Sunday, April 27, 2008

Economics 101

Traditionally, Republicans have been expected to know more than Democrats about the basics of economics, so it is disconcerting to see the Republican President prove, again, that he does not. Referring to the upcoming issuance of tax rebate checks, the President said, ""The money is going to help Americans offset the high prices we're seeing at the gas pump, the grocery store, and also give our economy a boost to help us pull out of this economic slowdown."

While it can be argued (though I am not convinced) that the tax rebate checks will stimulate the economy by giving consumers money to spend, no one who understands a supply and demand curve can claim that they can really "help Americans offset the high prices." Consumers spending more creates more demand, which in turn puts more upward pressure on prices. Activity that potentially raises already high prices even higher can hardly be said to be helpful.

While Democrats have frequently tried to make political hay by accsusing the President of sounding less than intelligent, in this instance the economic illiteracy is bipartisan. Speaker of the House Nancy Pelosi claimed that consumers "need this rebate to cope with the rising cost of gas and groceries."

3 Comments:

Blogger Lanette said...

I don't think it is from a lack of understanding simple economics. Perhaps it is more about understanding American short-sightedness and our reliance on quick-fix solutions, which then becomes a matter of understanding basic psychology.

1:05 PM  
Blogger MCO said...

Lanette, you have a point, but one might still wish that our political leaders could manage to be demagogic and coherent at the same time.

4:46 PM  
Blogger Lanette said...

Until we hold them to a higher standard, they are going to continue to cater to our base desires.

4:51 PM  

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