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President Biden on Wednesday appealed to Congress to suspend the federal gas tax, saying it was critical to reduce the pain Americans feel at the bomb. “I promise I’ll do my best to lower the price of energy,” Biden said, as images of oil bombs and gas stations flashed on the wall behind him.
But the notion of a gas tax party received instant criticism, not only from members of both parties on Capitol Hill, but even from many administration officials who said in private that it would probably do little to significantly reduce gas prices.
Senior Treasury officials expressed doubts about the exclusion of the gas tax, and at least two top White House economists also privately transmitted the reservations, according to two people familiar with the internal deliberations who spoke on condition of anonymity to disclose sensitive conversations.
Biden’s determination to move forward despite these internal concerns reflects his struggle to face an economic landscape that, despite some signs of strength, deeply worries many voters. From declaring inflation “transient” to describing a recession as “not inevitable,” White House officials have shifted from one message to another.
They have also urgently sought political moves to reduce the costs of Americans, despite having few obvious political tools to drastically reduce the price of gas. Although Biden on Wednesday urged Congress to pass the tax holiday, he called on states to suspend their own gas taxes and demanded that oil refineries produce more fuel, acknowledging the limitations of their political prescriptions.
“I fully understand that just a gas tax party won’t solve the problem,” Biden said. “But it will provide families with immediate relief, just a little leeway, as we continue to work to reduce prices in the long run.”
How a Gas Tax Party Works
Biden asked Congress to suspend the 18.3-cent-per-gallon federal gasoline tax — and the 24.3-cent-per-gallon diesel tax — for three months, a request that comes just before 4 p.m. July, when millions of Americans are expected to travel on vacation. The average cost of a gallon of gasoline reached nearly $ 4.955 per gallon nationwide on Wednesday, below its all-time high of more than $ 5 per gallon earlier this month, according to AAA.
But the president’s request is likely to face stiff opposition on Capitol Hill, including key members of his own party who have already made it clear they are opposed to a gasoline tax suspension. It is not yet clear what Biden plans to do, if necessary, to corner lawmakers to support politics.
Speaking to reporters on Wednesday, House Majority Leader Steny H. Hoyer (D-Md.) Stressed that he is “compatible” with the president’s request and that reducing gas prices is a “good goal.” . But Hoyer joined other Democrats in expressing his concern that “it will not have the intended effect in terms of selling price.”
And he said Democratic leaders “don’t know” if they have the votes to advance it and haven’t counted yet.
“[Rep. Peter A.] DeFazio [Speaker Nancy] Pelosi, I, have all expressed reservations about it. But the president of the United States has proposed it, “Hoyer added.” We will look at it. We all agree that the price of the bomb is hurting American workers.
But Biden faces the reality that the seemingly insoluble 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 that he is doing everything he can to help, even if not everything works in the short term.
Some vulnerable Democrats celebrated Biden’s announcement.
“I introduced my bill months ago to suspend the federal gas tax and I never stopped working to help Georgia’s families bomb,” tweeted Sen. Raphael G. Warnock (D-Ga.) , which faces a tough fight for re-election in November. Wednesday. “I’m glad the president supports this idea and finally listens to me and my colleagues to take this crucial step.”
However, this is not a universal view. Cornell University economist Eswar Prasad said senior Treasury officials have been clear in internal discussions that they believe Americans would likely see only limited benefits from a gasoline party. , even if enacted by Congress.
“The Treasury has been addressing this from an analytical perspective, and people there realize that the direct economic benefits to consumers are likely to be quite limited, while the budgetary implications would be significant,” said Prasad, who served as an official of the International Monetary. Background, citing conversations with several senior officials.
Treasury officials “expressed concern at the White House because this is not the optimal strategy to deal with inflation and the political benefits are likely to be quite limited,” Prasad said.
In his remarks on Wednesday, Biden said that if all his recommended actions are taken together: gasoline tax suspensions by Congress and states, and increased production at oil refineries, could save to Americans up to $ 1 a gallon at the bomb.
Speaking to reporters this week, Treasury Secretary Janet L. Yellen offered measured support for the idea and the idea that consumers benefit when gasoline tax is suspended.
“Several U.S. states have cut their gas taxes, and I think the research suggests that there is a reasonably high transfer when a state does so at bomb prices, not full, but reasonably high,” Yellen said. “At the federal level, we have a lower gas tax than at the state level. The evidence is more varied. “
He added: “Consumers are really suffering from higher gas prices. It’s been a burden for American households. And I think while it’s not perfect, it’s something that should be taken into account.” .
Members of both sides have also expressed concern about the consequences of suspending the gas tax just months after Congress passed a $ 1.2 trillion bill to improve the country’s infrastructure. Many federal highway and road programs are funded through a trust fund that comes from fuel tax revenue.
“Suspension of federal gas tax will not provide significant relief to the bomb for American families, but will blow up a multimillion-dollar hole in the highway trust fund, jeopardizing funding for future projects of infrastructure, “DeFazio (D-Ore.), the top legislator on the House’s top transportation 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 an election year trick.
“This ineffective stunt will join President Biden’s other ineffective maneuver on gas prices: emptying the Strategic Oil Reserve we need in the event of a real national security crisis,” said the leader of the minority. Senate Mitch McConnell (R-Ky.) In the Senate. pis.
Republicans may also be hesitant to give Biden a victory on an economic issue that worries voters deeply five months before the midterm congressional elections.
But Robert Wolf, the former CEO of UBS Americas and Obama’s economic adviser, has defended the move, even during meetings last week at the White House with senior officials. Wolf said he met with Ron Klain, the chief of staff, Brian Deese, the director of the National Economic Council, and Heather Boushey, a member of the Council of Economic Advisers, to discuss the gas tax party. among other economic issues.
“There are only so many tools you have to combat the rise in gas rises,” Wolf said. “Three things have happened to us at the same time that are really kind of events once in a decade. We have a combination of the oil embargo of the 1970s, the Persian Gulf War of the 1990s and the post-recession of 08 to 2009. gas increased with all three, and we have them all at once. We really had the perfect storm. “
Wolf added that concerns about budget deficits for infrastructure projects could be mitigated.
“We have already reached billions for the covid relief and tens of billions for the war in Ukraine,” he said. “Are you telling me we can’t do anything for Americans who work hard at the gas station?”
Boushey, in defense of the policy on Twitter, cited a University of Pennsylvania investigation that found that consumers benefited states that instituted a reduction in gas tax, although the impact of ‘a federal tax suspension would be more limited. “A federal gas tax party could help, especially if states follow suit,” he tweeted, sharing the analysis of Penn Wharton’s budget model.
While a federal gas tax party could be popular with drivers and could give Biden a small political boost, economists also say it risks exacerbating the problem. Lowering prices artificially sends a signal to consumers to drive more, which could be a problem at a time when there is still a severe fuel shortage.
“We want fewer people to use less gas because there’s a shortage of gas, and that would only encourage more use,” said Mark Zandi, chief economist at Moody’s Analytics.
He said it was “compatible with the problem they are trying to address,” but that a drop in gas tax is “very far off” in terms of reducing the price of gas.
It is also unclear whether the gas companies, which have been a regular target of criticism from Biden in recent months, will consume their own profits simply because the president says they should relieve consumers of the bomb. Energy Secretary Jennifer Granholm is scheduled to meet with oil company executives on Thursday to seek solutions to the gas price hike, although Biden will not meet in person with executives.
Biden also tried to give the subject a moral point about …