As promised, I gave Obama a three-day pass in recognition of his contribution to the ending of Osama bin Laden. But now it’s time to take the gloves back off and call him out on his silly radio address about gas prices…
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There are many things about which reasonable people can disagree. The fundamentals of economics are not among them. The laws of supply and demand are well established, both theoretically and empirically:
- if you raise the demand for a product such as health care, either by requiring people to buy insurance or by subsidizing those who could not otherwise afford it, then, other things being equal, the price will go up.
- if you implement a price floor on a product such as labor, and the price floor is above the market price, then, other things being equal, there will be less demand for the product. In the case of minimum wage laws, this will hurt the very people you seek to help by making them unemployed.
- if you raise the cost of providing a product such as gasoline by eliminating tax breaks or subsidies for the producer, then, other things being equal, the price will go up. As I’ve discussed previously, there are some sound free market arguments for repealing special privileges for oil companies. However, I have no illusions that doing so will lower the price of gasoline.