Tuesday, April 17, 2012

Politics Makes Idiots of Us All

I'm sure this isn't the last of these kinds of stories we'll see this year - it is an election year, after all:

Stung by gas prices, Obama seeks new oil market crackdown

There is lunacy on both sides of the aisle here. On Obama's part, this is both bad politics and bad economics. It is lousy economics, because the underlying reality is that oil is traded on futures markets on the global stage, and fuel (gas, diesel, etc.) is traded similarly both globally and within the US. You can't eliminate everything that looks like "speculation" from a futures market, because futures markets are essentially gambles - people bet on which direction the price will go. Some win and make money, some lose and lose money. Prices are affected by the sum total of those bets, but only where one actor controls a substantial amount of the supply (creating a monopoly, or a cartel) does it really matter - and there are already laws against that sort of thing.

This may or may not be the most efficient means of distributing these particular resources in the marketplace, but no President or Congress can make "speculation" go away with a wave of the hand. And the chances are good that any real attempt to do so would have all sorts of unintended consequences that will cause lots of pain for other folks, who will then get angry at the President anyway.

As bad as the economics here is, the politics aren't much better. There is a near-zero chance that these proposals will actually get passed by both the House and the Senate - a fact that is patently obvious to anyone paying attention. This looks, therefore, like a typical politician "do something" response - pretend to do something and blame your opponents for blocking it. It's political Kabuki theater. I'm tempted to say that insults the intelligence of the American voter, but that's an empirical question for another day.

Finally, the timing here is terrible. Obama is worried about the election in November. By the time we get to fall and people really start paying attention, nobody will remember this particular charade. Gas prices will do what they will do this summer regardless of this or that form of posturing, and how people feel about that in October is unlikely to be much moved by a poorly-researched press conference in April.

Of course, Obama would be less likely to engage in this kind of foolish pandering if the Republicans weren't already demonstrating their awful grasp of economics. The argument that "gas prices are the fault of Obama's energy policies" makes as much sense as claiming that the Easter Bunny will determine this year's World Series winner. But just as there is a base on one side that will lap up the "evil speculators" argument, there is a base on the other that will eagerly buy the "everything is Obama's fault" nonsense. It's sad to see a political party that prides itself on a free-market ideology throw its understanding of the free market under the bus for its own political gain. But then, that's American politics for you.

It being April, none of this will likely matter anyway. By September and October - the point where people really begin paying attention - things will be what they will be. Obama's ability to influence the trajectory of the economy for the better between now and then is vanishingly small. Luckily, the GOP's ability to trash the economy in the same time frame (and if you don't think some of them would just to gain electoral advantage, go read some Karl Rove) is equally small. In the meantime, it will be a long, hot summer of nonsense.

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