A gas tax holiday is a terrible idea

McCain used to have a respectable record of fiscal conservatism. That's why I'm disappointed in his recent "Gas Tax Holiday" proposal.

A gas tax holiday is a terrible idea. America needs to consume less oil and, as any student of the free market knows, the price signal is the means that will make this happen. The economic externalities involved in petroleum consumption, if anything, justify higher gas taxes. Expensive gas reduces the effective demand for oil and stimulates growth in badly needed alternative energy sources. Revenue from gas taxes could help reduce the federal budget deficit, which congress has so miserably failed to control.

We might also question the assumption that cutting the gas tax would really yield lower prices. Reducing a tax on a transaction benefits both parties in the transaction, but supply and demand determine how much benefit goes to which party. I'll leave it to smarter people than me to analyze the elasticity in demand of gas versus the ability to produce greater supply. But I will point out that the prospect of new refineries and oilfields being opened up to accommodate one summer's worth of gas-guzzling RVs seems unlikely.

The age of oil is coming to a close. If America wants to be a leader in the coming century, we will need to be a leader in alternative energy. Going deeper into debt to help people cling to a dying technology is a lose-lose proposal. The McCain campaign is capable of better.