Thursday, August 21, 2008

The Audacity of Fraud

We must take issue with this ad.  As you saw, Barrack Obama claims that (1) John McCain's 26 years in Washington means that he cannot solve the Nation's energy issues,  and (2) insofar as Mr. McCain voted in favor of the Bush's administrations policies, the Illinois Senator posits that his Republican rival is somehow derelict.

None of those claims make any sense.  

First off, we fail to see how Mr. McCain's tenure in Washington in and of itself precludes his ability to improve America's energy quagmire.  What's more, are we to believe that Mr. Obama, in only 3 years of senatorial experience, has acquired the answer to something that has alluded policy-makers for years?  Not likely.  When your a neophyte taking on the dean, its in your interest to undercut experience.  In the real world, however, experience matters.  

Next, the Democrat implicitly attacks Mr. McCain's support for drilling on the outer continental shelf (OCS) by stating that it will take seven years to bring those resources online.  That is simply false: industry leaders reckon that some wells could begin flowing in as little as 24 months.  Moreover, oil is traded on the futures market; thus, any prospective increase in production affects the overall difference between supply and demand.  Simply put, when market's know that there will be greater future supply relative to demand, prices fall.  

So, what does the community organizer propose?  (1) Raise mileage standards for automobiles, (2) "fast-track" technologies for alternative fuels, (3) a $1000 tax cut to the middle class, and (4) to "break the grip of foreign oil".  

None of these solutions--and we decline to consider No. 4 a solution, for it is baseless rhetoric--will create meaningful change.  

Insofar as milage standards make sense, America's automakers and consumers are already one-step ahead.  As sales of gas-guzzling SUVs tank, Detroit is scrapping offers like the Hummer and investing in the design and production of more fuel efficient cars.  In fact, just yesterday General Motors announced a $350 million investment for production of the Chevrolet Cruze, its next-generation ulta-fuel efficient replacement for the Cobalt.  So, if the market is beating Mr. Obama to the punch, what benefit derives from forcing the troubled American auto industry to institute changes already being made?  Not much.  

Next, Mr. Obama says he wants to "fast-track" investments in alternative energies.  Any incentive Washington can offer this nascent industry is certainly warranted, so we shall not take much issue here.   However, two points should be kept in mind: First, that Mr. McCain also supports similar investment incentives, and; second, that Washington often makes clumsy choices when it comes to such investments.  Consider the ethanol craze: but for massive subsidies, the industry would be insolvent and food inflation (ethanol uses lots of corn) would be curbed.  

Finally, Mr. Obama promises a $1000 middle class tax cut.  Bravo!  Lower taxes are always encouraged, regardless of who benefits.  The unstated problem here is that Mr. Obama also wants a "windfall" profits tax on energy companies.  Investments in energy are capital intensive and long-term.  An ever greater portion of the world's oil supply is found--either because of political or geographical reasons--in inhospitable locales.  Bashing the quarterly profits of ExonMobil might make for good campaign fodder, but it will not help such firms compete for crude in an exceptionally competitive environment.  And it will do even less to alleviate the pain Americans will feel once every $1000 of expropriated "Big Oil" dollars is spent without a single extra drop of crude having been found.

Mr. Obama has taken issue with John McCain's 26 years in Washington.  At least the Arizona Senator has been around town long enough to recall the disastrous results that followed when Jimmy Carter passed his own "windfall" profits tax.  Mr. Obama is fond of saying that John McCain is running for a third Bush term.  Well, with policies like these it is quite possible that Mr. Obama is running for the second Carter term.

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