May 4, 2008
Hillary Clinton: "I’m not going to put in my lot with economists."
"Elite opinion is always on the side of doing things that really disadvantages the vast majority of Americans." Idiocy.
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"Political candidates cite economists but they “never say anybody’s name, or where the study came from,” Mr. Moorman said. “So as far as me, it doesn’t have no relevance.”
Very true. And if you want three opinions on a subject, ask two economists.
A lot of economists, like many constitutional "scholars", are advocates and activists, pretending to be objective experts.
Economics is about why perverse side effects rule everything.
In the case of the gas tax, the price will not change a penny and the tax will go to the oil companies.
Not because the oil companies want it, but because the current price is what matches demand with supply.
If the price falls, demand increases, and it then exceeds the supply, which can't happen. You can't burn oil that doesn't exist. Therefore the price stays put.
If the price stays put, the additional amount goes to the seller.
Hillary vs. the wonks. Now I've seen everything.
Voters have been purchased for less than Clinton's Gas Tax freeze! Of course, Johnny Mac's also in favor of that! So perhaps it's a "good deal" especially since Obama, the real demagogue and our "Messiah," doesn't like it!
Why listen to economists when you can pander for votes?
I think a better idea would be to send each registered car owner $30. That will be their tax savings, and the cost of gas won't drop so supply and demand forcings won't change.
Wait a minute. I thought "economists" always tell us not to tax corporations because "They just pass the tax on to the consumer"
Now, they're telling us, don't cut taxes because the corporations will keep the money and *not* pass the lower prices on to the consumer.
So which is it?
rcocean said...
"A lot of economists, like many constitutional scholars, are advocates and activists, pretending to be objective experts."
I think there's a lot of truth in that, and often, criticism that a politician is ignoring "the experts" amounts to criticism that the politician is ignoring the experts who advance the critic's preferred view. Nevertheless, it does seem problematic to dismiss the view of the experts without some kind of articulable reason why one thinks they're wrong, because it suggests the kind of anti-intellectualism that plagues the modern GOP, the idea that because most experts have opinions, expertise should be looked on with suspicion.
The question that elicited this response?
"Can you name a single economist who thinks your plan is a good idea?"
You're not going to listen to economists on the economy? Yeah, just think with your "gut". That has worked sooo well over the past 8 years.
Someone needs to tell her "It's economics, stupid."
The problem is we need to know *what* experts are advancing the position and *why*.
But we never get that. We usually only get a blanket statement from a talking head that the "experts" think so and so.
Suppose Russert asked McCain,
"Senator, constitutional scholars have looked into the matter and think the death penalty is unconstitutional. How can you support it?"
How would you suggest McCain answer it without appearing "anti-intellectual"?
"How would you suggest McCain answer it without appearing 'anti-intellectual'?"
By explaining why he thinks they're wrong. Neither law nor economics are "hard" sciences - law's a little more likely to have ascertainably right or wrong answers than economics, but reasonable people can disagree. You give your reasons, cite your authority, and people will agree or disagree. At absolute minimum, if he doesn't want to discuss why he thinks the answer is Y, McCain could simply point to caselaw and say, look, the academy may say X but the courts say Y, and I think the court's right.
I don't disagree with you that we should be cautious about what the "experts" think, because often the "experts" are as divided as everyone else, and their conclusions as dependent on debatable premises as anyone else's. But it isn't as though there aren't any conservative economists or libertarian economists, and no economist has yet risen to defend Hillary's plan, and none of those who defend it have formulated an economic argument as to why the critics are wrong. If Hillary's got a good argument for why the economists are wrong about the economic effects of the policy, let's here it. It's only anti-intellectual if there isn't such an argument - if there is one, even if it's frivolous, it at least rises to the dignity of being wrong.
It is unfortunate that Clinton does not realize how that quote could apply to herself.
Hillary is just a simple middle-class American gal. She likes baking cookies on a real wood stove (she can stand the heat), bowling, and boilermakers. She went to her local public schools including Maine South HS, Wellesley, and Yale Law. She dislikes the elite who went to elite private schools with funny, unamerican names like Djakarta Madrassa, Punahou, Columbia, and Harvard Law, play foreign games like basketball (a Canadian invention, unlike Crown Royal), eschew meat, and sip chardonnay. Like many Americans, she put in her time working for Wal-Mart. After a successful artificial insemination, she and Bill raised a precious daughter, Chelsea, named after a part of London, who has a job making coffee and getting doughnuts for her bosses on Wall Street.
Tell me how is this different from McCain admitting he knows little of economics?
Because it's far more demagoguic.
Separating yourself from elitist eggheads is a continuing theme from our "populism" discussion thread (which was rather good, don't you think?).
It's a winner, this year, if the hand is played right. And Obama doesn't do play it well at all.
Cheers,
Victoria
I'm glad to know I can ignore "elite opinion" now. OK, I've been ignoring them already. Opinions are like assholes, everybody's got one but the elite just have (are) bigger ones.
"Wait a minute. I thought "economists" always tell us not to tax corporations because "They just pass the tax on to the consumer"
Now, they're telling us, don't cut taxes because the corporations will keep the money and *not* pass the lower prices on to the consumer.
So which is it?"
Both. You're mistaking externalities for pricing.
Suppose there is X demand for a product at $3/unit and that produces $.15 profit. If you tax it at $.18 (i.e. a 6% tax), then the producer *can't* afford to sell at a net loss, so he increases the price per unit until it reaches a new equilibrium price that *includes* the new tax. That is, the producer passes it on. He may not make as much profit, because the new equilibrium price (where an additional price increase will lead to a lower total, not net, profit) may only produce a profit of $.07, say. They'll still do it.
OTOH, if you drop the tax (lets say the original $3/unit already included a tax of $.20) the price is *already at* the profit equilibrium. That is, consumers are willing to buy at the $3 price that maximizes the total profit, the produce has *zero* reason to reduce the price just because the tax goes away. It's just additional profit at the same equilibrium.
Of course, you *could* try to fix *that* (lots of luck) by swapping the tax relief to the consumer by taxing the producer an equivalent amount, but that would shift the equilibrium again.
I know that many people (including rocean, evidently) believe that you can use these sorts of behaviors to force the results you want, but reality has a nasty way of rearing its ugly head. Have you ever heard of The Law of Unintended Consequences? (How is that ethanol subsidy for corn working for you, rocean? Enjoying those food price increases, are you? Or are you heartless Lefty bastard who doesn't care if poor people starve so long as biofuels get sold?)
I love that other Democrat economic genius Obama, who wants to raise taxes on high earners - not because it will produce more income for the government, he concedes it may produce less - but because of fairness. Because a robust economy that produces a lot more economic benefit for the high earners and a smaller benefit for the low earners is bad.
Generally you have two choices: more equality or faster advancement. The more Socialist Europe is growing slower than the more Capitalist America. I'll take it.
“Elite opinion is always on the side of doing things that really disadvantages the vast majority of Americans.”
Mark Moorman, another audience member and a firefighter, said he shared Mrs. Clinton’s mistrust of experts. Political candidates cite economists but they “never say anybody’s name, or where the study came from,” Mr. Moorman said. “So as far as me, it doesn’t have no relevance.”
It's the grammar that really helps her bond with the regular guy.
M.Simon, don't be so quick to over-simplify. America is out-of-step with Europe in two major ways in tax policy. Yes, European countries tend to tax individuals more (which is apparently socialist), but America has considerably higher corporate tax rates. It's not simply a game of higher or lower taxes, it matters what kind of tax we're talking about here.
http://www.taxfoundation.org/publications/show/22917.html
I’m calling shenanigans on this dumping on economists. Three opinions for every two and prone to bias.
I’d say it’s one of the very few social sciences with close to equal liberals and conservatives and dems and repubs… AND you can often still get a strong consensus on basic economic questions (re: you can get 80 something percent to agree on basic questions about the effects of policies)…
A lot of the best human behavioral research tends to come out of econ departments (vs. the other social sciences)… IMO probably because this balance prevents rigid ideological groupthink / PC notions taking hold…
It's the grammar that really helps her bond with the regular guy.
Christ on bike! For a second you had me thinking she was the one who had used a double negative.
Now that would be funny. Her transformation to Bubbalary would be complete.
Remember Dale Bumpers, the Arkansas pol who (though not a rube himself) used to make himself from approachable to his blue-collar electorate by undoing his zipper, and sticking out a bit of his shirt?
JFK himself said it was a neat trick.
Cheers,
Victoria
Correction! Something bugged me about that name, so I remembered it wasn't Dale Bumpers, but "Alfalfa" Bill Murray, the Governor of Oklahoma in the 30s.
A man of the people, but a bitter enemy to FDR and his New Deal.
Wouldn't you love to have politicians nicknamed Alfalfa again?
Try that Mr. Harvard-Columbia Obama.
Cheers,
Victoria
"That is, consumers are willing to buy at the $3 price that maximizes the total profit, the produce has *zero* reason to reduce the price just because the tax goes away."
There are no competitors in the oil biz? Competitors are the usual reason for price decreases of commodities.
There are no competitors in the oil biz? Competitors are the usual reason for price decreases of commodities.
Competition when suppliers constitute an oligopoly is not so hot. Three-quarters of my local gas stations have closed over the past twenty years. Oil companies pay the same OPEC-fixed price for a barrel of oil, and have roughly the same refining and transportation costs. As a result, the spread here between brand-name and no-name gas is about a dime a gallon, or 2.5%
Taking the tax off of gas might help, but my guess is that we'd never know one way or the other. The upward spike of gas prices would eat up those 18 cents so fast that it wouldn't matter, and then all the haters of Big Oil would say "see?", and would somehow feel vindicated. Oblivious to the fact that oil companies DO NOT set prices.
rcocean said:
"Very true. And if you want three opinions on a subject, ask two economists.
A lot of economists, like many constitutional "scholars", are advocates and activists, pretending to be objective experts"
The problem with this criticism, at least in this case, is that you will find it near impossible to find any economists who actually think this will have anything more than an extremely marginal benefit for the consumers. The more generous estimates I have heard place the savings at about a tank of gas . . . over the entire tax-freeze period.
The oil companies obviously see that people will still be buying gas at the high price, despite the economic hardship some will face. Why would they lower the price if people are willing to pay more?
Regardless of the many criticisms of Obama, on this one he is dead on. It is simply a way to pander to the voters, so Hillary (and McCain) can act like they are helping out "the people" and get some more votes, when the actual consequence of the freeze will be increased profits for the big companies that Hillary acts like she despises.
It's not so bad when all the experts disagree with you, but when fools applaud, then you've got a problem.
So which is it?
Temporary tax cuts work when supply exceeds demand. Permanent tax reductions work in any situation in which supply is capable of rising, over the long term, to meet demand.
Neither situation applies to Hillary's gasoline tax cut. Demand for gasoline currently exceeds supply; all the oil companies are producing it as fast as they can already. Furthermore, the normal way in which tax cuts lower costs -- by stimulating businesses to increase production capacity in order to take advantage of the opportunity to undersell their rivals -- doesn't apply here, because Hillary's gas tax cut is only temporary. Bring new production facilities online is a huge expense for oil companies. Even if they COULD bring them online in time for summer (which they can't), a tax break that only lasts a few months isn't an incentive to do so, because the couple of months of profits would swiftly be washed away by the costs of the now-excess production capacity.
Instapundit quoted something very funny from the WSJ, basically showing how schizophrenic the politicians are on this issue. They want:
More gas, but less gas consumption; lower prices, but more tax revenue; less exploration in America, but less dependence on foreign oil . . .
Our political class is insane. Certifiable. Lashing out at economists for refusing to rubber stamp your pandering is a symptom of that insanity.
I agree with slore. I don't think that economics is quite so soft a science as many are making it out to be.
Our political class is insane. Certifiable.
Well, the problem there is that those things are pretty much what the public wants, too. They want cheap gas, and for the cute little caribou in ANWR to live safe, Bambi-like lives; they want the government to pay for everything, but without having to actually pay taxes.
Obviously the political class seems nuts. They're trying to pander to people who don't know their ass from a hole in the ground.
Sie ist ein Lügner, Lügner
und sie hosen ist auf feuer.
What does naming the economist have to do with anything? She's running on a populist platform and insulting our intelligences, and I'm duly insulted. Sure, there'll be a few out there who'll bite but I do believe most people understand petrol taxes go to infrastructure maintenance. Drop the taxes, and you get bolloxed roads. Unless you're Liberal, you know, more facile in your thinking, being less rigid allows you to take from this to pay for that to make up over here and plug holes over there with funds from elswhere and switch these debits with those credits and blow smoke up your bum over here with exhaust generated over there and ... you get the idea, it all comes out in the wash. We don't need no stink'n experts. Especially one's that aren't named!
She believes what she can see, does she? So do I, and I see an agressive ambitious fraud. I. can. not. stand. to. watch. that. woman. There's something seriously wrong with that clan from Arkansas, edgykated at Yale.
I'm off to watch a Bugs Bunny cartoon. The one where he's in the Ozarks calling a square dance and two hillbillies are destroying each other. I'll pretend they're Democrats.
Did I mention I got straight A's in Economics? Majored in it, but that was nuth'n I aced everything, no brag just natural fact, everybody else was dumber than me. It bored the living piss out of me. Drew pictures the whole time. Oops. That reminds me. Apologies for nicking your tree picture. My bad.
There is no way in which what I think comes down to a mandated cutting of the price of gas--via taxes or otherwise--is good policy (in economic or/and other terms), given current circumstances and context. I don't think it ought even be an open question as to whether this would be good policy even if it were to (in transient terms) **work**. Which I don't think it would, but even if it did in the shortest term, I don't think it would be for the ultimate good over even the medium--much less long--term, for a whole host of reasons, and the "big-e" economic one not necessarily being at the top of the list.
rcocean --
Gasoline demand is highly inelastic in the short term; a $0.19 increase in the tax would translate to almost nineteen cents-a-gallon increase in price. But over the long run, demand is more elastic than over the short run, and the price would have to drop to maintain a market-clearing price.
Gasoline supply is similarly relatively inelastic in the short term; it takes time for OPEC to pump more oil, for it to be refined, etc. So a sudden decrease in the gas tax leaves us with no more supply; any cut in price drives up demand, the increase in demand drives the price back up, and the equilibrium is restored.
(Wait, didn't I just say the short-run demand was relatively inelastic? Why did the demand go up when the price went down, then? Well, because demand is more elastic in the face of falling prices than rising; you have to get to work, you don't have to take a drive in the country. If the price goes up, you can't stop commuting to work; if the price goes down, you can do more recreational driving.)
Now, from now until the end of summer is pretty much the short-term for purposes of both of those curves. So a tax increase that went away at the end of the summer would almost entirely be passed on to consumers, while a tax decrease that went away at the end of the summer would almost entirely be pocketed by the suppliers. (The answers would be different over, say, five years; consumers would eat less of the tax increase and recover more of the tax cut. But this is a summer-only tax cut we're talking about.)
If by some magic the tax cut did get fully transferred to consumers, it would amount to maybe a cent a mile driven. Drive five thousand miles while the tax is lowered, and you manage to save fifty bucks. And as I pointed out above, consumers will almost certainly only see a small part of that.
putz
It's inelastic both ways.
You could raise the gas tax and the price wouldn't change either, and the oil companies would pay it.
Longer term it has bad effects in keeping the price high by cutting off development of additional supplies.
You could look at it as confiscating low-cost oil from the oil companies.
Say what you will, it's excellent positioning for HRC, and makes a good deal of sense as such.
Economists have been on shakier and shakier ground in recent years. They have the misfortune to aspire to be scientists that practice their art on the evening news, in a domain that regular people hold near and dear. Their predictive powers are notoriously poor, because they're always constructing models to accurately model the past. And they only deliver bad news these days!
HRC's ideas about what she deems 'economics' are a joke.
She is concerned that Americans are paying $50 more for gasoline each month than they were last year or two years ago, and wants to relieve that pain by confiscating the profits of oil companies; profits that rightly belong to the shareholders.
But she has utterly no concern for the financial pain that will result from the average taxpayer having to pay $5,000 more in annual federal income tax payments as a result of her long-promised implementation of higher federal income taxes.
HRC is a redistributionist who truly believes in high taxes and government control of every aspect of a 'free' market. Show me one credentialed, respected, non-political economist who holds this belief.
This is the economics of Saul Alinsky, not Milton Friedman.
If we can believe those ne'er-do-well economists, the burden of gas taxes is split more or less equally between buyers and sellers. (I should point out that the chain of inference from "buyers and sellers split the tab" to "we should raise the gas tax" is perhaps just slightly longer than Matt Yglesias makes it out to be.)
A good CEO listens to [often conflicting] opinions of "experts" and formulates strategy. A bad CEO already knows all the answers and doesn't understand strategy, operating instead in the moment a la Clinton (p) - who was driven by the political poll du jour. It looks as though Clinton (v) is cut from the same cheap mold.
The entire THIS WEEK WITH GEORGE STEPHANOPOULIS --essentially a televised townhall meeting with Hillary, Stephanoupolis as moderator---was an amazing hour. Hillary tried to use reluctant George, who worked for the first Clinton WhiteHouse, to corroborate Hillary's behind the scenes anti-Nafta stance. Hillary kept standing up, forcing George to stand as well. Hillary kept talking over George. She clearly dominated the hour. Stephanopoulis seemed cowed by her---smaller and fearful of her bite. Stephanopoulis on that show was no Tim Russert.
I call pandering! This is on par with offering "Christ" as one's "favorite political philosopher".
If this means HRC won't be listening to Paul Krugman, this is a good thing!
Hillary kept talking over George. She clearly dominated the hour. Stephanopoulis seemed cowed by her---smaller and fearful of her bite.
Well duh. George was one of their houseboys when they lived at the White House. Shaking off that servile role is hard for any one. I bet Big Daddy took him to the woodshed a time or two, and George's backside still quivers whenever he remembers it.
Wait a minute. I thought "economists" always tell us not to tax corporations because "They just pass the tax on to the consumer"
I believe that the taxes they are talking about temporarily suspending are those at the pump. State and Federal taxes. They are not taxes on the oil companies but are instead sales tax and excise taxes on the finished product. In my state, California, the total at the pump taxes are .18 cents for the state, .18.4for the feds and a 7.75% sales tax per gallon. Works out to about .50 per gallon now. And they are talking about raising the state tax by another .10 cents and indexing it to inflation. (as if they don't already tax us to death)
This state excise tax is "supposed" to go to improving and maintaining highways and roads but which has been diverted into the black hole of the "general fund".
Gasoline is not fungible (yet) and is relatively (not perfectly) inelastic as a commodity. Lowering the price might increase demand but raising the price will not lower demand much either. Truckers and others who rely on a set amount of fuel to do their jobs are going to experience a temporary drop in operating costs, but they will not pass those on to the rest of the economy as they know it is just a passing whim of the government and they will be hammered again.
In short.... it will help no one in the long run and is a blatant pandering for votes and is insulting to our intelligence. Once again the feel good short sighted fix by our vaunted leaders (sarcasm) that fixes nothing and in fact probably just makes everything worse.
My prediction is that the actual demand for gasoline will not go down until it reaches 6.00 a gallon and then people will change their usages.
Dust Bunny raises some good points about demand and price--we are going to continue to see higher demand, primarily from India and Chinese consumers. That a whole bunch of people who are entering the market for gasoline.
The price of oil will, I suspect, reach the point where American oil shale will become economically feasible to exploit. The Brazilian and North Dakota finds will eventually come on line as well. But one of the "long poles in the tent" is going to continue to be American refining capacity--we simply need more to increase the supply of gasoline to respond to American demand alone.
We want what we cannot have: cheap energy with no downsides.
So we regulated the downsides to the point that energy is fast becoming very very expensive.
A brief tax break?
If it's so smart for the economy, why not make it permanent?
Otherwise, it's another bullshit proposal by populist bullshitters.
A simple description of what sets the gasoline price:
The guy at the local tank farm notices that the inventory is going down. People are trucking it out faster than he can get it in.
So he raises the price to slow the outflow.
When the outflow equals the inflow, he stops raising the price.
Happy result : no lines, no shortage.
Side effect #1 : the demand for gasoline is ``inelastic.'' This means not that the demand doesn't fall if you raise the price (you just raised it and it did fall), but that you have to raise the price a whole lot to do it. This is accompanied, as a result, by screaming and kicking. This is what inelastic means.
Side effect #2 : oil companies get windfall profits. They don't want windfall profits because it's a public relations nightmare, but the fact is that all the cheap oil owned from old times is suddently returning huge profits. New oil though is not exceptionally profitable, and it's that oil that the price affects the production of.
Observation: windfall profits are not a problem except to oil companies : you can buy votes with it, see kicking and screaming above. That's how it's a problem to oil companies. They do take the money, however, and plow it back into newly feasible oil production, which is what you want. Leave it alone.
Dust Bunny Queen said...
"I believe that the taxes they are talking about temporarily suspending are those at the pump. State and Federal taxes."
The federal government has jurisdiction to enjoin states from imposing sales tax on a particular commodity?
The federal government has jurisdiction to enjoin states from imposing sales tax on a particular commodity?
It seems to me that the logic of Gonzales v. Raich would give them that power.
Yes, that is idiocy. Thanks for mentioning it, Ann. Sounds downright Bushian.
All this "elitist" talk is also idiocy. As if the multimillionaires John McCain and Hillary Clinton are not elites.
I'd like to flag an issue raised by Steve Chapman of the Chicago Tribune:
John McCain's embrace of the violence-espousing, nonrepentant 1970s radical G. Gordon Libby. McCain is far closer to Liddy than Obama is to Ayers and Liddy continues to espouse violence in domestic affairs.
A "cruelly neutral" blogger may want to opine on this.
I believe that the taxes they are talking about temporarily suspending are those at the pump. State and Federal taxes."
The federal government has jurisdiction to enjoin states from imposing sales tax on a particular commodity?
I was pointing out that the taxes being discussed are those that are after production assessed by our State and Federal government. They are not taxes on the big bad oil companies themselves. They are at the pump excise and sales taxes.
I believe that Hillary is proposing to temporarily suspend the Federal tax and still not lose the revenue by back charging that amount TO the manufacturer. If that were to be the case then, as most economists rightly point out, the manufacturer will merely raise the cost of his product by that amount. The net result is zero savings to the consumer in the hopes of making it look like the government is actually doing something when all they are doing is making the price of gasoline higher and when the "tax holiday" is over the price will go up even more.
Additionally, trying to punish oil companies for making a profit has much larger ramifications on the economy. These companies are widely held in mutual funds and when they make less profit because they have become the whipping boys for our failed energy policies, they will not be able to pass those profits on to the shareholders. Their stock prices will fall taking mutual funds and indexes right along with them. The result will be smaller balances in people's 401Ks and other personal holdings.
Punishing a company that is making a profit (just like raising taxes on business owners) leads the company or business owner to reduce their tax burden by several mechanisms....one of which is to reduce output. Less gasoline, less oil being pumped and less jobs.
We really need to get some politicians who have a glimmer of intelligence and the ability to think of more than one thing at a time.
"Windfall Profits" taxes is populist demagogery raised to the nth degree. How much did these firms pay in corporate taxes (you only hear about one side of the ledger)? How do these profit margins compare to other industry sectors. Of course when what I expect is a majority of the American people believe that the oil companies control the price of gasoline, its easy to appeal to mass stupidity.
Other demagogery: "dependence on mid east oil..." only about 20 percent comes from the mid east;
Most Americans I suspect couldnt identify our major suppliers.
This is where Bill O'Reilly showed his stupidity during his interview of Hillary.
"O'REILLY: You know, your husband and I make a lot of money. Did you know that?
CLINTON: I've heard that.
O'REILLY: Yes, we make a lot of money. And you, if you're president, are going to take more of my money and your husband's money away. Away. OK, now I'm paying 33 percent fed tax now. You're going to raise that to what?
CLINTON: I'm going up to what we had in the 1990s...
O'REILLY: 39.5, all right.
CLINTON: ...36, 39. People...
O'REILLY: All right. So I'm getting a 6.5 percent bump, and so is Bill Clinton.
CLINTON: Well, it's only for the people making more than $250,000."
He missed several issues.
Simple fairness for one.
But the main question he should have asked: What, if any, is the upper limit on total taxation on an individual or corporation in the US? And why do you think so?
Currently, combined Federal, state and local taxes eat up an average of 32.7% of our income, from a low of 29.1% to a high of 38.3% in Connecticut.
In 1996, that average was 32%.[source 1]
So any change she makes will punish savers and earners. Again. The benefit will be only to government dependents, and will serve to shrink the pool of those actually generating new wealth.
Ireland, which is experiencing an economic boom, not coincidentally cut its taxes so that the Total Tax Rate is just 23% [**.
She should justify paying more than 25% total by anyone.
"Low of 29.1% in Lousiana".
I'm guessing all the so-called climate experts pushing Kyoto and such aren't to be listened to either.
Hahahahahahahahahaha. Sorry.
DBQ said: We really need to get some politicians who have a glimmer of intelligence and the ability to think of more than one thing at a time.
I think you're giving them the benefit of the doubt when you attribute it to stupidity, DBQ. I think it's dishonesty.
The WSJ editorial Daryl mentioned is a good read:
Windfall Profits for Dummies
I don't believe they can possibly miss the incoherence of their positions. They can't be that stupid. They are, however, banking on the voters to be that stupid.
I'm guessing all the so-called climate experts pushing Kyoto and such aren't to be listened to either.
Pretty much.
Simon--
Economics is hard science, just often with bad politics overlaid on it. The USSR reaped the rewards of pretending otherwise.
I transition to disgust when people use nouns like "advantage" as verbs.
rhhardin --
What lousy excuse for an economics course did you take? The whole meaning of "inelastic demand" is that the quantity demanded doesn't vary much with price, so that increases in the price to the supplier (such as a higher tax the supplier has to pay to the government on each gallon) get passed on almost wholly to the consumer in the short term.
Are Wall Street Journal writers dishonest or just stupid?
We tried this windfall profits scheme in 1980. It backfired. The Congressional Research Service found in a 1990 analysis that the tax reduced domestic oil production by 3% to 6% and increased oil imports from OPEC by 8% to 16%.
The experience of the 1980 tax has little relevance to a true windfall profits tax:
The 1980 tax was an excise tax, not a profits tax.
The 1980 tax was levied even though the price of crude was decreasing and the oil refiners profits did likewise.
The 1980 tax continued until 1988 even though oil companies had not received a "windfall" for years. Continuing the tax after all justification for it had gone caused more foreign oil to be imported.
America's dependence on foreign oil could be lessened by switching from Cadillac Escalades to Toyota Rav 4s. Today's fullsize trucklets get worse mileage than my 70 Olds with the 350 cu.in. Rocket V-8. My neighbor garaged his Chevy Suburban in favor of an Acura Legend, but not everyone can buy a new car while letting a $40K piece of machinery sit idle. Both vehicles do the same job of hauling his two kids around.
"dependence on foreign oil could be lessened by switching from Cadillac Escalades to Toyota Rav 4s."
One approach would be to force people to use a Volkswagen, i.e. the people's wagon, brought to you by that other liberal fascist.
Are Wall Street Journal writers dishonest or just stupid?
Well, they were smart enough to recognize that none of the objections you raise are relevant.
America's dependence on foreign oil could be lessened by switching from Cadillac Escalades to Toyota Rav 4s.
No, it couldn't. When demand for oil decreases, producers pump less oil -- but they do that by cutting back on production at their less-profitable wells. The ones in America, for example.
Right now, about 60% of our oil comes from overseas -- for every 100 barrels of oil we use, 60 of it is pumped in foreign lands. A person ignorant of the specifics of the oil industry might, therefore, assume that we could eliminate our use of foreign oil by cutting consumption by 60%. In reality, however, if we cut our oil use by 60%, the first thing to go would be most of that 40% -- the domestic oil production. So instead of using 100 barrels of oil (60 foreign, 40 domestic) we'd use something like 40 barrels (38 foreign, 2 domestic). Our reliance on foreign oil would actually increase dramatically.
The only way to significantly reduce our dependence on foreign oil would be to both substantially cut our domestic demand AND slap punitive tariffs on imported oil. That would violate all sorts of trade agreements and lead to retributive tariffs on US exports.
Stephen
rhhardin --
What lousy excuse for an economics course did you take? The whole meaning of "inelastic demand" is that the quantity demanded doesn't vary much with price, so that increases in the price to the supplier (such as a higher tax the supplier has to pay to the government on each gallon) get passed on almost wholly to the consumer in the short term.
The tax is added on at the pump. The oil company doesn't see it.
In the case of removing this tax, the quantity demanded has to be the same, so the price to the consumer has to be kept the same, no matter how inelastic the demand is. So the price the oil company receives increases by the amount of the tax.
If you're saying that you can burn a tiny bit more oil than in fact exists, you're probably a Democrat.
That the demand is inelastic comes in when you want to account for the huge price increase required to get people to cut back in the first place. It's not oil company greed but the need to cut demand that causes it.
A person ignorant of the specifics of the oil industry might, therefore, assume that we could eliminate our use of foreign oil by cutting consumption by 60%. In reality, however, if we cut our oil use by 60%, the first thing to go would be most of that 40% -- the domestic oil production.
Then you're saying the way to eliminate the use of foreign oil is to vastly increase consumption?
Since 1985, we have tripled our consumption of foreign oil while domestic production has decreased by thirty percent. Perhaps coincidentally, Chrysler introduced the minivan in 1984.
Of the top 15 exporters of oil to the US, six are from the Western Hemisphere, five are from Africa, while only three are from the Middle East. (Russia is the remaining one.) Invading Iraq benefited us little compared to its cost -- Most Middle Eastern oil goes to Europe and Japan.
So we've had the Hillary vs. the Economists when we've done with the gas tax. How convenient? How about inhibiting free trade and raising prices and lowering exports from such policies. Seems more likely of significance than a 3 month gas tax holiday. OK, to discuss. The effect of the gas price should be considered as an integral of price vs. time. The shock to change behavior is basically already delivered or in the books and this holiday is equivalent to the 'awesome' Keynesian 1040 tax rebate.
Are Wall Street Journal writers dishonest or just stupid?
Well, they were smart enough to recognize that none of the objections you raise are relevant.
No, they thought that Obama was dumb enough to copy something Jimmy Carter implemented that didn't work.
It's not oil company greed but the need to cut demand that causes it.
More accurately, it IS oil company greed that causes it, and the need to cut demand is what makes it a good thing that oil company greed is causing it. If it wasn't for "oil company greed", we'd arrive at the gas station and there wouldn't actually be any gas there to buy.
Then you're saying the way to eliminate the use of foreign oil is to vastly increase consumption?
I explained in my post the one and only way to eliminate the use of foreign oil, and that wasn't it. Go back and read my post, and pay attention this time. Quick summary: reduction in oil usage *combined* with punitive (and, under our trade agreements, illegal) tariffs.
Since 1985, we have tripled our consumption of foreign oil while domestic production has decreased by thirty percent. Perhaps coincidentally, Chrysler introduced the minivan in 1984.
Yes, that was a coincidence.
The reason we started using more foreign oil is that more of it was available at a lower cost than domestic oil. There were a number of reasons for this, with the big ones being (a) domestic oil fields started to play out and become more expensive, (b) domestic oil exploration was crippled by the "environmentalist" boom of the last 50 years and (c) many new oil foreign sources became available for exploitation.
Invading Iraq benefited us little compared to its cost -- Most Middle Eastern oil goes to Europe and Japan.
That's a fascinating claim, but what the heck does it have to do with this discussion?
No, they thought that Obama was dumb enough to copy something Jimmy Carter implemented that didn't work.
Well there's plenty of reason to think Obama is a complete idiot on matters of economic policy. His NAFTA position alone proves that beyond a shadow of a doubt.
Economics are being confused with politics here.
What the candidates are really saying is this: "It's been one long and expensive mother of a campaign. We're damn near out of dough, and it's getting really, really hard to see how we're gonna scrape up more dough for the general election. So here's a message to you big oil people. Start sending the DNC some big bucks, now, or we're gonna screw with your profits. Send a shitpile of contributions, and comp us the use of a corporate aircraft every now and then, and we'll turn our attention to other matters. Consider yourselves warned!"
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