Last week Senator John McCain suggested a "tax holiday" - eliminating the federal gas tax from Memorial Day through Labor Day.  Then Speaker of the House Nancy Pelosi said the government should stop adding to the Strategic Petroleum Reserve.  Even worse, there were reports that Speaker Pelosi wanted to draw from the reserve as a way to increase supply and thereby lower prices at the pump.

I'm no economist, but several things strike me as being really, really wrong with these proposals:

1) Does Nancy Pelosi think this is as bad as things can get?  Does the current situation demand using our only rainy day fund?  The whole delivery and processing system for oil is running close to its limits and any disruption from terrorists, hurricanes, earthquakes, etc. could make $4/gallon gas seem very reasonable.  The Strategic Petroleum Reserve is all we've got to fall back on, and we should continue building our cushion.  Too bad nobody wanted to fill up the reserve in a hurry while oil was only $60/barrel.

2) About 70,000 barrels per day are being deposited in the Strategic Petroleum Reserve.  That sounds like a lot, until you realize that the US consumes about 20 MILLION barrels per day.  The deposit being made into the reserve is such a small fraction that eliminating it wouldn't make a dent in prices.

3) Eliminating the federal gas tax is bad policy on several fronts, but mostly because it would have little impact on the price at the pump.  Prices are going up so fast that an immediate reduction of 20 cents would be a barely noticeable blip, if that.

4) Eliminating the federal gas tax would also take money away from desperately needed infrastructure projects.  Roads and bridges are crumbling, sometimes with deadly results.  Senator McCain would make up the shortfall with general revenue funds, as if nobody will notice that taxpayers provide that money as well.

What I don't understand is why anyone would be looking for schemes to increase demand (by reducing prices) for gas.  We, as a country, should be trying to reduce consumption.  But even $120/barrel oil doesn't seem to be reducing our demand yet.