The gas tax holiday proposal by both John McCain and Hillary Clinton has been widely derided both by economists for its total ignorance of basic supply and demand theory and by environmentalists concerned that Americans are continuing to live in a dream world where 5% of the world’s population can continue to consume 25% of the world’s non-renewable energy.

The best rant on this policy is by Tom Friedman in a New York Times article entitled “Dumb As We Wanna Be.”

The McCain-Clinton proposal is a reminder to me that the biggest energy crisis we have in our country today is the energy to be serious — the energy to do big things in a sustained, focused and intelligent way. We are in the midst of a national political brownout.

However, the sheer stupidity of the gas tax holiday proposal has fostered an interesting contest. James Fallows, the wonderful writer for the Atlantic, asked readers of his blog to nominate the stupidest bipartisan public policy enacted by the federal government.

Among the worthy submissions:
farm bill and its subsidies to wealthy factory farm corporations
Kyl-Lieberman amendment, which declared Iran’s standing army a terrorist group
1986 Anti-Drug Abuse act, set up sentencing distinction between crack and powder cocaine
Patriot Act

The winner was mandates and subsidies for ethanol production and use.:

“I think bi-partisan support for ethanol is more stupid [than the McCain-Clinton ‘gas tax holiday’ plan], because it’s actually harmful and because it not only panders to the public … worse it panders to a special interest group (Midwest farmers and their regional politicians).
It’s harmful because: 1) it helped to catalyze higher levels of food inflation, 2) it consumes as much energy to make and distribute as it provides, 3) it deflects attention from developing trying sound policies to enhance our energy security, 4) it didn’t allow for removal of taxes on the import of truly energy efficient ethanol produced in Brazil from sugar, and 5) it’s a such an extreme example of government disfuntionality it causes people like me to become truly disillusioned with the political process.”

I’m not quite sure if my choices were bipartisan, but it’s hard to beat the stupidity of the Savings and Loan deregulation in the 1980’s and the 1999 Gramm-Leach-Bliley Act. The former, combined with the Reagan administration’s hatred of government oversight and regulation allowed S & L ‘s to be looted by corporate pirates, forcing taxpayers to bail out the system to the tune of $5 billion. The latter repealed the provision forbidding bank holding companies from owning other types of financial companies. many economists feel that this created the corporate climate that has resulted in the current meltdown of the mortgage market. That $5 billion S & L bailout will seem like peanuts when we’ve come through the worst of the credit mess today.


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