I don't know why, but I always seem to be surprised by the pandering of politicians. I guess that makes me somewhat naive.
The latest bit of idiocy from two of the three candidates for the highest office in the land was a suggestion that federal gasoline taxes -- 18.4 cents a gallon -- be suspended from Memorial Day to Labor Day. To his credit, Barack Obama dismissed this as counter-productive gimmick. I don't have a horse in this race, but I am heartened to see at least one candidate is not clueless.
A quick lesson in Supply & Demand 101 for the Maverick McSame and Yoko: Strong demand and limited supply of a product lead to price increases. If you artificially lower the price of something -- i.e., waive taxes for a period of time -- all you will have accomplished was stimulating more demand. The higher demand and increased consumption eventually lead to even higher prices.
Hence, the expression the cure for high prices is high prices.
Put this plan into effect and long before summer's end, gasoline prices would have risen to the pre-tax holiday levels. Then, we slap that tax back on, and the electorate is pissed at you. Then, neither of you gets elected. Not only bad economics, but bad politics.
We have no energy policy, and none on the horizon. Candidates serious about the issue of high energy prices should be discussing increased CAFE standards, capital gains tax waivers for alternative energy investments, greater offshore drilling, Pigou taxes, rapid nuclear plant approvals, a huge increase in the basic R&D the government does on energy -- a Manhattan project for energy and transportation science.
Courtesy The Big Picture
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