Wednesday, March 9, 2011

Gas Prices, Congress, and the Reid Windmill: a Fable about Federal Spending

The U.S. Energy Information Administration reported on Monday that the average cost of a gallon of gasoline in the United States is $3.52, up 13.7 cents in the past week. In response to rising gas prices, Congressional Republicans today filed legislation to force the Obama Administration to issue new permits for oil drilling in the Gulf of Mexico. A party spokesman estimated that, if enacted, the Republican plan would lower gas prices by 6 cents to $3.46 a gallon. House Speaker John Boehner said, “The American People spoke in November. They sent us here to do something. It’s time to roll up our sleeves and go to work.” The Speaker, who perennially enjoys tepid support from the Tea Party, then began crying, rendering the remainder of his statement unintelligible.

In a response on the Senate Floor, Majority Leader Harry Reid said, “If passed, the GOP plan would lower gas prices on the backs of the unemployed, who would be forced to give up generous jobless benefits in order to return to work on oil platforms. The effects on daytime television ratings would be devastating. Also, do you know how dirty it is on an oil platform? Yuck. Furthermore, this Tea Party plan provides no help to children, polar bears, and other people who don’t buy gas.” Senator Reid went on to say something about egrets, but it was really boring and I didn’t take notes.

Democrats offered an alternative plan involving the construction of a portable windmill that could be placed in front of Senator Reid whenever he made a speech. They estimated that this powerful green energy source could lower gasoline prices from $3.52 per gallon to $3.51 and 4/10 cents per gallon.

The Reid Windmill is of course made up, as is the whole story, but it helps put the current debate over Federal spending in perspective. The minor impacts of the fictional Democratic and GOP plans on gas prices are equivalent to the real-life impacts of the proposed Democratic and GOP plans for reducing Federal spending. The proposals that have caused so much heated rhetoric in recent weeks consist of $61 billion in cuts offered by the Republican Party and $6.5 billion offered by the Democrats. Based on the OMB estimate of $3,819 billion in total Federal spending in 2011, the Republican plan works out to a negligible 1.6% reduction in spending; the Democrat plan a truly pathetic 0.17%. These are the same percent reductions that would be achieved in gasoline prices if the cost per gallon fell 6 cents and 0.6 cents respectively.

One thing in the story that is true: Speaker Boehner really did say, “It’s time to roll up our sleeves and go to work.” When are you going to start, Mr. Speaker?

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