But the idea of a gas tax credit was met with immediate criticism — not only from members of both parties on Capitol Hill, but even from many officials within the administration who privately said it would do little to drastically reduce gas prices.
Senior Treasury officials have expressed skepticism about the gas tax credit, and at least two senior White House economists have privately sent reservations, according to two people familiar with the internal deliberations who spoke on the condition of anonymity to reveal sensitive conversations.
Biden’s determination to move forward despite these domestic concerns reflects his struggle to confront an economic landscape that, despite some signs of strength, is a source of deep concern for many voters. From declaring inflation “temporarily” to describing a recession as “not inevitable,” White House officials veered from one message to the next.
They also urgently called for policy moves to lower costs for Americans, even though there are few clear policy tools to bring gas prices down significantly. Even Biden on Wednesday Congress urged to pass tax exemptionHe asked states to suspend their gas taxes and required oil refineries to produce more fuel, acknowledging the limitations of his policy prescriptions.
“I fully understand that the gas tax credit alone will not solve the problem,” Biden said. “But it will provide families with some immediate relief, just a little breathing room, as we continue to work to bring prices down over the long term.”
Biden asked Congress to suspend the federal gas tax of 18.3 cents per gallon — and the diesel tax of 24.3 cents per gallon — for three months, a request that comes just before July 4, when millions of Americans are expected to travel for the holiday. The cost of a gallon of gas averaged nearly $4,955 a gallon nationally on Wednesday, down from a 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 They have already made it clear that they object to the suspension of the gas tax. It remains unclear what, if anything, Biden plans to do to compel lawmakers to support the policy.
Speaking to reporters on Wednesday, House Majority Leader Steny H. Hoyer (D-MD) stressed he was “sympathetic” to the president’s request and that lowering gas prices was a “good goal.” But Hoyer joined other Democrats in expressing concern that it might not have the “intended retail-price effect”.
He said Democratic leaders “don’t know” if they have the votes to advance and haven’t counted yet.
“[Rep. Peter A.] Divasio… [Speaker Nancy] I’m Pelosi, we’ve all expressed reservations about it. But the President of the United States suggested that. “We will look at it. We all agree the price at the pump hurts working Americans.”
But Biden is faced with the fact that the seemingly intractable problem of high prices threatens to overwhelm his agenda and any democratic political message. Many inside the White House have concluded that the president must at least show that he understands the suffering of Americans and does everything in his power to help, even if all does not work out in the short term.
Some weak Democrats celebrated Biden’s announcement.
Senator Rafael J. tweeted. Wednesday. “I am delighted that the President supports this idea, and is finally listening to me and my colleagues about taking this crucial step.”
However, this is not a global view. Eswar Prasad, an economist at Cornell University, said senior Treasury officials made it clear in internal discussions that they believed Americans might see only limited benefits from the gas tax credit, even if Congress were to issue one.
“The Treasury has been approaching this from an analytical perspective, and people there are realizing that the direct economic benefits to consumers are likely to be very limited, while the budget implications will be significant,” said Prasad, who served as an official at the International Monetary Fund. Finance, citing conversations with several senior officials.
Prasad said Treasury officials “have expressed concerns to the White House that this is not the best strategy for tackling inflation and that the political benefits are likely to be very limited.”
In his remarks Wednesday, Biden said that if all recommended actions are taken together — Congress and states suspending the gas tax, increasing oil refinery production — it could save Americans up to $1 a gallon at the pump.
Speaking to reporters this week, Treasury Secretary Janet L. Yellen offered measured support for the idea and the concept that consumers benefit when the gas tax is suspended.
“A number of states in the US have lowered gas taxes, and I think the research suggests that there is a reasonably good amount of scrolling when the state does it with prices at the pump — 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 mixed.”
She added, “Consumers are really hurt by the high gas prices. It’s been a burden on American families. And I think, while it’s not ideal, it’s something to keep in mind.”
Members of both parties also raised concerns about the consequences of suspending the gas tax just months after Congress passed a nearly $1.2 trillion bill to improve the country’s infrastructure. Many federal road and highway programs are funded through a trust fund drawn from fuel tax revenues.
“The suspension of the federal gas tax will not provide meaningful relief at the pump for American families, but it will bridge a multi-billion dollar hole in the Highway Trust Fund, jeopardizing funding for future infrastructure projects,” DeFazio (D-Ore). The top legislator for the House’s Main Transportation Committee, said in a statement before the White House announced his request.
Republicans, who generally support tax cuts of all kinds, have dismissed Biden’s proposal as an election year gimmick.
“This ineffective stunt will join President Biden’s other ineffective gas price stunt: emptying the Strategic Petroleum Reserve that we need in the event of a real national security crisis,” said Senate Minority Leader Mitch McConnell. floor.
Republicans may also be reluctant to hand Biden a victory on an economic issue that deeply worries voters five months before the midterm congressional elections.
But Robert Wolff, the former chief executive of UBS Americas and an economic adviser to Obama, has endorsed the move, including during meetings last week at the White House with top officials. Wolf said he met with Bron Klein, chief of staff, Brian Dees, director of the National Economic Council, and Heather Bushey, a member of the Council of Economic Advisers, to discuss the gas tax credit, among other economic issues.
“There are just too many tools that you have to combat the ever-increasing increases in gas,” Wolf said. “Three things have happened simultaneously and they are really once-in-a-decade events. We have a combination of the oil embargo in the 1970s, the Persian Gulf War in the 1990s and post-recession from 2008 to 2009. Gas prices went up with all three, and we got All of them at once. We really lived through the perfect storm.”
Wolf added that concerns about budget shortfalls for infrastructure projects could be allayed.
“We’ve already come up with trillions of coronavirus relief and tens of billions of dollars for the Ukraine war,” he said. “You’re telling me we can’t do anything for Americans who work hard at the gas pump?”
Bushy, in his defense of the policy on Twitter, cited research from the University of Pennsylvania that found that consumers benefited in states that imposed a gas tax exemption, although the effect of the federal tax suspension would be more limited. “Federal tax credits on gas can help — especially if states follow suit,” she wrote on Twitter, sharing analysis from Ben Wharton’s budget model.
While the federal tax credit on gas may be popular with drivers and could give Biden a small political boost, economists also say it risks exacerbating the problem. Artificially lowering prices sends a signal to consumers to pay more, which can be a problem at a time when there is still a serious fuel shortage.
“We want fewer people to use less gasoline because there is a shortage of gasoline, and that would only encourage more use of it,” said Mark Zandi, chief economist at Moody’s Analytics.
He said he was “sympathetic to the problem they are trying to address” but the gas tax credit was “largely on the sidelines” in terms of lowering gas prices.
It’s also unclear whether gas companies, which have been a regular target of Biden’s criticism over the past few months, will eat away at their profits simply because the president says they need to give consumers a rest at the pump. Energy Secretary Jennifer Granholm is set to meet with oil company executives on Thursday to seek solutions to raising gas prices, although Biden will not meet in person with the executives.
Biden also sought to moralize the issue on Wednesday, attributing rising gas prices to Russian President Vladimir Putin’s war against Ukraine. “It wasn’t just Putin’s invasion of Ukraine — it was the refusal of the United States and the rest of the free world to let Putin get away with something we haven’t seen since World War II,” Biden said.
Even if the gas tax credit isn’t very effective, his supporters said, it’s important that Biden convey his sympathy for Americans’ struggles.
“I think they know it’s not going to have a huge impact on prices,” said Dean Baker, a liberal economist and White House ally. “It looks like you’re doing something, but it’s not really – I think they know that.”