What Obama Doesn’t Seem To Understand About Economics By Betsy Newmark

While Obama had fun calling Republicans ignorant, he is demonstrating, as IInvestors Business Daily writes, that he doesn’t understand the effect of taxes on businesses.

In an admission that increased supply means lower prices, Barack Obama, in yet another flip-flop, has proposed releasing 70 million barrels of oil, about a week’s worth of imports, from the Strategic Petroleum Reserve.

Last month he told reporters in St. Louis just the opposite: “I have said, and in fact supported, a congressional resolution that said we should suspend putting more oil into the strategic oil reserve,” he said then. “The strategic oil reserve, I think, has to be reserved for a genuine emergency,” he continued, saying a terrorist attack was an example of such an emergency.

The GOP campaign to “drill here, drill now” has resonated with the American public tired of paying $4 a gallon because of high gas taxes and congressionally restricted supply. Obama’s poll numbers have dropped significantly during this effort, something team Obama obviously considers a “genuine emergency.”

But as he supports releasing oil from the SPR to increase supply, he proposes a revival of the failed windfall profits tax that in its earlier incarnation decreased domestic supply and increased foreign imports. The man who pokes fun at John McCain’s economic knowledge ignores the simple economic truth that when you tax something you get less of it.

He would give more of a McGovern-style handout to familes to help them buy the high-priced gas. That would increase demand and reverse any other efforts to lower prices unless there is a corresponding increase in supply. Releasing oil from the Strategic Petroleum Reserve only works for a very short term. It’s about as short term an action as McCain’s weak gimmick of temporarily lifting the federal tax on gas.

And with hurricane season approaching and an ever increasing threat of an Israeli attack on Iran, we should not release the reserve oil, but save it for a real emergency. High prices are not the emergency that was envisioned when the reserve was created.

Oil exploration is a risky business. Vast sums are expended in the search for black gold, with dry holes too often the result. America was built by such risk-taking, motivated in part by the hope of great reward. Without such incentives, few chances are taken.

All this talk about allowing offshore drilling as part of some grand compromise on energy is a con game. Democrats know there will be no incentive to drill for oil if the profits from any success will be confiscated by a government that takes none of the risk. Then they’ll criticize the oil companies for sitting on oil

Once upon a time, young America was advised to go west. Today, we should be telling our risk-takers to drill deep.

Drilling alone is note the solution, but it should be an integral part of a comprehensive plan. McCain is proposing more than drilling; he also supports research on alternative energy. The reason he focuses now on drilling is because of the contrast with Obama and the Democrats. Obama ridicules the focus on drilling because it will only come to the market several years from now. But how long before we get all those new alternative forms of energy up to speed to power our nation’s energy needs?

Even Jay Leno understands how weak their arguments are against drilling for more oil because it will take 10 years to bring to market.

This content was used with the permission of Betsy’s Page.

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