I like to call them the cowardly lions and the scarecrows. Why? Because both are afraid. They are afraid to do anything. Whatever you do don’t stick your neck out! So what happened today? Two votes in the senate on two separate proposals, first a spending bill which originated in the house as the constitution states. The other an amendment to that bill formulated by Reid and his cronies to gut the cuts in HR1 and trim the cuts to 4.7 billion. The Democrat Cuts amount to about 1 percent across the board. Talk about cowardly lions. What is really scary is the cuts proposed by the Scarecrows are only in discretionary spending. Yesterday Dick Durbin opines that we can’t cut discretionary spending. We just can’t. Well Dick what can we cut?
Folks can anyone see this train coming through the tunnel? The middle east, a large supplier of the world’s oil is blowing up. The price of Gas is going up at a very fast pace. Rising over 50 cents in a few weeks. What is really bad is how it is being sold. Under the past administration the rise in gas prices of 2008 was a catastrophic phenomenon that caused the economic downturn and swept in this administration. So here we are three years later and what does the media tell you? Here is a headline from the New York Times with the story dated yesterday.
U.S. Economy Is Better Prepared for Rising Gas Costs
HUH? Let me get this right. If a Republican is President rising gas prices are bad. If a democrat is in the White House it is just a minor bump in the road. Interesting
Oddly Time magazine heralds the perils of a rise in gas prices but only after they cried no foul previously. Here is the mia culpa from Time.
So when oil prices began to rise recently, a number of economists didn’t see a problem. Most people see oil as an inflation concern, and it is afterall what we associate with the 1970s: high gas prices and high inflation. But with prices for most everything else (minus oil and raw materials) barely rising, inflation didn’t seem to be a concern. In fact, the Federal Reserve is actually concerned that we don’t have enough inflation, not too much. Then there’s the fact that we are driving hybrids and other more fuel efficient cars these days. Even our SUVs get better gas mileage than many of the cars we drove back in the 1970s and 1980s. So I wrote last week a post that said oil was not likely to stall the recovery. Some economists said they would be worried if oil got to around $130 a barrel, but at $105 for US oil, we are still in the clear.
Turns out, if you look beyond inflation, there is a compelling case to be made that higher gas prices, even by as much as a quarter, could drag down the economy. Despite all of the reasons I gave above, the economy, it appears, is no less dependent on oil today than it was 40 years ago. At least that was the conclusion of a study done mid-last year by Valerie Ramey, professor of economics at the University of California, San Diego and Federal Reserve economist Daniel Vine. The two economists found the same drag on the economy from the rise in gas prices in the 1970s as the rise in gas prices in the mid to late 2000s, when oil hit a high of $150 a barrel in 2008. How can that be? Well, while we do drive more efficient cars, we drive them further than we used to. The rise of exurbs and the two-income household has dramatically increased commutes, and the number of miles we all drive. The result is that we haven’t got that much of an economic benefit from more fuel-efficient cars. And while manufacturing employs significantly fewer people in the US than it used to, it is still a large part of our economic output, some 30%. So the rising price of oil is felt there too. Then you have to factor in the fact that all those goods have to make it here from China. Some of that journey is by boat, but trucks are involved as well.