by Don Boudreaux on August 2, 2008

in Politics, Prices

Here’s a letter that I sent to the Aurora (Illinois) Beacon News:

Barack Obama proposes
to deal with rising gasoline prices by giving a $1,000 "emergency
rebate" to consumers – a rebate to be paid for by taxing the so-called
"windfall profits" of oil producers ("Obama pitches $1,000 energy rebate checks," August 2).

In other words, a critical
part of Sen. Obama’s strategy for reigning in high gasoline prices is
to subsidize gasoline consumption and more heavily tax its production.
This plan – which increases the demand for gasoline and reduces its
supply – makes as much sense as trying to put out a fire by dowsing it
with jet fuel.

Donald J. Boudreaux

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Speedmaster August 2, 2008 at 10:57 am

Well-stated! Dr. Boudreaux, you, Dr. Roberts, Dr. Williams, et al., have a gift for cutting right to the point of these issues in concise terms that the layman can understand. Much appreciated.

Bill Nichols August 2, 2008 at 11:10 am

To be fair, the rebate would not be a direct consumption subsidy because it is not tied to actual fuel consumption. The consumer would see a higher cost at the pump and receive his or her rebate check irrespective of actual gasoline consumption. One would be as free to spend the $1000 on bus tickets, groceries, or lottery tickets as on gasoline.

Sam Grove August 2, 2008 at 11:11 am

That lovely idea must have come from his progressive economic adviser.

skh.pcola August 2, 2008 at 11:17 am

And thus ends the latest episode of Democrat pandering in an attempt to buy the votes of ignoramuses.

Exxon only had ~$11 billion in profit for the quarter, so: $11,000,000,000/$1,000 = 11 million. Who would decide which 11 million "consumers" get a rebate, and why would Exxon (or any other oil firm) continue to produce anything at all when faced with confiscatory policies such as the one The Obamamessiah proposes?

indiana jim August 2, 2008 at 11:30 am


As long as the income elasticity of gasoline is positive (it is), Don has in no way overreached by asserting the the demand for gasoline will increase. Had he said that the demand for gas would increase commensurate with an excise subsidy to gasoline (in the amount of the $1000 rebate) he would have overstated. However, again, Don has in no way overreached in his posted comment.

jpm August 2, 2008 at 11:36 am

Don is not being fair to Obama, because Don left out the best part of his plan: Air up your tires and tune up the car. You have to give him his due credit for this, Monday I aired up my tires and tuned up my car and I noticed that the price of gas has dropped $.10 since then!

Daniel Earwicker August 2, 2008 at 11:52 am
Mace August 2, 2008 at 12:38 pm

Come on folks – it's just a very cleverly disguised anti-global warming program.

spencer August 2, 2008 at 4:51 pm

Have all the reputable papers given up on printing your ideological rants and you are reduced to writing letters to third rate newspapers in the hope they will publish your foolishness?

Is August 2, 2008 at 6:13 pm

Exxon only had ~$11 billion in profit for the quarter, so: $11,000,000,000/$1,000 = 11 million. Who would decide which 11 million "consumers" get a rebate

Why do you suppose they will not tax them more than their expected profit? Exxon can afford to take a loss in the name of fairness. Right?

dave smith August 2, 2008 at 6:45 pm

Spence, you think Don's criticism of this plan from Obama is foolish?

Obama's plan is dumber than the gas tax holiday.

Michael Mace August 2, 2008 at 7:48 pm

"publish your foolishness?"


Please give us your reasoning as to why Don's letter is "foolishness" rather than your ad hominem attack. This one I gotta hear.

kurt August 2, 2008 at 8:37 pm

Does Obama know that the mayor holders of oil company stock are mutual funds who provide for the retirement benefits of middle class America?

Freedom_Lover August 2, 2008 at 9:51 pm

Just a little history lesson. In the 1930s FDR instituted a "undistributed profits tax" on corporations that lengthened the Great Depression by years. I don't think this country is going to go down THAT road again.

Freedom_Lover August 2, 2008 at 9:58 pm

Oh and Spence is a left-wing tool.

Corey August 2, 2008 at 10:21 pm

Dear Spencer,

First of all, ad hominem attacks don't do much to further your cause.

Second (and less importantly) your ad hominem attack doesn't even make sense: Mr. Boudreaux's letters make major national newspapers (http://online.wsj.com/article/SB121599638732549745.html) all the flippin' time!

While I dislike both major political parties, I have an irrational hope (see Caplan, Bryan) that Obama doesn't really mean what he says. I'm going to vote for him because of the Supreme Court- one more conservative justice and we can kiss church/state separation goodbye. However, I can't stand the proposals put forth by Obama on energy, farm bills, free trade, etc, because he's either economically illiterate or straight pandering (probably the latter).

That said, Sen. McCain isn't much better. I get the impression that while Republicans support free market capitalism (usually during some homage to Reagan), the support is merely superficial. When politically popular opportunities rear their heads (coughsteeltariffscough), Republican politicians are all too quick to jetison their free market 'ideals.'

gappy August 3, 2008 at 10:41 am

For a longer discussion of the issue, and the historical context, check the related entry on the Becker-Posner Blog.

vidyohs August 3, 2008 at 11:48 am


"I'm going to vote for him because of the Supreme Court- one more conservative justice and we can kiss church/state separation goodbye."

I don't understand the thought that went into this.

With the democrats holding the majority in both houses, how is McCain going to nominate a conservative justice and actually get him seated to play with the Supremes?

Your fear is unfounded, but you'll vote for a man who is going to screw you royally in every other aspect of your life because of a fear you haven't thought through.

In a related thought, what logic would compel you to choose Marx over Jesus?

Even in the so distant from the source interpretation of the teachings of Jesus even the modern politician's lip service to the priciples of Jesus offers hope and freedom and people have prospered and found life, liberty, and the pursuit of happiness.

No matter how you slice and dice the teachings of Marx or how close or remote you choose to view the interpretations of his teachings, the practice of those teachings by politicians have totally removed hope and freedom, and no life, liberty or pursuit is allowed.

Marx is stagnation and death.

roystgnr August 3, 2008 at 12:08 pm

I just hope that consumers are smart enough to make their rebates last. At $3 for a loaf of bread and $30 for a circus ticket, $1K could last a long time if we're responsible with it.

Okay, but kidding aside: Don probably left out the "air up your tires and tune up your car" part of the plan because that's the only good part. Many people could improve their gas mileage by 5-10% that way, and if enough people paid better attention to those things then the aggregate demand for (and thus price of gas) would be expected to drop.

Rudy August 3, 2008 at 4:54 pm


When our current Supreme Court comes down to a 5 to 4 vote in favor of allowing the Washington D.C. residents the “right to bear arms,“ the interpretation of the real meaning of the Constitution is non-existent if it gets 4 justices to vote against it.

Or take the courts other recent ruling of another 5 to 4 in favor of giving foreign prisoners held in Guantanamo Bay the same habeas corpus rights as U.S. residents. (The first time in our history that constitutional habeas corpus rights have been extended to alien fighters captured overseas). And you’re worried that too many Conservatives would be appointed?

But then again, your Constitutional knowledge came shining through when you mentioned concern over kissing “church and state separation” goodbye. Our First Amendment reads that, “Congress shall make no Law respecting an Establishment of Religion, or prohibiting the free Exercise thereof.” (“Separation of Church and State” did exist,however, in the former USSR’s Constitution though).

Concerning Obama and the Democrats standing in the way of drilling; since both love to import oil, I say we sell Alaska back to Russia, have Russians drill for the oil and sell it back to us!! I’m sure Democrat economics would agree to such terms. (And Obama justices would probably agree too).


skh.pcola August 3, 2008 at 6:36 pm

@Is:Why do you suppose they will not tax them more than their expected profit? Exxon can afford to take a loss in the name of fairness. Right?

You do realize, don't you, that Exxon paid over $29 billion in taxes in the same quarter that their profit was ~$11 billion, right? Do you?

Further, "fairness" is a nebulous term that has no place in a rational discussion about anything of substance. People who use the word are engaging in febrile babbling brought on by listening to liberal liars who are honing their propaganda to appeal to idiots who can't think for themselves.

vidyohs August 3, 2008 at 7:05 pm


I do believe that "is" above was decidedly tongue-in-cheek on his/her post.

I think he/she is on your side of the issue.

Matt Silb August 3, 2008 at 8:31 pm

I guess everyone missed how McCain was giving he money directly to the oil companies by having a gas tax holiday.

Methinks August 3, 2008 at 9:21 pm

Corey, McCain (whom I also don't adore) is not conservative when it comes to judges. But if you want to vote for Obama and give both branches to a party that is gushing with Marxism, go ahead. I hope you enjoy your time in the unemployment line.

I guess everyone missed how McCain was giving he money directly to the oil companies by having a gas tax holiday.

We missed it because it didn't happen.

Methinks August 3, 2008 at 9:26 pm

Spencer provides the typical left-wingnut idiot argument: "Well, if that's what you think then you're just a stupidhead." He is just a perfect left-wing specimen (also, right-wing extremist – although that quote will somehow involve God).

These real "arguments" by Spencer are the reason we all thought that Crusader's jokes were real left-wing arguments.

skh.pcola August 4, 2008 at 4:22 am

vidyohs, thanks for clearing that up. I haven't spent nearly as much time here as I had in past years. Muirego pretty much put me off enjoying the informed commenters' input. I'm not as familiar with the regulars as I used to be.

Speaking of muirego, I ran into him/her/it on another blog a couple of days ago, still spouting the same tired, anti-corporate crap.

vidyohs August 4, 2008 at 5:57 am

"Speaking of muirego, I ran into him/her/it on another blog a couple of days ago, still spouting the same tired, anti-corporate crap.
Posted by: skh.pcola | Aug 4, 2008 4:22:33 AM"

Only two ways to deal with a devout evangelic socialist.
1. Cut if they stand
2. Shoot 'em if they run

As long as they are alive they will work to yoke and chain you.

MHO of course.

Ed August 4, 2008 at 10:01 am

Should there be a 'g' in reigning?

Cora August 4, 2008 at 10:08 am

Yet another solution to solve higher gas prices that will result in….higher gas prices? Oh my.

NObama August 5, 2008 at 9:31 am

Well stated case of Obamanomics 101. Hopefully the American people will wake up sooner than later.

Matt S. August 5, 2008 at 11:30 am

First point, rebate = handout, whether it's a "gas emergency" rebate or a "stimulus" rebate.

Why not instead provide up to $1,000 in tax credit (not just free cash) for taxpayers who can prove that they drive less than other taxpayers?

Some off-the-cuff ideas:

1. Make all public mass transit expenses and bicycle maintenance expenses tax-deductible
2. Tax credit/deduction for purchasing a bicycle and equipment
3. Tax credit for having a residence within a 15 minute drive of your place of work
4. Tax credits for owning smaller cars or hybrid vehicles

This could decrease the incentive to consume gasoline without merely subsidizing consumers to buy more fuel.

Charle August 10, 2008 at 9:21 pm

McCain does not bring many conservative/libertarian ideas to the table. However, the thought of Obama appointing one or more Supreme Court Justices scares me to death. Count me as a pro-life, Catholic, libertarian leaning guy who understands that since 1973 we have killed about 45 million unborn kids. From an economic perspective we have lost 45 million consumers and taxpayers.

Abhishek Saha August 11, 2008 at 2:08 pm

I am a libertarian who supports Obama and here are a few reasons why:

1. Obama is better on foreign policy and the Iraq war.

2. Obama is better on civil liberties, including free speech and rights of detainees.

3. Obama is likelier to spend less on prosecuting drug possession and pornography.

4. Obama's SC appointees are likely to be worse (from a libertarian point of view) on economic issues and issues related to anti-discrimination/affirmative action; McCain's SC appointees will be likely to overturn Roe vs Wade (I do not view abortion as a states' issue) and also likelier to condone laws that punish sexual aberrance. I view the latter as more dangerous.

5. McCain isn't that libertarian on economic issues anyway!

So, yes, Obama's economic policies are messed up, and he might be a collectivist at heart, but McCain is, IMHO, even worse. I believe most libertarians whp are pro-choice and see the essential stupidity of current US foreign policy have similar sentiments.

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