Gene Sperling, senior advisor to President Biden, joins Yahoo Finance Live to discuss how the White House is responding to soaring gas prices and the possibility of a gas tax holiday.
JOE BIDEN: My message is simple, to the companies running gas stations and setting those prices at the pump, this is a time of war, global peril, Ukraine. These are not normal times. Bring down the price you are charging at the pump to reflect the cost you are paying for the product.
- That was President Biden pressuring oil giants and calling on Congress today to approve a three-month gas tax holiday. National average gas prices dipping this week below $5 a gallon in its first weekly decline that we've seen since April. Joining us now to discuss this, we want to bring in Senior Advisor to President Biden Gene Sperling. Gene, thanks so much for taking the time to join us today.
GENE SPERLING: Thank you. Thanks for having me.
- So let's start first with President Biden. He's under some pressure here to provide some relief at the pump. He's calling on Congress to suspend the gas tax first. How big of a difference is this going to make for our individual viewer out there?
GENE SPERLING: Well, the President called for three things today. And I think the combination can be significant. One was a three-month holiday in the $0.18 federal gas tax. Two was for states that have experienced the surge in surpluses with the growth since the American Rescue Plan to also suspend their gas taxes. Some of those are larger, up to $0.30.
And then he also called on the oil refineries to do more to bring on capacity. They brought down over a million barrels of capacity over the last two years. What can they do to bring that back and to ensure that when we are seeing drops in oil, drops in the gas tax, that those benefits are being passed on at the gas pump?
And the President noted at the end that oil's fallen $10 in the last week. We should have seen a $0.25 drop in gas prices at the pump. Instead, it was a few cents, maybe a nickel, but not nearly as much as it should be. And that's very important as we do a gas tax holiday that that $0.18 be passed on directly to consumers.
- Well, Gene, what you just said there about the refineries has pressed on some of these big oil companies to up their refining capacity. In June, they were running at 95%, close to max capacity. So how much wiggle room is there really there?
GENE SPERLING: I think there's more than that suggests because you have to remember they took down a million barrels a day. 800,000 in 2020 before President Biden came. So there's been about a million.
So we think that you need to do everything you can. Look, what we at the White House do, what we in this administration do is we realize there's no silver bullet. But you look for every single thing. So the President has had strong words. But on the other hand, he has said to them, meet with the Secretary of Energy, Jennifer Granholm, tomorrow and other members of our team. And let's put every idea on the table.
So this is not the President just scolding. The President is giving a stern message to them, to everybody else to do everything you can. But the goal is results. And we will want to hear their ideas. And we want to figure out everything we can do. You saw one of the things today. Do a three-month suspension of the federal gas tax.
- And Gene, Rochelle here. I want to ask you-- because you did mention that oil executive meeting that's coming up-- what are the expectations there being that we have seen a lot of representatives of oil companies saying, look, this isn't on us. We're doing our part. We need more support.
GENE SPERLING: Well, I mean, this is a chance for everybody to get in a room and talk to each other. I don't think that people should be offended because the President is standing up for consumers who are being squeezed at the gas pump. I mean, this is ultimately the result of an unthinkable act of aggression by Putin and the world's decision to stand up to him.
I mean, gas prices were at $3.31 on January 17. That's actually below the historic real averages over the previous decade. So they were not particularly high when this started with Putin. Since then, since the reaction by the United States and Europe and others to sanction Russia, we've seen gas prices up $2 or more in European countries and about $1.70 here. That is Americans paying a tax for unthinkable aggression. We don't want to stand down on standing up to Russia and Putin. But we do want to do everything we can.
And when we're talking about giving a federal gas tax holiday, when we see prices come down $10 a barrel, I think the United States should be giving every warning-- not warning. But every strong message possible that we expect those savings to be passed on at the pump and not just lead to larger profits that are being used to do share buybacks or stock buybacks instead of putting those profits to use to bring down prices for average Americans.
- Gene, it's interesting. Wharton studied this recently, the gas tax holiday, and found that in certain states, for example, Maryland, unintended consequences, yes. Consumers got a little bit of a break. But afterwards, prices rose faster than they would have without said holiday. I also want to ask you about your former boss, Barack Obama, the President in 2008 when Joe Biden was the Vice President. He called the federal gas tax holiday, quote, "we're arguing over a gimmick that would save you a half a tank of gas over the course of the entire summer so that everyone in Washington can pat themselves on the back and say they did something." So was Barack Obama wrong or was it a gimmick?
GENE SPERLING: You've mentioned two things. Let me take the first one. I think the most important thing in that Wharton Pennsylvania study that you mentioned was that they did find that 75% to 84% of the benefit was passed on to consumers. And that's not enough. But it does show in the most current example, which is a state gas tax holiday, that those savings can be passed on to consumers.
And two, yes, this is not a normal policy solution for normal times. This is an exceptional policy solution for exceptional times. And having an aggressive military invasion by Russia of Ukraine is an exceptional time. It is a time of war. This is not an idea that I would be for at any particular time or at the time when we were there and I was in the White House. But we were not facing a Putin invasion of Ukraine. We were not seeing the roiling of international energy markets because of unthinkable military aggression.
This is a different time. Every time we go anywhere, there's one thing we know. People want the President to be doing everything in his power to help take off some of these price hikes at the gas pump that are not their fault, the people pulling up with their cars. They are the fault of Vladimir Putin and his unthinkable aggression. And this is a way that the President can give us some relief to American consumers without backing down to this dictator.
- Gene, let me get your thought since we have you on where we stand just in terms of the economic picture right now because we're talking about the record high gas prices that we're seeing. Inflation at its highest level that we've seen in 40 years. Recession fears seem to be growing. We talked to market participants day in and day out about this. What's your assessment of where the economy stands today?
GENE SPERLING: Yeah. No. Thanks for asking. I mean, look, I'm not in the forecasting game. But of course, I, like everyone else, follow forecasters closely. I think that people are not fully appreciating some of the resilience in this economy. And let me give you an example. It helps that we have had this great return to work, that 4.2 million Americans are back at work. It helps that people are working, that we have, not just historically low unemployment, but that really all segments from the long-term unemployed to Hispanic to African-American workers have all got back to work. There's some conflicting studies. But most studies show that across the board, families have less household debt service. They have a stronger checking accounts.
So all I would say is that there are strengths in this economy that came out of the American Rescue Plan that position us well to make the transition to more stable growth with lower prices. And, yes, I'm a bit more optimistic than some of the people you might have on your show that there is more resilience in the American economy than some forecasters are seeing.
- Gene, I do want to ask you about the American Rescue Plan, the implementation of it. A lot of people said that because of this plan, that's also what fueled some of the inflation that we're seeing right now. In terms of the overall impact of this plan contributing to inflation versus, say, long term, what would you tell them?
GENE SPERLING: I mean, there's no question that the major impact has really been four things, of which none of them are the American Rescue Plan. One, the fact that really for the first time-- not even in 1918-- you saw the global economy completely shut down and start up and the friction that created. Two, the fact that you had delta and then omicron slow the supply chain correction. You saw semiconductors in Asia production freeze up, lockdowns in China, and then the rise in gas prices from the Russian aggression, which, again, gas prices were only at $3.31 before Putin started doing military exercises.
The final thing I'd just say quickly is the average inflation rate for the top 38 countries is 9.2%. That's the OECD rate. This is clearly a global phenomenon dealing with global issues in terms of shutdown, supply constraints, delta, omicron, and now the war. And so, yeah, I just couldn't disagree more that the American Rescue Plan would be seen as a significant contributor to that global inflation that is literally everywhere in the world, whether or not they had strong or weak fiscal policy response.
- Gene, quickly. A man very well, Larry Summers, who preceded you in the Obama administration, called it the least responsible macroeconomic policy we've had in the last 40 years. Was he wrong?
GENE SPERLING: Well, listen, Larry is a friend. I respect Larry. Larry's been unhappy with the Federal Reserve reaction, which I'm not going to get into. He's had his points on the American Rescue Plan. But I think that one has to look at the strength, that is in there. I mean, I will tell you I succeeded Larry as the national economic advisor under President Obama.
I was there when we were stuck in long-term unemployment. I was there when we were stuck in 9% unemployment. I was there when it took six years for Black and Hispanic unemployment to recover from where it was. And now I'm here in a world in which Americans are working at unprecedented levels, Black and Hispanic unemployment's already recovered, long-term and youth unemployment has dropped. They'll be less scarring.
So we need to take a full look. And I think that full look shows that the American Rescue Plan led to a very strong recovery, that it's given us some resilience to deal with omicron, delta, and now this Russian war, and that I think it's given more resilience to American households to help us make this transition from this unique time to one that's more stable with lower prices, even in the face of the tough actions that we know the independent Federal Reserve will take.
- You've got your work cut out for you, sir. Senior advisor to President Biden. We spoke a lot about Obama here. Gene Sperling, great to have you on the show. Thank you so much.
GENE SPERLING: Thanks. Thanks for having us.