Melissa Harris-Perry: This is The Takeaway. I'm Melissa Harris-Perry. It's officially summer. For many families, this means it's a great time to hop in the car and drive to that perfect vacation spot. This year, there's one major hitch. I am not talking about your teenager controlling the music during the drive.
Earlier this month, average US gas prices hit an all-time high of $5 a gallon according to the latest data from AAA. Now, the national average has now dipped slightly below $5, but most people agree the gas is just too darn high. The Biden administration tried to offer a little bit of summer relief by releasing tens of millions of barrels of oil from the Strategic Petroleum Reserve this summer, but it had little effect. On Monday, the President leaves some blame at the doorstep of oil and gas companies.
President Biden: My team is going to be sitting down with the CEOs of major oil companies this week, and then try to get an explanation of how they justify making $35 billion.
Melissa Harris-Perry: This morning, the Biden Administration announced it will ask Congress to suspend the federal gas tax for the next three months. Think of it as a gas tax holiday going into the busy summer travel season. It's a key political move. An ABC Ipsos poll from earlier this month found the gas prices will be extremely or very important to the midterm votes of 74% of the people they polled. Now, I can't tell you for sure what's going to be important in November, but one thing is certain, gas prices are important to many of you right now.
Laura: Hi, I'm Laura. I'm in California, I drive for a living. These gas prices are 100% attacks on the poor. It's just not fortunate.
Tammy: Hi, my name is Tammy. I'm calling from Mankato, Minnesota. I just filled up the other day and it was almost $52. Yes, quite an increase, and it really stinks.
David: This is David from Cleveland Heights, Ohio. I have a small hybrid car, and I just spent $50 to fill it up. On the other hand, compared to most other countries, we pay a lot less in gas, and we contribute a lot more towards global climate change. Maybe if it becomes more expensive, the politicians will lose out, but we might be better off in the long run.
Julia: Hi, this is Julia from Clayton, California. My message to politicians regarding the gas prices is, please do something quick because it's ridiculous, and it could be financial ruin for those of us that have to drive for work. I've had to choose between buying gas to go to work or food so that I can still get my mortgage and utilities paid. Hopefully, you can get an end to this and bring prices down or maybe get us all some free gas for the summer.
Melissa Harris-Perry: Little bit of free gas for the summer. As always, we thank you so much for calling us, and keep calling at 877-869-8253. Now, let's go ahead and get into this. I'm joined now by Joel Payne, CBS News political contributor and former aide to Hillary Clinton's 2016 presidential campaign. Welcome back to The Takeaway, Joel.
Joel Payne: Good to be with you, Melissa.
Melissa Harris-Perry: Also with us is Denvil Duncan, Associate Professor of Economics at the Paul H. O'Neill School of Public and Environmental Affairs at Indiana University. Thanks also for being here, Denvil.
Denvil Duncan: Thank you, Melissa.
Melissa Harris-Perry: All right. Denvil, there's a lot of blame going around here. What are the main factors behind these gas prices at the moment?
Denvil Duncan: The first I would say is just the pandemic, a big decline in demand for goods and services, but also a big drawback in the supply of goods and services as people are staying home. Demand came back roaring and supply just wasn't able to keep up. We saw massive increases in prices across the board, including fuel. That's one factor. The second one is the idea that there is some restriction on supply of fuel, particularly in the US, where there are some concerns about environmental impacts and whether we can continue to explore new oil reserves. The last one is geopolitical conflict.
Melissa Harris-Perry: Okay. You can't see me right now, but I am making my screwface of skepticism because I suppose I'm not quite sure I believe that this is a supply and demand problem, Denvil. Is this really about an insufficient supply or is this about an opportunistic capacity to talk about this potential uncertain future where there might be a supply problem and crank up prices right now?
Denvil Duncan: I do think there is some merit to the idea of demand and supplies. Define pricing a contract, the contract that then pricing is not for today is for some future period. If to the extent that you have perceived future global disruptions, that is going to affect those prices today. Now, I think your skepticism is merited in the sense that how important are each of these factors. I'd say at least two of these, the war and just the recovery from the pandemic playing an important role here.
Melissa Harris-Perry: Joel, we just heard from Denvil this idea of a future's contract, which I understand is a bit of technical-economic language about genuinely having a contract in the future. There's another future contract. That is called the midterm elections. How important of gas price has typically been in the kinds of choices that voters make in midterms, especially when we're talking about summer gas prices? Will this really hold as a key issue for November?
Joel Payne: Melissa, I'm sitting here listening to that conversation with you and Denvil. I think Denvil is right and you guys are circling on probably the right core factor issues that go into the gas prices, but it also just hits me that none of this matters to voters because all they know is, "It used to cost me $43 to fill up, and now it cost me $75 to fill up." The interesting thing about these gas prices are they are one of the core components of what I call the lived experience economy.
The GDP prices don't matter. The unemployment rate doesn't matter, those Bureau of labor statistics, they don't matter to people, the stock market is even secondary. It's the stuff that it's tangible that they can touch and feel every day. When you look at the midterms, and when you look at President Biden and his allies, this is going to be the issue that's the albatross around the neck of the Democratic Party.
Melissa Harris-Perry: Gas prices being high is larger problem because of how it cuts into whatever your fixed pie is, but isn't the other possibility instead of subsidizing gas, basically subsidizing it by removing the federal tax on it, what about bringing down some other kinds of prices? I don't know, maybe raising the minimum wage, trying to address questions around food prices or other commodities. Why go at gas?
Joel Payne: When you talk about this phenomenon of, "Well, shouldn't people consider it as a part of the pie?" They should, but they don't. Politics is a feeling, this kind of economic phenomenon we're going through right now. I've been calling it the bad vibes economy because the vibes are all off. People know it very intuitively to themselves. They don't have to be told that things are going well, or they're not going well, they're all just going based off of, "What is their wallet field? What is their checkbook field?"
Yes, it's a fair point to say that you should drive wages up. Guess what, there's some statistics that will say, "Wages are up, they're just not up fast enough or high enough." That's the tension in politics right now. The next test that the leadership or the Democratic Party is facing is in the November midterms. Right now, they are not set up for success because this is something that they cannot get out of the minds of the American people.
Melissa Harris-Perry: I got to say, Team Takeaway is annoyed with me every time I say this, but I keep saying "No, the gas prices aren't too high. They're too low." We heard this from one of our callers, David, who pointed out that on a global scale, we still paid less than, for example, if you're living in London and filling up your car, and after all, don't know if you've heard, but driving private vehicles freely has an enormous effect on the environment. Is this an opportunity to actually maybe let the gas prices ride and reduce the incentive for driving rather than using our Federal Tax Power to incentivize driving?
Denvil Duncan: I think here you have this trade-off. We just heard a conversation about the political impact. One thing I've observed over time is, there seems to be something special about fuel and politics. You look at instances of riots, or people protesting. I might just mention, I'm from Jamaica, and the only time I've seen a national protest was over price of fuel, ever. You see the same thing happening in Europe, people complained about prices and there was a protest in France and so on. Yes, you're right, if you drive up the price of fuel, you're making it more expensive to rely on the internal combustion engine. That's an incentive for people to switch over to alternative fuel vehicles, electric vehicles, hybrids, and so on, but a politician has to consider the impact of that strategy on the likelihood of winning an election. As we just heard, the prospects are not good. While it is a way to speed up the transition to alternative fuel vehicles, it's not clear to me that politically it would be the best move to make.
One of the main factors that go into the decision to buy an electric vehicle, for example, is a trade-off between the high upfront cost and the fuel savings over the life of the vehicle. With fuel prices where they are right now, that payback is very high and that is going to shorten the time it takes you to recover that initial investment.
Theoretically speaking, you would expect to see a transition. That's a good thing. I think you really have to consider the political impact of such a move and also the distributional impacts of such a move. There are lots of families, as you think about the budget. Lots of families are capable of absorbing the additional cost of fuel.
Many families are not. We want to be careful in how we try to advance these objectives so we're not making the distributional impacts such that some people are paying a high price, whereas others are able to make that transition without the same level of burden. I'd be careful about saying, "We're going to just allow fuel prices to go through the roof simply because of the distributional impacts of such a move."
Melissa Harris-Perry: Also, perhaps the best evidence of the day that MHP should not be hired to be your political consultant, Denvil, Joel, we're going to take our foot off the gas for just a moment, but we'll be right back. This is The Takeaway.
Melissa Harris-Perry: We're back. We're talking about the Biden Administration's decision to use a federal gas tax holiday to provide consumers with some relief while gas prices remain high. Still with me are Joel Payne, CBS News Political Contributor, and Denvil Duncan, Economist from Indiana University. I want to talk for a minute about this [unintelligible 00:12:32], Joel, that you mentioned that the gas prices will be [unintelligible 00:12:37] around the neck of Democrats. Let's just take a listen for a moment to Ohio Republican, Bill Johnson, speaking on Fox News last week.
Bill Johnson: They control the [unintelligible 00:12:48] on gas prices at the White House. It's not Vladimir Putin, it's not the oil companies. It's 1600 Pennsylvania avenue that controls the [unintelligible 00:13:00]. They can take gas prices up, they can bring gas prices down.
Melissa Harris-Perry: Ooh, was such a good moment. Use a word. People don't quite know, but sounds like thermos stat and say that the president has full control. How effective is something like that?
Joel Payne: Oh, listen to the otherwise uninitiated, it can be very effective, Melissa. As we all know politics often has people making intellectually dishonest arguments. I think that might be [unintelligible 00:13:27] at least for this moment and the topic that we're talking about. One of the things that's also so frustrating about this is, it is such an easily [unintelligible 00:13:34] issue.
You can't trust your political opponents to carefully and responsibly manage a conversation like this when there's so much at stake, when they can use this really to hold leverage over you to stifle your political agenda and to see political advantage long term. No one has the patience in the moment and obviously, your political opponents are not going to have the grace to not be intellectually dishonest when we're in a moment like this.
To me so much of this is about hustle and about, there's a phrase in politics, get caught trying. I think the president has to get caught trying to solve the issues here. What is probably disturbing to some of his allies and some folks that maybe want the president to emote a little bit differently is they want him to show up as a fundamentally different president than he pitched himself to be to the American people.
He pitched himself to be a president who, "I'm going to get out of the way. I'm not going to be in your face every day. I'm not like that other guy 45 who was all over the place and made it hard to have conversations about politics at dinner parties." Now is a moment where it requires a president to be front and center in your face at all times. I do think the president, Biden has leveled up, so to speak his engagement in this issue in recent weeks, I think he has to hope that the American people feel like he is signaling the right type of hustle and the right type of urgency of the moment.
Melissa Harris-Perry: Then let's talk for a moment about this question. I heard Joel say, the long term of 2024, and I smiled because only for a political consultant is two years out constituting a long term. I want to remain for a moment on this question about the use of the federal government's capacity to tax or to offer tax relief as a way of thinking about signaling priorities.
I so hear what you're saying about the ways that gas prices are particularly in elastic for those with the lowest incomes, with the most fixed incomes, that the most vulnerable are most harmed by a dramatic rise in a consumer item like gas and fuel. Is there a way to provide some relief to the most vulnerable while again, not signaling that our primary interest is in ensuring that gas prices are low, but rather that households have enough?
Denvil Duncan: That's a good question. I would say the answer is yes, but it's difficult. [unintelligible 00:16:14], I'm always going to talk about trade-offs. What they're proposing is this gasoline tax holiday. It's a very easy thing to do. Once you get over the politics, the stroke of a pen you can just say, "We're not going to collect the tax." That is going to provide some relief to consumers, but it provides relief to every consumer regardless of their capacity to absorb the higher fuel prices. That would be one way to do it.
My position is that I don't think the impact will be large enough, but as a signaling device, I suppose it wouldn't hurt. If you're thinking about it from a political perspective, it wouldn't hurt to say, "We're going to signal that we're interested in your welfare." One way to do that is to provide some tax relief. The alternative or at least one alternative way of trying to assist would be to use some type of rebate program where the benefit that you're offering to individuals is more targeted.
You might imagine something where a check is sent to someone if their income is below some level. That would be a more targeted approach. It would go to the people who are potentially hurting the most. The challenge of course is that it's going to be more expensive to administer such a program. It probably would also take a little bit longer to get that rolled out. You have this tension between what can I do that is going to target specific groups versus the speed at which I can get that benefit out to the people who need it.
Those are broader speaking two ways that you could try to offer some help, but they differ in their costs of administration and the speed at which you could roll them out. You might expect the gas tax holiday is the easier one. That probably is what we will end up doing. I do want to mention one thing though, if we think back to the 7Os' when we had also an oil crisis and high prices, one thing that came out of that era was the corporate average fuel economist standards.
You were talking about environmental impacts and how might we leverage this moment to achieve those climate goals. I think looking back to that era of seeing that high prices at that point led to a shift toward trying to get vehicles that are more fuel-efficient, which would then lower the amount of energy consumed was somewhat a positive.
We could always have a different conversation about whether the corporate average fuel economist standard is the way to achieve this goal. I do think drawing on that era, you see that there is an opportunity here where policymakers, if they're serious about climate change, can try to use this moment as a way of advancing policies. That long-term would have a big impact on climate policy.
Melissa Harris-Perry: Denvil Duncan, Associate Professor of Economics at Indiana University, and Joel Payne, CBS news, Political Contributor, thank you both for joining us today.
Denvil Duncan: Thank you.
Joel Payne: Thanks for having me.
Melissa Harris-Perry: All right, ya'll, let's hear from more of you about this. How's the price at the pump treating you and what do you want elected officials to do about it?
Margie: Hi, my name is Margie. I'm calling from Raleigh North Carolina. I am very aware that the United States gas prices have been increasing dramatically. However, we still pay less than almost any other country in the world. I do think increased prices should help us decrease our reliance on gasoline and other non-renewable energy.
Greg Keenan: Hi, my name's Greg Keenan calling from Stanford Connecticut. As far as gas prices are concerned, we should be sticking it to the gas companies, we should be conserving, we should be driving 55 miles an hour. I'd like politicians to tell us to work as a group and conserve and drop gas usage by 30%. The price will drop.
Jimmy Sanders: My name is Jimmy Sanders, and I'm in Dallas, Texas. I don't really have a message for politicians. I have a message for ExxonMobil, and BP, and the companies that are making a fortune off of the prices being paid at the pump by citizens who are already being hit. With high inflation prices in the grocery store and supply chain issues. That's what needs to happen.
Christian: My take is that the rising gas prices is largely a distraction from the bigger issue, which is we need to be funding better public transit within our cities and between cities. We need an infrastructure that allows people to walk and bike so that we aren't dependent on fossil fuels in the first place. My name is Christian [unintelligible 00:21:13]. I'm calling from St. Louis, Missouri.
Melissa Harris-Perry: Thanks for calling. My number is 877-869-8253. That's 8778, my take.
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