Democrat policy on gas prices sows fear and ignores basic economics [UPDATED]

According to Greg Sargent, Democratic strategists have some talking points they want to push to ‘protect Americans at the gas station’ in response to rising gas prices. Here is the key policy:

* Although there is no single, easy answer for addressing increased gas prices in the short term, there are things we can do to guarantee that Americans aren’t victims of escalating gas prices in the long term.

* One thing we can do is eliminate unnecessary tax breaks for the oil and gas industry and instead invest that money into clean energy, so that we can cut our dependence on foreign oil.

Given the government’s track record in alternative energy (remember Synfuels ?), there is no guarantee government  ‘investments’ in clean energy will lead to lower energy prices. So what will be the effect of eliminating tax breaks for oil and gas companies ?

Eliminating tax breaks means raising taxes. If companies’ taxes go up, they will try to pass the cost on to their customers to keep their profits constant (that’s what I would do).

How will this brilliant Democratic strategy keep gas prices from rising ? The answer is it won’t. These talking points are pure demagoguery that seek to gain support from folks upset with rising prices by demonizing business.

I am not the only one to notice this. And I am hardly a fan of tax breaks for oil and gas companies – or tax credits or subsidies for ‘green’ cars, alternative energy sources, or ethanol, for that matter. These should all go away along with a host of other targeted government tax breaks and subsidies. Their primary effect is to buy votes. But eliminating tax breaks for oil and gas companies and throwing the money at clean energy is ignorant of basic economics. It guarantees that prices will go up in the short term. There is no guarantee the imagined benefits will ever come to pass.

UPDATE: Larry Kudlow weighs in on the $4B in tax breaks Dems want to eliminate. Hint – the piece is titled ‘The Left Hates Oil Companies.’


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