Suppose you want to achieve the following 4 goals:

1. Help Vladimir Putin win the war in Ukraine.

2. Global warming is on the rise.

3. To make the budget deficit worse.

4. Enriching oil refiners at a time when supply is limited and they are already making tremendous profits.

What is the most effective way to do four? The alternative would be to temporarily abolish the federal gas tax.

I don’t really believe that’s why President Biden recently came up with this idea. I think that public policy reflects the ignorance of basic economic theory and we reduce that amount. Another question is whether ignorance exists between voters, policy makers, or both. But those who analyze politics from a “who gains” perspective often miss the fact that the world is complex, and that not all public policies help the intended beneficiaries.

PS If you have trouble seeing all the connections, imagine a simple model where the short-term supply is extremely elastic due to the closure of the refinery. Suppose the gas tax shifts the demand curve (tax net) to the right by 5% and the balance increases by 1%. In that case, US spending increases, making the world a worse place for caution. The rise in the net global price of oil helps finance Putin’s war. Most of the tax cuts go to short-term suppliers, which helps payers. And reducing tax revenue, increasing the budget deficit. A portion of this revenue deficit will later be made up of less effective taxes than the petrol tax. (Real-world effects will obviously be small, but this example illustrates the basic idea.)

If you decide to kill 4 birds with one stone, make sure that 4 birds are not a valuable specimen at the local zoo.

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