Analysis by Paul LeBlanc, CNN
Updated: Wed, 22 Jun 2022 22:41:03 GMT
Gas prices are too high.
Almost everyone agrees on that. How to address it is another story entirely.
President Joe Biden waded more forcefully into the debate on Wednesday, pitching a temporary gasoline tax holiday as a prudent step forward.
"By suspending the 18-cent gas tax, federal gas tax, for the next 90 days, we can bring down the price of gas and give families just a little bit of relief," Biden said in a speech from the White House.
But such a step is a long shot in Congress. Here's what you need to know about the President's proposal and why it's likely to stay just that.
What is a gas tax holiday?
A gas tax holiday is exactly what it sounds like. The typical taxes that are applied to purchases of gasoline and diesel are lifted for a period of time, offering a measure of relief to consumers.
These tax holidays can come from the federal government, state governments or both.
Revenue raised from the federal gas tax helps finance the Highway Trust Fund, which is already short on funding. The federal gas tax hasn't been increased since 1993, when gas was selling for just over $1 a gallon.
What does Biden's federal proposal entail?
The federal tax on gas is about 18 cents per gallon, while the federal tax on diesel stands at 24 cents per gallon. Biden's proposal would lift those taxes through the end of September.
"I fully understand that a gas tax holiday alone is not going to fix the problem, but it will provide families some immediate relief, just a little bit of breathing room as we continue working to bring down prices for the long haul," the President said Wednesday.
How much could it help?
Combined with other steps (we'll get to those in a minute), senior administration officials claim Biden's proposal could reduce the price per gallon of gas by $1.
Yet that figure relies on a number of steps entirely out of the President's control, and some economists are skeptical that the potential savings would ever even reach consumers.
Mark Zandi, chief economist at Moody's Analytics, has an even more cynical outlook, telling CNN's Matt Egan that a gas tax holiday could even be inflationary, forcing the Federal Reserve to raise interest rates more aggressively.
"I'm not a fan. You want people to drive less and use less gas. This works against that objective," he said. "It's not well-targeted."
Have any states enacted gas tax holidays?
In recent months, Maryland, Georgia, Connecticut and New York all suspended their gas taxes for varying lengths of time.
The nonpartisan Penn Wharton Budget Model reviewed the tax holidays in Georgia, Maryland and Connecticut and found "causal evidence" that benefits "were mostly passed onto consumers at some point during the tax holiday in the form of lower gas prices."
However, consumers don't receive the full benefit of state gas tax holidays. The report found that they have to share the savings with gas suppliers, which capture part of the benefit if prices at the pump don't fall by the full amount of the suspended tax.
Why is Biden's proposal dead on arrival in Congress?
Even if the President can get all 50 Democratic senators behind the legislation, he would need 10 Republicans to join the cause in order to advance the measure, which seems extremely unlikely.
Why do Republicans oppose it?
Republicans are citing a variety of concerns about lifting the gas tax. A scan of GOP senators' tweets following Biden's speech Wednesday afternoon shows some of the sentiment he's up against:
Sen. Roger Wicker of Mississippi: "First, President Biden blamed Vladimir Putin for skyrocketing gas prices. Then, he blamed energy producers. Now, he is trying to dodge blame for our energy crisis by resorting to a cheap gimmick."
Sen. Marsha Blackburn of Tennessee: "President Biden said he was going to shut down American energy, and he is following through on that promise. It's time for him to stop his gimmicks and start drilling domestically."
Sen. Kevin Cramer of North Dakota: "When gas is $5 a gallon, the American people aren't asking for 18 cents of relief, they want the Trump energy policies back! Suspending the gas tax is nothing more than a knee-jerk political stunt providing minimal relief while blowing a hole in our infrastructure funding."
Why do Democrats oppose it?
Democrats, including House Speaker Nancy Pelosi, have been cool to the idea that Barack Obama labeled a "gimmick" while still a presidential candidate in 2008.
Just read this dispatch from CNN's Capitol Hill team: In a sign of an uphill climb for Biden, moderate Democratic Sen. Joe Manchin of West Virginia, who chairs the Senate Energy and Natural Resources Committee, told CNN's Manu Raju Tuesday evening that he's "a little skeptical" of the gas tax holiday that Biden plans to embrace, saying "there's no guarantee" it will reduce gas prices.
And Sen. Tom Carper, a Democrat from Biden's home state of Delaware, said in a tweet he was "glad" Biden was exploring ideas for gas prices, but added it was " a shortsighted and inefficient way to provide relief."
With Manchin and Carper sounding opposed, Democrats also would fail if they tried to pass such a measure themselves through a procedure called reconciliation, which would only require 50 votes to advance.
Even the Democrats voicing support for Biden's proposal don't sound particularly enthusiastic. Take Democratic Whip Sen. Dick Durbin of Illinois.
He told CNN on Wednesday he's supportive of the proposal, but he warned that the administration and Congress needed to be "honest" about the effects it would actually have in effectively driving down the cost of gas. Durbin also warned it could affect infrastructure funding, which the federal gas tax supports.
How is the Biden administration approaching negotiations?
Energy Secretary Jennifer Granholm told CNN on Wednesday that the Biden administration is "in touch with Congress all the time" as she brushed off the concerns voiced by Democrats and Republicans.
"Well, I mean ... this is a conversation, right? So that conversation is ongoing," Granholm said during the White House news briefing. "And I know that those Democrats are also concerned about the price their constituents are paying at the pump, and Republicans are as well -- I mean, that is the issue, so hopefully, you know, in the past, Republicans have introduced a gas tax holiday, and there's no time that's more acute than right now."
Biden, she added, will be "having these conversations with Democrats and Republicans" moving forward. "I would hope that both sides of the aisle are listening to their constituents about getting relief -- I think the citizens will be the loudest voice in the room."
What other steps is Biden taking?
Beyond his proposal for a federal gas tax holiday, the President called on states to take steps to remove their own taxes on gas and diesel. He also urged oil refining companies to increase their capacity ahead of their planned meeting this week with administration officials.
"My message is simple," Biden said. "To the companies running gas stations and setting those prices at the pump: This is a time of war, global peril, Ukraine -- these are not normal times. Bring down the price you are charging at the pump to reflect the cost you are paying for the product. Do it now. Do it today. Your customers, the American people, they need relief now."
What's at stake for Biden?
A lot. Gas prices and inflation more broadly are among the biggest political liabilities for Democrats heading into November's midterm elections.
Biden and his administration have repeatedly blamed Russian President Vladimir Putin and his war on Ukraine for rising gas and energy prices, though experts also cite other factors -- including high demand, clogged supply chains, rising housing costs and Covid-19 stimulus efforts -- as reasons behind the surging prices.
A CNN poll published last month found that the economy remains a notably weak spot for the President.
Only 23% rate economic conditions as even somewhat good, down from 37% in December and 54% in April 2021. The last time public perception of the economy was this poor in CNN's polling was November 2011, when 18% called economic conditions good.
Americans also said by nearly 4 to 1 that they were more likely to hear bad news than good news about the economy.
If that doesn't change, Democrats' aspirations for November could soon be running on empty.