Patterico's Pontifications

11/13/2012

Another Reason to Be Down on Chris Christie: He Doesn’t Understand Basic Economics As Well As . . . Ron Paul (Alternate Post Title: Hooray for Price Gouging!)

Filed under: General — Patterico @ 11:02 pm

It was recently reported that New Jersey is going after those damned price gouging gas station owners:

New Jersey authorities filed civil suits Friday accusing seven gas stations and one hotel of price gouging in the wake of Hurricane Sandy.

“New Jersey has a tough price gouging law to ensure that profiteers will not take unfair advantage of people at their most vulnerable — those who have been displaced from their homes, have limited resources, and are seeking fuel, shelter and the basic necessities of life,” said Governor Chris Christie. “Businesses operating in New Jersey will obey our laws — or face significant penalties.”

Thanks, Gov. Christie! What could possibly go wrong?!

Oh — coincidentally, there were significant gas shortages in New Jersey during Sandy.

Any guesses as to why? (Yes, there are a variety of factors, but one of them is economic in nature.)

I sat down to write a tribute to price gouging, which is simply a pejorative name for the raising of prices when depressed supply meets increased demand. But then I found that one had already been written.

By Ron Paul. It’s called In Praise of Price Gouging.

As the northeastern United States continues to recover from Hurricane Sandy, we hear the usual outcry against individuals and companies who dare to charge market prices for goods such as gasoline. The normal market response of rising prices in the wake of a natural disaster and resulting supply disruptions is redefined as “price gouging.” The government claims that price gouging is the charging of ruinous or exploitative prices for goods in short supply in the wake of a disaster and is a heinous crime. But does this reflect economic reality, or merely political posturing to capitalize on raw emotions?

In the wake of Hurricane Sandy, the supply of gasoline was greatly disrupted. Many gas stations were unable to pump gas due to a lack of electricity, thus greatly reducing the supply. At the same time demand for gasoline spiked due to the widespread use of generators. Because gas stations were forbidden from raising their prices to meet the increased demand, miles-long lines developed and stations were forced to start limiting the amount of gasoline that individuals could purchase. New Jersey gas stations began to look like Soviet grocery stores.

Had gas stations been allowed to raise their prices to reflect the increased demand for gasoline, only those most in need of gasoline would have purchased gas, while everyone would have economized on their existing supply. But because prices remained lower than they should have been, no one sought to conserve gas. Low prices signaled that gas was in abundant supply, while reality was exactly the opposite, and only those fortunate enough to be at the front of gas lines were able to purchase gas before it sold out. Not surprisingly, a thriving black market developed, with gas offered for up to $20 per gallon.

With price controls in effect, supply shortages were exacerbated. If prices had been allowed to increase to market levels, the profit opportunity would have brought in new supplies from outside the region. As supplies increased, prices gradually would have decreased as supply and demand returned to equilibrium. But with price controls in effect, what company would want to deal with the hassle of shipping gas to a disaster-stricken area with downed power lines and flooded highways when the same profit could be made elsewhere? So instead of gas shipments flooding into the disaster zones, what little gas supply is left is rapidly sold and consumed.

Exactly 100% right.

This is simple, basic economics. It’s supply and demand. It’s about allocating scarce resources, and providing incentives to meet increased demand.

Bashing the price gougers feels good, I guess. But it’s the wrong thing to do in a crisis. And anyone with any basic economic sense knows it.

I am less impressed with Chris Christie all the time.

James Rainey: Exit Polls Show 60% of Voters Want Taxes Raised?

Filed under: General — Patterico @ 7:48 pm

James Rainey at the L.A. Times on the upcoming budget battle:

An impasse has been created by Obama’s insistence on including tax increases for the wealthy in his alternative, while Republicans in the House, in particular, have demanded achieving the budget goals only through cutting programs. Exit polls after last week’s election showed that 60% of voters favored tax increases for those who earn the most.

More than 60% of Americans believe that a failure to compromise would hurt the U.S. economy and about that number feel their personal finances would take a hit. If the two sides can’t compromise, 90% of Americans will see their taxes go up — with the biggest jumps for top income earners.

Economists said that broad loss of disposable income, combined with cuts to defense and other programs, could throw the economy back into recession.

Wait, what? James Rainey is arguing that we need to keep the Bush tax cuts? James Rainey is recognizing that the Bush tax cuts were broad-based and extended to 90% of Americans? Sure, we can tell the truth now . . . if we’re planning to blame Republicans for their going away — and especially if we’re planning to blame a future recession on Republicans.

But hit the rewind button for one second. What was that about exit polls saying “60% of voters favored tax increases for those who earn the most”? I went searching for a story about exit polls and here’s what I found, from the Wall Street Journal:

One exit poll question on Tuesday asked “Should taxes be raised to help cut the budget deficit?” The answer was no by nearly 2 to 1. A second question asked if tax rates should “increase for all” (13%); “increase only on income over $250,000″ (47%); or “not increase for anyone” (35%). Three quarters of the latter 35% voted for Mitt Romney, which means they are represented more or less by Mr. Boehner, whose House majority also won re-election. On taxes as with so much else, the country is still divided.

Now. I suppose that if you add 47% (the “tax the rich!” crowd)* and 13% (the “tax everybody!” crowd), you can find 60% support for taxing the rich, since the rich are a subset of everyone.

HOWEVER. If the very same poll says that Americans oppose raising taxes to cut the deficit — and oppose it by a 2-1 margin — then an honest pundit might want to tell the folks that.**

So either Mr. Rainey is looking at a different exit poll with scary different results, or he’s not telling you the truth about this exit poll.

Guess which I think is happening here? (There is a typographical hint in the preceding paragraph.)

By the way, since you asked . . . what should we do?

THE PATTERICO PROPOSAL: I think the Republicans should propose $10 trillion in tax hikes over the next ten years, and demand only $5 trillion in spending cuts.

Under my proposal, the tax hike for the first 5 years will be $1 billion per year for a total of $5 billion over 5 years; beginning in the sixth year, tax hikes will be several hundred billion dollars per year, increasing to over a trillion per year by 2020. Unless, of course, Congress changes its mind in the interim, which, hey, you can’t tie future lawmakers’ hands.

Meanwhile, the spending cuts will start with $2 trillion next year, taper off to $1 trillion the following year, and go down from there. This may (read: will) necessitate a massive entitlement overhaul, but sssshhh!

If by now you have recognized this proposal as a parody of the “let’s cut $1.5 trillion over ten years starting with $21 billion next year!” model of “spending cuts,” then you earn a pat on the head and are allowed to graduate to the next blog post.

______________________________________

*Weird how it’s 47%, huh?

**Yes, these numbers don’t add up. If 66% of the people oppose taxes in question #1, and 60% of the people support taxes in question #2, this means a sizable percentage of people both believe we should not raise taxes and that we should raise taxes. This suggests an infirmity in the polling question, or that a sizable percentage of the voters are morons, or both.

L.A. Times Editors Have News Pages Push Theory That the Voters Have Rejected the Tea Party

Filed under: Dog Trainer — Patterico @ 7:41 am

Why did Republicans lose? Republicans can debate that all they like, but the L.A. Times news editors have decided the only theory worth mentioning is that it’s the fault of the Tea Party:

As a subdued John A. Boehner started to lay the groundwork for compromise with President Obama to avert a year-end tax and spending crisis, the House speaker also began a delicate dance around the deep divisions in the Republican Party.

As Congress returns Tuesday, the Ohio Republican must contend with the tea party wing, which helped the GOP retain the House majority as many conservatives won reelection, but which also contributed to its losses in the Senate.

Republican leaders are reevaluating their relationship with the tea party, a political marriage that has fueled gridlock and, some believe, played a role in the GOP’s dismal outcome at the polls.

Some others believe that Romney was not a strong enough candidate and didn’t articulate a Tea Party message strongly enough. But that message does not appear in the story. “Some” might be right and “some others” might be wrong. But it is not for news editors to decide — any more than it is their place to conclude that voters want a deal that is the opposite of what the Tea Party wants:

“The president and his team have made clear they believe his reelection is a mandate for his tax plan,” Boehner told rank-and-file Republicans on a conference call after the election. “Well, ladies and gentlemen, that is not the case.”

On the call, Boehner characterized his House majority as “the line of defense” against the Obama administration, according to a GOP source who was not authorized to discuss internal party matters publicly.

“For the next two years, that will continue to be our role,” Boehner said.

This is the complicated courtship the chain-smoking speaker must undertake in the next 50 days as he attempts to satisfy his right wing while meeting Obama across the aisle for the deal that voters — and the stock market — have signaled they want.

Why couldn’t we say that the voters signaled that they wanted to hold the line by re-electing a Republican majority in the House?

Again, people can debate these issues, but having them decided as a matter of Conventional Wisdom and articulated on news pages (as opposed to opinion pages) is wrong. We have to fight against that mentality and point it out when we see it.

New Military Sex Scandal!!!!1! So Let’s Forget About the Important Questions

Filed under: General — Patterico @ 7:27 am

Ay yai yai:

The sex scandal that led to CIA Director David Petraeus’ downfall widened Tuesday with word the top U.S. commander in Afghanistan is under investigation for thousands of alleged “inappropriate communications” with another woman involved in the case.

Even as the FBI prepared a timeline for Congress about the investigation that brought to light Petraeus’ extramarital affair with his biographer, Paula Broadwell, Defense Secretary Leon Panetta revealed that the Pentagon had begun an internal investigation into emails from Gen. John Allen to a Florida woman involved in the case.

Allen succeeded Petraeus as the top American commander in Afghanistan in July 2011, and his nomination to become the next commander of U.S. European Command and the commander of NATO forces in Europe has now been put on hold, as the scandal seemed certain to ensnare another acclaimed military figure.

I fear we are losing sight of the main issues: what can Petraeus tell us about Benghazi? He traveled there personally after the attack and filed a report. Even Dianne Feinstein seems interested. And what did Obama know about his affair? Seems like the FBI has known this stuff for quite a while. Obama didn’t??

Plus, new questions are emerging all the time: how did Broadwell seem to know the attack related to a secret prison? What did Obama know about that? Was he conducted enhanced interrogation at secret prisons?

Hey, everything will be OK once we have John Kerry at Defense and Susan Rice at State.

P.S. Everyone knows that people with access to our most classified information can’t be involved in these affairs. It makes them subject to blackmail and puts our national security at risk.

Unless, of course, they are a Democrat president, in which case they can also obstruct justice and commit perjury, and come out of it a loved national figure who can help another Democrat win re-election.


Powered by WordPress.

Page loaded in: 0.2246 secs.