England for Obama

The battle over the Indiana primary is being fought for the most part on the McCain/Clinton “Gas Tax Holiday” proposal, which has been universally slated by economists. As we said before, it is a fight Obama is not shrinking from, despite being a populist move on Clinton’s part.

Early in the morning, Barack Obama held a press conference to condemn the plan (see video above) and stated that it had already been tried but proved to be a failure in Illinois. He attacked Hillary Clinton for her choice of language the day before when she called on members of Congress to support her policy, echoing President Bush’s phrase “you’re either with us or against us”.

Later in the day, the Obama team released a second TV advert about the proposal:

Hillary countered by reiterating that she planned to introduce legislation in the Senate, forcing Obama and other Democrats to vote against it, then releasing a follow-up TV ad of her own:

Meanwhile there are indications that Barack Obama’s principled stance may be resonating with superdelegates. One undeclared superdelegate, Congressman and Senate candidate Mark Udall, wrote a stinging rebuke of her policy on his website yesterday saying:

“The so-called ‘temporary gas tax holiday’ that Senators Clinton and McCain propose won’t deliver this needed relief. This will not create the economic relief they say it will, because prices will continue to rise until we address the real source of this problem. We do need to provide immediate relief for families hard-hit by spiraling gas prices, and we can do that by demanding the President stop adding to the Strategic Petroleum Reserve. This will ease the production crunch that is causing these skyrocketing gas prices.

“Senator Clinton claimed yesterday that I either stand with her on this proposal or stand with the oil companies. To that I say: I stand with the families of Colorado, who aren’t looking for bumper sticker fixes that don’t fix anything, but for meaningful change that brings real relief and a new direction for our energy policy. We can’t afford more Washington-style pandering while families keep getting squeezed.

“It is exactly the kind of short-sighted Washington game that keeps us from getting real results to our energy problem. Experts across the ideological spectrum agree that it will increase the deficit, drain money away from Colorado roads and bridges, and hurt the environment, all without actually making prices lower for drivers.”

As the race hots up for the next primaries in North Carolina and Indiana you’re going to hear a lot about “a gas tax holiday.” That’s because Hillary Clinton has jumped on the McCain bandwagon and is proposing to cut taxes on petrol, which the Americans call ‘gas’, for the 3 months of summer. British readers facing the prospect of paying £1.50 a litre may look enviously as Americans baulk at paying $4 a gallon, and would probably love to see taxes on petrol cut too, but economists agree that the ‘tax holiday’ plan is a very bad idea indeed.

The problem with the plan is that the moratorium on the 18.4-cents-per-gallon tax is unlikely to be passed on to consumers, but pocketed by the oil companies. It might even increase petrol prices at the pump, because the price is mostly determined by tight supply.

The battle is now on for Barack Obama, who opposes the plan, to explain the reality of what is likely to seem like money for nothing to voters. In effect he’s asking them to vote for higher taxes, or at least that’s how it will probably look to many. It could hardly be a more difficult proposition if McCain and Clinton were to hand out Dollar bills, rather than try to buy votes using Federal money.

Obama isn’t shying away from the task though, quite the opposite. As the video above shows, he’s linking the plan to a more central theme - that the “old politics” of gimmicks is symptomatic of all that’s wrong with Washington. Instead he’s trying to push his policy of levying a windfall tax on the oil companies and cut taxes on “middle income” families by $1,000.

He’s also gone on the offensive politically by publishing statements by two former Clinton administration Energy secretaries slamming the proposed tax break. One of them, New Mexico Gov. Bill Richardson, called it “a shameless political ploy that would do nothing to help American families.” The other, Federico Pena, called it “the kind of pandering that insults people’s intelligence.”

It’s a tough sell all the same, but one which may pay long term benefits as superdelegates are likely to be impressed by the principled stand based on sound economics. The voters however aren’t known for voting for perceived higher taxes in America any more than they are in the UK.