Thursday, April 24, 2008

Unintended consequences, again

In "Bailout of the Year" Opinion Journal explains how Congress forced banks out of the student loan business so now Washington wants to bail out the banks: "To summarize: Congress mandated a return on student loans that is too low to attract private capital in the current market. So Congress will now use your money to create artificial investor demand. Taxpayers will bear more risk so that Congress can fashion a new business model to replace the one it just destroyed. The Bush Administration, unwisely but typically, has endorsed this approach."

Oh we all hate the inequities of capitalism, until we try to fix them. Here's Sir John Cowperthwaite, first Financial Secretary of Hong Kong: "In the long run, the aggregate of decisions of individual businessmen, exercising individual judgment in a free economy, even if often mistaken, is less likely to do harm than the centralised decisions of a government, and certainly the harm is likely to be counteracted faster."

Yet, over and over, people are taken in by the siren call that government can make everything right. For example, here's a review of Hillary Clinton on Keith Olbermann's show when asked about high gas prices:

What can the president really do to bring down gas prices? Clinton seemed slow to respond. (Maybe she was as surprised by the question as I was?) But she followed up with a long, nuanced answer. She started by offering a few short-term fixes: investigating possible market manipulation, tapping the strategic petroleum reserve, and taxing the oil companies and using it to finance a consumer tax holiday (something I hadn't heard before). She then acknowledged the limits of this strategy and said the real answer was encouraging energy independence over the long term.
There's absolutely nothing there that has a hope of bringing down oil prices. Taxing the oil companies? Oh, I'm sure they won't pass on the cost to drivers, no more than the cigarette companies pass on the cost to smokers. And while the Saudis rake in the cash on $100+ barrels of oil, we don't dare upset the Alaskan caribou and forge a path to energy independence. The percentage of oil imported into the United States is now much, much higher than the level in 1973 when OPEC shocked the American economy into submission.

Please, no more help from the government.

Extra - The government tries to "help" with ethanol, too.

1 comment:

Anonymous said...

Hillary's response indicates that she doesn't know why gas prices are high: low value of dollar and oil speculation.

Had Hillary understood the underlying causes she could have responded with working to strengthen the dollar and make other investments more attractive to the oil speculators. Its the economy, stupid.

- Timothy