Posted by
Andrews on Friday, October 10, 2008 7:02:52 PM
I have mentioned this several times in recent posts, but I think it has received too little attention and it is quite relevant. Despite claims that without a comprehensive energy solution we would be facing $10 a gallon gas, we have seen not only an end to rising oil prices, but a drop of one dollar a gallon or more in just over a month. And this drop in prices, this aversion of the terrible "crisis" the media claimed we were facing was all achieved by a simple solution, doing nothing. Well, there was one step taken, the government did not renew restrictions on offshore drilling, and that did put some downward pressure on the market, but, in reality, the solution was mostly due to something even more simple. The higher prices caused two things, people economized, using less gasoline or substituting other products for petrochemicals, and those who produce petrochemicals took steps, at least whatever steps were available, to bring more fuel to market. That is how the market worked, and despite nay sayers, it is working perfectly. Faster than any government meddling would have.
So, what would have happened had we listened to those who were demanding massive, intrusive solutions? Those who demanded a forced switch to alternative fuels? Who proposed massive subsidies of fuel? Who advocated some form of extended drilling, but coupled with a nationalized oil industry? Or who insisted an increase int he requirement of ethanol in the gasoline mixtures?
That is obvious, we would still be paying $5 a gallon. Or maybe more. Oh, with the subsidies we would be PAYING $1 at the pump, but $4 or more per gallon in taxes. In fact, any of those solutions would have saddled us with a massive tax burden, and even less fuel than we have now. At best, any of those solutions would have done nothing to interfere, letting us reach the same point we did without any government, but at the same time costing us a fortune in taxes.
And what if, worst of all, we had listened to those who demanded windfall profit taxes? Or insisted we drive speculators from business? Without profits to be made, do you think the oil companies would have worked to bring more fuel on the market? Or speculators would have diverted holding from less lucrative uses to the US consumer market? Sure, we could have felt morally superior for striking a blow against greed (as we greedily seized other people's money for ourselves, because we greedily want to pay less for fuel), and some politicians would have doubtless won reelection on senseless class envy and populism, but we would have had no more fuel. And the fuel we had may have reached that much feared $10 per gallon mark.
So, why do I bring this up? Because it applies every bit as well to our current "crisis" that the media is talking up so strongly and politicians are promising to solve.
All the current talk is about how much money we can squander trying to avoid any discomfort, but the truth is we will face discomfort at some point. Either we will face higher taxes to pay off these debts, or we will end up inflating and facing an even worse crash in the future. Eventually we will suffer the consequences, no matter what politicians and their lapdog economists might say. And so, our choice is simply to endure some suffering now, or else to postpone it and endure worse in the future.
Why do we think suffering more in the future is better? Obviously it is for politicians, who may be out of office by the time the bill comes due. And for some who believe they can keep inflating their way out of troubles, never facing the music. But the truth is we will have to face it, and except for politicians, no one benefits from putting it off.
We would best do what we did to deal with the oil crisis. Nothing. Like the oil crisis, we could remove some bad government intervention, put an end to Fannie and Freddie, perhaps, let the banks set their lending policies without Washington intervention, maybe end the worst politicization of the interest rates. But other than removing government meddling I would suggest that our best response is to do nothing.
It obviously is anathema to politicians, doing nothing. It gives them nothing to brag about, and it scares voters to see them doing nothing, but, in reality, often doing nothing is the best solution.