Ex-Obama adviser says president should raise payroll tax cut if gas prices jump

A former adviser to President Obama outlined a plan this week to parry Republican attacks on the White House over rising gas prices.

Ron Klain, Vice President Biden’s former chief of staff and a former Obama adviser, floated the idea of an additional 1 percent payroll tax cut if gas prices go above $4 a gallon.

“[T]he White House should act boldly, and move immediately to cope with the problem before it becomes politically red hot,” Klain said Monday in his Bloomberg View column, referring to rising gas prices.

Under the proposal, which Klain called a “pocketbook protection” plan, consumers could receive as much as $50 per month. The plan would cost about $5 billion a month, which Klain called a “relatively modest” price tag.

The plan would allow Obama to capitalize on the momentum from his victory in extending the payroll tax cut last week. Klain said the president could argue that the $40 per month that the average American will receive under the payroll tax cut isn't enough, given rising gas prices.

"[F]or an average couple living in suburbia, driving about 1,500 miles per person each month, in two cars that get average gas mileage, a 50-cents-a-gallon increase will cost them about 20 percent more than the payroll-tax cut saves them," Klain said. "In their case, what the president and Congress gives, the gas man takes away."

Obama said Tuesday that the payroll tax cut extension is a "big deal" for families who are struggling to fill their gas tanks.

"It means $40 extra in their paycheck, and that $40 helps to pay the rent, the groceries, the rising cost of gas — which is on a lot of people's minds right now," he said.

Klain said the plan's costs could be offset with a surcharge on increased oil company profits that stem from higher gas prices.

“[A] modest surcharge would help fund at least a partial pocketbook protection program to make sure the cost of the oil companies’ gain isn’t excessive pain for the rest of us,” he wrote.

The plan is preferable to GOP plans to cut the gas tax because “it doesn’t weaken any incentives for fuel conservation or efficiency,” Klain added, echoing a long-time criticism of environmental groups.

In addition, Klain said, “the relief provides the greatest relative help to lower-income workers who need gas to commute and feel the price pinch the hardest.”

According to AAA, the average regular gallon of gas in the United States costs about $3.57. That’s up from the price per gallon this time last month ($3.38), as well as this time last year ($3.17).

Republicans are working to pin the blame for rising gas prices on Obama’s policies, while promising that expanded domestic oil-and-gas drilling will help remedy the problem. Energy analysts say that even a dramatic expansion of domestic drilling will have little short-term effect on oil-and-gas prices.

Still, Klain said, growing pressure from Republicans on gas prices puts the White House in a politically tenuous position.

They face “three bad choices,” he said: “abandon principled positions on conservation and the environment, watch as working-class voters critical to the candidacy rally behind ill-advised Republican plans for gas-tax cuts and recklessly expanded oil production, or suffer the political consequences of taking no action at all.”

Rather than waiting for gas prices to decrease later this year, the White House should act aggressively to counter GOP attacks with the proposal to give consumers an additional 1 percent payroll tax cut, he said.

"The administration should take this chance to fill its tank with political capital before the gauge says “E” — for economic peril," Klain wrote.