day to Labor Day in a bid to get gasoline prices down. Color me tepid.

Let’s take these issues one at a time. John McCain is absolutely correct to blame the SPR for helping to drive-up world crude oil prices. Oil economist Phil Verleger, for instance, thinks that federal fill orders for the SPR has driven up the price of crude by at least $10 a barrel and perhaps as much as $30. But why only temporarily stop the madness? Now’s a good time to dump the all federal inventories on the market and shut the SPR down once and for all. If we’re lucky, we’ll burst what may be an oil price bubble along the way and finally have something positive to show for the tens of billions of dollars of taxpayer funds that have been sunk into this white elephant.

The same goes for the federal gasoline tax. John McCain of all people should know that federal gasoline tax revenues are steroids for localized pork and special-interest subsidy. Road construction and maintenance (and the taxes that pay for them) should be turned back to state and local governments. A short-term moratorium on taxes, however, would probably have little impact on pump prices. If gasoline supplies are relatively fixed over the next several months (as I suspect they are), any service station that tried to pass the tax cut on to consumers would find demand increasing beyond where it otherwise would have been, and that increased demand would bid prices back up to where they were before federal taxes were cut. Over the long term, a cut in federal gasoline taxes would indeed reduce pump prices, but that’s not what John McCain is talking about here.

Sen. McCain is on the right track. But half-measures won’t accomplish much.