That headline should be the policy mantra of sensible politicians. Unfortunately, President Obama believes he has to do something to get prices down lest he pay a terrible price at the polls. Equally unfortunate, Republicans are using high gas prices as a stick with which to beat the president.
It is certainly true that high gas prices get voters’ attention. Gasoline is a repetitive purchase; its price is displayed on the multiple signs that commuters pass going to and from work. And when drivers fill ‘er up, they watch the spinning dials at the pump with mounting horror.
No good telling them we are less dependent than in the past on oil. No good telling them that since about half our consumption of oil comes from domestic sources, the impact of high oil prices is less than it might seem. No use showing studies that suggest the recovery will survive this increase. And no good telling them that the rise in oil prices is less a result of a supply problem than of a general rise in commodity prices, stoked in part by the Fed’s decision to keep printing money.
So here’s what you can tell them.
First, high gasoline prices will help wean us off oil coming from countries that use the money we send them to finance terror attacks and the preaching of the doctrines of radical Islam. They will help us to import less, and increase the incentives to conservation and domestic investment in exploration and development. No, they won’t make us energy independent -- that is a ridiculous and anyhow unattainable goal. But they will enable us to curb consumption, and to rely more for what we do use on countries that have no desire to see our political and social system consigned to the dustbin of history.
Second, the Strategic Petroleum Reserve is not the answer. Sure, it might bring a temporary drop in prices, but we live in the long-run, not the short-run, no matter what John Maynard Keynes said about us all being dead in the long run. But the SPR should be reserved for times when supplies are cut off, such as in an embargo.
Third, the pinch caused by high gas prices can be offset by another cut in payroll taxes. Instead of attempting to roll back gasoline prices, reduce payroll taxes again and either get those checks mailed promptly or the fatten the pay envelopes immediately. That would offset any threat high prices pose to the recovery, while at the same time preserving the benefits of high gasoline price.
That should be a policy on which reasonable men can agree. Oh yes, one more wrinkle. Remove some of the impediments the administration has put in place to prevent fuller development of domestic oil and gas resources. The President seemed sufficiently defensive at his last news conference to want to be the guy who says, “In response to high gas prices we are cutting your payroll taxes and opening up vast new areas to exploration and development.” If he won’t, and I suspect he won’t, there is a real opening for a serious Republican to say just that. Whether the public will lend him their ears, I can’t say. That’s a political calculation that economists had best leave to others.