By Brian E. Clark
Michael Knetter, the UW-Madison Business School dean, today ridiculed Sen. John McCain’s proposed summer gas tax holiday as “political pandering.”
Speaking at a global economics conference at the Fluno Center, Knetter said McCain’s proposal to suspend the 18.4-cent tax on gasoline (and the 24.4-cent levy on diesel fuel) from Memorial Day until Labor Day is flawed.
The Republican senator and presumptive GOP presidential candidate’s plan has been backed by New York Sen. Hillary Clinton. Ill. Sen. Barrack Obama, who is battling Clinton for the Democratic nomination, has opposed it. Though Knetter was most critical of McCain, he said was not particularly impressed by any of the economic plans to dates by the candidates.
“I’m not a big fan of Sen. McCain’s gas tax holiday,” Knetter said at the conference, which The conference was sponsored by the Center for World Affairs and the Global Economy and the Center for International Business Education and Research.
“For someone who takes as strong a stand as he does against special interests, I see that as absolute political pandering that plays to a very large audience and helps a lot of people a little bit, but gives us exactly the wrong signal about the long-term (energy) adjustments that we need to make as a country,” he said.
The business school dean spent most of his talk on the nation’s international trade deficit, which he said did not greatly alarm him. He also said the nation’s economic fundamentals are sound, but predicted it may take some time before the country pulls itself out of the current slowdown.
Knetter said he is concerned, however, about the toll the high cost of energy is taking on the economy.
“The things that worry me most about our economy aren’t international (trade) imbalances,” he said. “We built an economy… conditional on the low price of oil and gas and carbon fuels and energy in general.
“We are not very well positioned for a high energy price world in terms of our housing stock and our transportation infrastructure and that will be a real problem for our economy going forward,” he said.
Knetter also lamented what he called the “recent episode in mortgage lending and financial excesses would have long-term negative consequences because it will erode confidence in the dollar as a reserve currency and… damage the credibility of an important export service industry, which is investment banking.”
He said people are rightfully suspicious of investment banks because they were deeply involved with “recycling” mortgage products that buyers did not fully understand and “it seems investment banks didn’t fully understand because they got caught with a lot of them on their books.”
He also predicted the dollar will regain value, but warned his audience not to invest on that advice.
“I don’t,” he said.