Hats off to whoever in the White House came up with the idea of sending people special debit cards to buy gas. But not because it’s a prudent policy. Rather the opposite.
This is one of the craziest political ideas we have ever heard. Yet it perfectly illustrates the Biden administration’s approach to public policy issues: When you have a problem, throw money at it.
Just in case anyone in the Biden administration reads this – stealthily, on a private server no doubt – let’s explain why this is such a crazy response to the problem of high gas prices. The price of gas has increased because demand has greatly exceeded supply.
How did that happen ? Let’s look at the supply side. We cut off Russian oil because of the invasion of Ukraine. We cut off Iranian oil a long time ago because the Iranian mullahs refuse to stop promoting terrorism and researching nuclear weapons. We cut off Venezuelan oil to avoid enriching its diabolical regime. And then we went ahead and restricted our own oil extraction and refining industry by promising to ‘end fossil fuels’, starving it of capital, threatening the banks with regulation on the “transition risk” and promoting ESG investing (which we have called Cancel Culture for fossil fuels), shutting down pipelines and refineries, and generally neglecting the idea of energy independence.
The rest of the global oil extraction industry has also been starved of capital for many of the same reasons. As Breitbart’s Penny Starr recently reported, OPEC is consistently below its quotas. President Joe Biden plans to visit Saudi Arabia to demand more oil, but it’s pretty clear that there’s no fast track to closing the gap between supply and demand.
It turns out that the multi-pronged campaign against oil extraction and refining has reduced the supply of oil we can extract and refine.
Demand here and around the world has been inflated by pent-up travel demand. After about two years of confinement, people want to fly and they want to drive. Commuting is back as more and more people return to the office, full-time or part-time. Moreover, here in the United States, households are sitting on a pile of excess savings left over from stimulus checks, suspended student loans and depressed spending on services.
The last thing you would want to do under these circumstances would be to pump more money into the system. It’s a recipe for higher gas prices. More so, it’s a recipe for higher prices all around. As May’s retail sales figures indicate, high and rising gasoline prices are actually subtracting demand from other sectors of the economy. Record gas is arguably a deflationary force right now, as it sucks up revenue that would otherwise be spent on other goods and services. If the government steps in to fill gas tanks, those dollars will drive out other goods and services. Inflation is therefore getting worse.
Fortunately, the Biden administration’s inflationary plan was halted by two factors. First, they couldn’t figure out how to make sure people weren’t using the Biden Bux to buy scratch-off lottery tickets, vape cartridges, beer, soda, chips, etc. Of course, even if you could limit it to only gasoline purchases, it wouldn’t make any difference. Money is fungible. So if the government rushes for gas, it just leaves consumers with funds left over for the other things they want, which is one of the reasons the program is inflationary.
The second factor is that they realized they couldn’t get hold of the microchips they would need to run the Biden Bux cards, which means that, perhaps for the first time in history, a shortage actually helps to keep prices lower.
The Washington Post story on this said there was also a third concern that such a huge national spending plan would likely need to be authorized by Congress. But that worry seems unlikely because this administration has found so many ways to achieve its goals without congressional authorization; it would seem odd that they would suddenly hesitate to flout the constitution now.
There’s a good reason the Biden administration has found itself pursuing clownish ideas like this to deal with escalating gas prices. The more sensible approach of encouraging more oil production in the United States is basically off limits to them. The base of the administration will not tolerate anything that would make oil drilling more rewarding and therefore attract more investment. Democrats on Capitol Hill are already threatening so-called windfall taxes on oil companies. There is therefore no question of increasing supply through national production.
It’s a bit of a mystery why the Democratic left hates domestic production so much more than foreign production. Why is it okay to ask OPEC to extract more oil but not to entice American drillers? It’s not about pollution, where local production can seem particularly dangerous. These are said to be emissions that contribute to global climate change, which should make the location of production irrelevant. One cannot escape the feeling that there is an almost religious impulse at work. Oil production is a sign of impurity. If that must be done, let it be left to those who are not of the faith.
It seems the republic is immune to this idea of fighting inflation by handing out cash – for now. The Washington Post pointed out that this is actually the second time this idea has been considered at the highest levels of our government. So you can’t rule out a third attempt. After all, one of the definitions of insanity is trying the same thing over and over again and expecting a different result.