More On Economics And The Price Of Gas

Economist Arnold Kling has thoughts on the basic economic soundness of Congress responding to a restricted supply of gasoline by giving people a rebate that enables them to do what?--Buy More Gasoline!! What a great idea. Next time the country's running low on tomatoes, maybe Congress can print coupons so there's a national tomato-buying frenzy. Kling offers a mini Economics 101. He discusses whom he believes the 18.4 cent per gallon temporary tax cut would actually end up benefiting. (Hint: Iran could afford to enrich more of that Uranium that isn't for nuking Isreal.) He goes on from there to talk about what artificially deflating the price of gas will do to American decision-making.

Suppose that you do not believe my analysis, and you think that a cut in the gasoline tax actually would be passed through to consumers. In that case, would it be a good thing? Do we want to send consumers a message that gasoline prices really are not that high? Do we want them to make their automobile purchases and driving decisions based on the assumption that Congress can and will always find a way to hold down the price of gas? Or do we want consumers to understand that there is a chance that gas prices will stay where they are and rise further in the future?

Congress wants to treat American consumers like children, who should not have to deal with reality when it comes to the supply and demand for gasoline. It might be better to treat consumers as adults, and let us make grown-up decisions. These grown-up decisions probably will serve the country's interest more than the infantile energy policies now under consideration.

Kling calls his TCS Daily article "Energy Policy for Idiots", but you don't have to be an idiot to read it.

Update: Nick Schulz has a few things to say about why, with the price of gas rising, people are planning on using more of it this summer, rather than less.

Update II: Pete Geddes has this to add:

Democrats favor higher gasoline taxes and higher gasoline prices -- except when gasoline prices are high. While claiming concern about rising levels of CO2, they demand gasoline price caps to "protect consumers." Don't they understand that high gas prices provide the best incentive to transition to more environmentally friendly fuels? Democrats who object to higher gas prices simply aren't serious about dealing with climate change.

Republicans favor letting oil markets "work" -- except when gasoline prices are high. Don't they understand the cure for higher prices is -- higher prices?

There's more if you're interested.