Economic Illiteracy on Parade

The three gubernatorial candidates addressed a crowd Monday of some 400 people in a forum sponsored by the Virginia chapter of the American Association of Retired People. One of the topics that came up was the spike in gas prices. And all three candidates pandered to the crowd with nostrums that put their economic illiteracy on display.

Russ Potts demonstrated that he doesn't have the faintest idea of how the capitalist system works. According to the Richmond Times-Dispatch account of the forum, Potts "criticized 'obscene' oil-company profits and called on President Bush to 'stop the tax cuts to the richest Americans right now.'" He also said he would raise $2.5 billion a year in taxes to pay for more mass transit and rail, to ease the burden on motorists.

Russ, I'll explain this real slow for you... Profits are good. Yes, even oil company profits are good. Profits send a signal to oil companies to drill more oil and refine more oil in the hope of making more profit. I'm not speaking too fast, am I? Profits also give them the means to do so. The most sure-fire way of keeping gasoline prices high is to punish oil companies for making a profit.

Also... listen real careful now... when you raise taxes for transportation projects, you're taking money away from people -- just like the oil companies do! But there's a difference. When oil companies earn profits, they do things, like drill more oil and refine more gasoline, that reduces the price pressure on gasoline. When you build more roads, which encourages people to drive more instead of, say, sharing rides or taking the bus, you increase the demand for gasoline and increase the pressure on prices. Got it?

Kilgore noted that as attorney general, he helped push an anti-price gouging statute through the General Assembly. Tyler Whitley's account doesn't describe exactly what powers that statute has to restrain gasoline prices. Hopefully, it's a toothless measure that the politicians wheel out when they want to act concerned, but really has no impact.

Let me explain it to you real slow, Jerry. High gasoline prices act as a rationing mechanism. If you force gasoline prices to stay low, you'll create a shortage. Then people will start topping off their gas tanks, making the shortage even worse. If you allow prices to stay high, people don't top off their tanks -- it's too expensive. Instead, they start conserving by finding ways to drive less. "How about the poor?" you say. When you cap prices and create shortages, people conserve by running out of gasoline. If you're poor and you need gasoline to drive to work, which would you prefer: To pay an extra $1 per gallon -- or run out of gas and not be able to drive to work at all?

Tim Kaine said he urged companies to restrain themselves after Hurricane Katrina and shun higher profits so consumers could afford to buy gas. In other words, Kaine's position is Potts and Kaine Lite. Jawbone the oil companies, but don't actually do anything. In other words, make a lot of noise so people think you're concerned, but let the market do its thing.

Come to think of it, that may be the best solution. Let's give it up for Tim Kaine!