Wednesday, May 14, 2008

Americans Badly Misunderstand Current Economic Situation

Today the Washington Post ran an article in their business section titled "Burdened by the Weight of Inflation: Standards of Living are Challenged". To be sure, it's some scary stuff - seven in 10 Americand are worried about being able to maintain their standard of living, a concern which has "spread to wealthier households and [gasp] Republicans." Six in 10 Republicans and six in 10 people who live in households pulling in more than $100k annually expressed a similar fear, up from three in 10 in December, 2007. Here's the real kicker:

In the poll, big oil companies take the brunt of the blame for high motor fuel prices. Three in 10 people said that the oil companies or greed are the main cause of the rising costs, two in 10 pointed to market forces (including supply and demand), one in 10 blamed President Bush and 9 percent pointed at the Organization of the Petroleum Exporting Countries and other foreign oil producers.

The problem is that this just isn't right; the *main* factor in the spike in oil prices is the surging demand in India and China and the fact the governments of those countries, especially the government of China, are more than willing to encourage that demand by subsizidizing oil prices to keep up economic growth. This not to say that the Iraq war, the mafeasance of the Bush administration, greed of the oil companies, etc, don't play into it, but that shouldn't detract from the main culprit, as it were, the huge and still-increasing demand in China and India.
Sidebar: I'm not lambasting China and India; they have as much right to economic development as we do, and having the government subsidize oil costs seems like it just makes sense for their national economies. In fact, despite all the harranging that the Middle Kingdom received for its neglect of the environment, there have been a flurry of articles in the last week that have suggested that China is paying more attention to environmental concerns in its industrial development than many nations in the West did.

Finally, there's the bit about the gas tax. When asked if they would "support or oppose suspending the federal gasoline tax of 18 cents per gallon this summer," 46% supported and 47% opposed. The ever quirky WaPo followed up with this:

Critics of the idea say that suspending the gasoline tax might not reduce prices much, and would cut billions of dollars from the fund the federal government uses for highway improvements.

60% then said they would oppose, with only 33% still supporting. And, we think the critics are right. The federal gas tax - despite being relatively regressive - is necessary, both to raise much-needed revenue and to discourage undesirable behavior (driving when not necessary), indeed, as the poll notes, "About two-thirds of those who say gas prices are a burxdden have cut back on driving." And that's a good a thing. See also, Paul Krugman, Gas Tax Follies.

2 comments:

puja said...

"In fact, despite all the harranging that the Middle Kingdom received for its neglect of the environment, there have been a flurry of articles in the last week that have suggested that China is paying more attention to environmental concerns in its industrial development than many nations in the West did."

what a standard!

Rule 12 (f) said...

could do worse.