Price is determined by the market clearing price.

A gas tax holiday reduces market prices leading to an increase in demand. A demand that cannot be met, we are told, because there are insufficient supplies due to cut offs of oil exports from Russia.

Which means the increased demand caused by artificially subsidizing a lower price causes the market clearing price to rise.

Second, the US government loses revenue from foregone gas taxes. Which means the government borrows and prints more money, leading to higher inflation and higher prices everywhere.

This is virtue signaling that “I care” to an economically illiterate population who will end up with higher inflation as a result.

Are politicians this stupid? Wow.

Source: Biden says he’s considering a gasoline tax holiday

Undoubtedly this plays well to an economic illiterate group of voters – but makes things worse.

By EdwardM

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