McCain's, Clinton's gas tax holiday

Hillary Clinton and John McCain recently proposed the idea of a tax holiday for gas/oil in the States to "help middle and low groups". A tax holiday basically pauses the desired tax.

A reader of the link pointed:

You don’t have to look much further than Central NY to see how disastrous a suspension of a gas tax can be. Oswego County suspended its portion of the gas tax to “help” local residents. The overall impact…gas prices did not go down by the 5 cent tax as the lawmakers fully expected…The savings flowed directly to the pockets of the gas station owners and suppliers.

The legislators were perplexed and taken aback that the gas stations didn’t pass along the savings. Can you imagine that?

Not too hard to figure why.

As prices go down, it stimulates demand
demand goes up
suppliers pay less tax, supposedly they have more incentive to produce more
but supply of oil is inelastic, it doesn't change
so prices go up again.

This is almost the exact same point that I've been trying to make for the Malaysian oil subsidies. Subsidies stimulate demand, demand goes up, we consume more oil than we would otherwise have consumed if subsides were instead abolished to be used to fund tax cuts - where we can buy more food, or maybe DSLRs. It's not equal.

I'm almost convinced however that a lot of lay people will buy Clinton's idea. People simply believe that the idea of free lunch is pretty much alive when it involves the government.