Fiden’s latest economic news: Recession is not definite

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President Biden on Wednesday called on Congress to suspend the federal gas tax, saying it was important for Americans to reduce the pain they feel at the pump. “I assure you I will do everything I can to reduce the price of energy,” Biden said, as pictures of oil pumps and gas stations gleamed on the wall behind him.

But the idea of ​​a gas tax holiday met with immediate criticism – not only from bipartisan members on Capitol Hill, but also from many officials in the administration, who personally claimed that it would significantly reduce gas prices.

Top Treasury officials have expressed skepticism about the gas tax holiday, and at least two top White House economists have made personal bookings, with two people familiar with the talks, who spoke anonymously to release key conversations.

Despite these internal concerns, Biden’s determination to move forward reflects his struggle to face the economic landscape, which, despite some signs of strength, is of deep concern to many voters. White House officials have shifted from declaring inflation “intermediate” to describing the recession as “inevitable.”

Despite some obvious policy tools to drastically reduce the price of gas, they were quick to make policy moves to reduce Americans’ spending. Like Wednesday Pitana Congress urged to pass the tax holidayHe asked states to suspend their own gas taxes and demanded that oil refineries produce more fuel, which he agreed to the limits of his policy recommendations.

“I fully understand that the gas tax holiday alone is not going to fix the problem,” Biden said. “But it will provide immediate relief to families, with a little breathing room. We continue to work to reduce prices in the long run.”

How the gas tax holiday works

Biden called on Congress to suspend the federal gas tax of 18.3 cents per gallon – and the diesel tax of 24.3 cents per gallon – for three months, just before July 4, when millions of Americans are expected to travel on holiday. The average price of a gallon of gas reached $ 4,955 a gallon nationally on Wednesday. $ 5 per gallon Earlier this month, according to the AAA.

But the president’s request will face strong opposition on Capitol Hill. They have already made it clear that they oppose the gas tax suspension. It is unknown at this time what he will do after leaving the post.

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Speaking to reporters on Wednesday, House Majority Leader Steny H. Hoyer (D-Md.) Stressed that there was “sympathy” for the president’s request and that it was “good intention” to reduce gas prices. But Hoyer, along with other Democrats, expressed concern that “it will not have the intended effect in terms of retail prices.”

They do not know whether the Democratic leaders have the votes to do so or not. ”

“[Rep. Peter A.] Defacio [Speaker Nancy] Pelosi, myself, we have all booked about it. But it was proposed by the President of the United States, ”Hoare later added. “We’ll see that. We all agree that the price of the pump affects working Americans.

But Biden faces the reality that the insurmountable problem of rising prices threatens to obscure his agenda and any democratic political message. Many in the White House have decided that the president should at least show that he understands the suffering of Americans and will do all he can to help, even if in the short term everything does not work out.

Some vulnerable Democrats celebrated Biden’s announcement.

“I introduced my bill several months ago to suspend the federal gas tax and never stop working to provide relief to Georgia families,” said Sen, who faces a tough re-election campaign in November. Rafael G. Warnock (D-Ka.), Tweeted. On Wednesday. “I am pleased that the President supports this idea, and I am finally asking myself and my colleagues to take this important step.”

However, this is not a global view. Easwar Prasad, an economist at Cornell University, has made it clear in internal discussions with top Treasury officials that they believe Americans will only reap the benefits of the gas tax holiday, even if Congress passes it.

“The Treasury is approaching this from an analytical perspective, and the people there have realized that the direct economic benefits to consumers will be minimal, while the budget implications will be significant,” said Prasad, who has served as an official with the International Monetary Fund. Finance quoting conversations with several senior officials.

Treasury officials said the White House was “concerned that this was not the optimal strategy to tackle inflation and that political rewards would be minimal.”

In his comments on Wednesday, Biden said that if Congress took all of its recommended measures together – if Congress and the states increased gas tax cuts and increased production of oil refineries – it could save Americans up to $ 1 a gallon at the pump.

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Speaking to reporters this week, Treasury Secretary Janet L. Yellen gave measured support to the idea and the idea that consumers would benefit if the gas tax was suspended.

“Many states in the United States have reduced their gas taxes, and I think one state has a fairly high pass-through when it comes to pump prices – not entirely, but reasonably high,” Yellen said. “At the federal level, we have a lower gas tax than at the state level. The evidence is very mixed.

He added, “Consumers are really suffering from rising gas prices. This is a burden on American families. I think, while not perfect, this is something that needs to be considered.

Members of both parties have raised concerns about the consequences of suspending the gas tax just months after Congress passed a $ 1.2 trillion bill to improve the country’s infrastructure. Many federal road and highway projects are funded by trust funds derived from fuel tax revenue.

“The suspension of the federal gas tax will not provide meaningful relief to American families at the pump, but will jeopardize billions of dollars in highway trust funding and jeopardize funding for future infrastructure projects,” DeFazio (D-Ore.), The House’s leading transport panel, said in a statement. Said in a statement earlier.

Republicans, who generally support all forms of tax cuts, have rejected Biden’s proposal as an election-year gimmick.

“This useless stunt will add to President Biden’s other useless stunt on gas prices: emptying the strategic petroleum reserves we need during the real national security crisis,” Senate Minority Leader Mitch McConnell (R-Guy) told the Senate. Floor.

Five months before the midterm congressional election, Republicans may be reluctant to give Biden victory in an economic crisis that worries voters.

But Robert Wolf, Obama’s economic adviser and former CEO of UBS Americas, backed the move, including meetings with top officials at the White House last week. Wolfe said he met with CEO Ron Klein, National Economic Council Director Brian Dees and Economic Advisory Council member Heather Fawcett to discuss the gas tax holiday, among other economic issues.

“There are only so many tools to combat the increased gas rises,” Wolf said. “Once a decade, three things have happened at the same time. We have a combination of the 70’s oil embargo, the 90’s Persian Gulf War and the post – 08 to 09 regression period. We have received.

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Wolfe said concerns about budget deficits for infrastructure projects could be addressed.

“We have already brought in trillions for Govt relief and tens of billions for Ukraine war,” he said. “Are you telling me there’s nothing we can do for Americans who work hard at the gas pump?”

Boushey, who supported the policy on Twitter, cited research from the University of Pennsylvania which found that consumers benefited from states that established gas tax holidays, although the impact of the federal tax suspension would be minimal. “The federal gas tax holiday will help – especially if states follow suit,” he tweeted, while Ben Warden shared an analysis of the budget model.

While the federal gas tax may be popular among holiday drivers and may give Biden a slight political boost, economists say it risks exacerbating the problem. Reducing prices artificially sends the signal to consumers to drive more, which can be a problem at a time when there is still severe fuel shortages.

“We want less people to use less petrol because there is a shortage of petrol, and this will encourage more use,” said Mark Jandy, chief economist at Moody’s Analytics.

He said he was “sympathetic to the problem they were trying to solve” but that the gas tax holiday was “too high” in reducing gas prices.

It is also unclear whether the gas companies, which have been the regular target of Biden’s criticism for the past few months, will eat at their own expense as the president says they should provide relief to consumers at the pump. Energy Secretary Jennifer Granholm is scheduled to meet with oil company executives on Thursday to seek solutions to the gas price hike, although Biden will not personally meet with executives.

Biden on Wednesday sought to give a moral argument to the issue, blaming Russian President Vladimir Putin’s war on Ukraine for the rise in gas prices. “This is not just Putin’s invasion of Ukraine.

While the gas tax holiday may not have been the most effective, his supporters said it was important for Biden to show sympathy for the American struggles.

Dean Baker, a liberal economist and White House ally, said: “I know they know it’s not going to have a big impact on prices.”

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