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Democrats Manufacture "Economic Crimes"

May 2, 2006

In a recent article on the current gasoline "crisis," I laid blame on the Republicans in Congress for inflammatory statements coupled with terrible legislation that has laid the framework for what is occurring at the gasoline pumps. Bad economic legislation coupled with the beating of yet more war drums — directed this time at Iran — means that we are expending increasing amounts of money just to fill our gasoline tanks.

In my criticism, I believe the Republicans are receiving what they deserve, especially since many Republicans like to tout themselves as adherents to free market principles. However, there also is another political party in Washington, one that is not short of "ideas" for energy policy prescriptions. Since I have raked Republicans over the coals — justifiably so — it is only fair to turn toward the Democrats.

Perhaps the most important voice of the Democratic Party is the editorial page of the New York Times. Read the editorials of the Times and you will have a good sense of the thinking by the movers and shakers of the Democratic Party. Thus, I take a look at some policy ideas that were recently made by the Times editorialists.

An April 26, 2006, editorial begins:

During his State of the Union speech last January, President Bush correctly diagnosed America's oil consumption as an addiction. Unfortunately, Mr. Bush is balking at taking the steps to cure the abuse.

To say that consumption of oil products is an "addiction" is like saying that the breathing of air is "addictive." Petroleum is a commodity that has many uses, and without it we would be much poorer and life expectancy would be considerably shorter. Furthermore, the tone of the statement implies that it is somehow immoral for someone to use gasoline or any petroleum-derived fuel to power vehicles, to heat their homes, or to wear (as in nylon products). It would be nice to classify the Times's position as nonsense, but that is too nice. Instead, I think that evil or immoral better fits. Here is the "newspaper of record" telling people that their use of fuel oil is morally the same as smoking crack cocaine or mainlining heroin.

It does not take the editorial long to make its own point:

The obvious solution, to increase fuel efficiency standards for ordinary cars, was not mentioned. The current standard, 27.5 miles per gallon, on average, has not been raised in more than two decades.

Now, the Times has repeated this suggestion for so long that one wonders if the editors use it as a mantra for meditation. Indeed, raising fleet mileage standards has been a constant part of Democratic Party statements since the original "energy crises" of the 1970s. Yet, this policy suggestion, which on the surface seems to make sense, is another example of Bastiat's "Broken Window Fallacy."

Automobile companies are regularly excoriated for producing "gas guzzlers" and other such socially-unacceptable (at least among elitists) products such as sport utility vehicles. Yet, there is a reason that automobile firms — and US companies in particular — have been producing these vehicles despised by leftists like Arianna Huffington, who once paid for commercials that said people who drove SUVs are supporting terrorists.

Given their present state, US companies simply cannot make enough money selling small automobiles to survive. Thus, if the government were to order new mileage standards, such policies would force automakers to spend billions of dollars in new research and new production lines, with near-zero or even negative financial returns. While people may declare the automakers to be obstructionists, in reality new changes in fleet mileage requirements would place firms like GM in even worse positions than they are at the present time. (Right now, GM's bonds are enjoying junk ratings.)

Thus, we would see real malinvestment of resources in order to "save" fuel. At the present time, consumers, should they so choose, can purchase automobiles that are extremely fuel-efficient, so there is no need for the government to mandate what could be bankruptcy for auto companies just to make some editor from the New York Times happy.

Next, we hear the usual nonsense on environmental matters:

He also offered some veiled environmental rollbacks as a way to increase supply and lower prices. He proposed to loosen the rules on "boutique fuels": formulations that are required in some areas but not in others. That would make the market more flexible. But if specially formulated blends were eliminated without imposing a higher overall environmental standard for gasoline, the result would be more pollution. Similarly, Mr. Bush's suggestion to streamline the refinery approval process would also amount to an environmental end run, if, as is suspected, it simply allowed refiners to avoid meeting established standards.

As pointed out in my previous article, the environmental "benefits" from oxygenated fuels are negligible at best and harmful at worst, since consumers are paying billions of dollars for this "protection." To put it another way, the Times continues the outright dishonesty that these gasoline regulations actually help clean the air.

Of course, what would a Times energy editorial be like without yet another call for central government planning? Thus, we read:

The alternative energy technologies Mr. Bush emphasized — biofuels, hybrids, hydrogen power — are important and promising. What's missing is a plan to get us from here to there. That means oil and gas prices will continue to rise, as America leads the world in draining the planet's petroleum resources.

I am tempted not to comment on that last paragraph, since it speaks for itself. Yet, one must read between the lines here. What the editors are really saying is that taxpayers must be shaken down in order to provide vast subsidies — and that is what people on the Left really want — for development of alternative fuels that even in this age of high-price petroleum are not economical. Furthermore, when one takes into account the entire economic picture — as Bastiat said, "what is seen and what is not seen" — we see that fossil fuels are still a bargain, no matter what the Times editorialists might tell us.

Nor are other Democrats silent. We read that Democrats are calling "for a new energy bill and federal legislation to punish price gougers.

"There's no reason why we can't put forth a real energy policy that addresses the needs of this nation," said Rep. Bart Stupak, a member of the House Energy and Commerce Committee, "from gouging to market manipulation to biofuels. We can do it."

Arianna Huffington, another prominent Democrat, all but says that oil companies are gouging the public:

All this huffing and puffing about manipulated markets and record gas prices scream of a blatant attempt to inoculate Republicans from consumer rage over the massive earnings oil companies are scheduled to announce this week. Industry analysts predict that ExxonMobil will report first-quarter earnings of only $9.1 billion on Thursday — down from the record $10.7 billion posted in the fourth quarter of 2005. With profits like that, Lee Raymond's $400 retirement package is starting to look a little stingy. Except to those paying through the nose at the pump.

Other Democrats declare that the "solution" is turning corn into alcohol, and that all of this is little more than an oil company plot:

On Wednesday, Democratic Rep. Stephanie Herseth of South Dakota said the administration had underfunded development of alternative fuels like ethanol and biodiesel.

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"They have stifled those opportunities at the behest of the large oil companies," she said. "I'm pleased that the president made the speech he made yesterday, but words alone aren't enough to solve this problem."

In case the reader is wondering, they grow corn in South Dakota.

So, in the end, we have Republicans calling for criminal investigations into oil company actions, new wealth transfers from taxpayers and consumers to the ethanol lobby, anti-trust actions against oil companies, and more government control of markets. On the other side of the aisle, we hear Democrats call for criminal investigations into oil company actions, new wealth transfers from taxpayers and consumers to the ethanol lobby, anti-trust actions against oil companies, more government control of markets, and new increases in automobile fleet mileage standards. From my reckoning, we are nearing political convergence.


William Anderson, an adjunct scholar of the Mises Institute, teaches economics at Frostburg State University. Send him mail. See his Mises.org Articles Archive. Comment on the blog.


Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.

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