<b><a href = "http://www.nytimes.com/2005/08/16/business/16fuel.html?ei=5094&en=0832df7076c087e4&hp=&ex=1124251200&adxnnl=1&partner=homepage&adxnnlx=1124193893-6s5G+iN2pMTTIyEBjFXI/Q">Fuel Economy Plan Seen Omitting Rule for Big S.U.V.'s</a></b>

By DANNY HAKIM
Published: August 16, 2005

<img src = "http://graphics8.nytimes.com/images/2005/08/15/business/fuel.gif"></img>

DETROIT, Aug. 15 - The Bush administration is expected to abandon a proposal to extend fuel economy regulations to include Hummer H2's and other huge sport utility vehicles, auto industry and other officials say.

The proposal was among a number of potential strategies outlined by the administration in 2003 to overhaul mileage requirements for light trucks - sport utility vehicles, pickup trucks and minivans. It had been seen by industry officials as likely to be adopted.

But the impact of the tougher requirements would have been borne almost solely by the increasingly troubled domestic auto industry, a concern for the administration.

Its broad plan to overhaul the light-truck mileage rules would change the regulatory system from one using averaged mileage for an automaker's entire annual light-truck output to one that sets up five or six classes, determined by a vehicle's size.

The rules, the first major rewriting of fuel economy standards since they were created in the 1970's, will be released late this month. They are sure to renew vigorous debate about the nation's dependence on foreign oil, a matter underlined by rapidly rising oil and gas prices.

The administration plan is still being reviewed by the Office of Management and Budget, which has had a role in drafting the plan. Further revisions could be made, including on the question of extending the regulatory system to cover larger vehicles. Until the details are published, its potential effect on the nation's oil consumption will not be fully clear. And the volatility of oil prices could push consumers toward buying more efficient vehicles, a trend that may outstrip regulations in determining fuel consumption in years ahead.

"We have no comment on it until we're ready to release it," said Rae Tyson, a spokesman for the National Highway Traffic Safety Administration, a branch of the Transportation Department. "It's still a fluid process at this point. We look forward to significant fuel savings without sacrificing safety or doing harm to the American economy."

Because cars, S.U.V.'s and other light-duty vehicles account for 40 percent of the nation's oil use, changes in the regulatory system are always watched closely, more so in an era of increased concern over foreign oil imports, rising fuel prices and debate on the effects of global warming.

The broad outline of the Bush plan is almost certain to meet objections from environmentalists and those hoping for an aggressive approach to curbing dependence on foreign oil. But domestic automakers are likely to see it as a victory, since the new plan will decrease advantages that some foreign automakers, like Honda, have in the current system because they do not make the heaviest trucks and S.U.V.'s.

Roughly speaking, corporate average fuel economy regulations - known as C.A.F.E. standards in the industry - divide each automaker's annual new vehicle production into two categories: passenger cars and light-duty trucks. New cars must average 27.5 miles a gallon and light trucks 21.2 miles a gallon in 2005 models and 22.2 miles by 2007. The figures represent lab-generated mileage and overstate the numbers that can be achieved on the road. Rules for cars are not being changed.

When the current two-category system was created in the 1970's, cars ruled the American road. Since then, automakers have developed new classes of vehicles that qualify as trucks, including S.U.V.'s, minivans and family-oriented pickup trucks with two rows of seats. As a result, not only is the number of vehicles on the road increasing, but the average new vehicle is getting lower mileage than it did two decades ago because so many more new vehicles are trucks. An increasing emphasis on horsepower is also a major factor.

Larger sport utility vehicles and pickup trucks weighing more than 8,500 pounds when loaded, like many Hummers and Ford Excursions, have been exempt from the regulations. When the system was created, vehicles of that weight were generally used for commercial purposes, but now hundreds of thousands sold each year are intended for family use.

Automakers have had powerful incentives to produce such vehicles because they are exempt from fuel regulations, have had rich profit margins, and many consumers can claim tax breaks for them. The administration had suggested including larger S.U.V.'s in fuel economy regulations in a first wave of proposals in December 2003, but domestic automakers objected that such a move would harm their fragile bottom lines.

The decision not to include larger S.U.V.'s was a recent development, said people briefed on the deliberations, who declined to be identified before the plan is made public. There could still be revisions, and the plan's release will be followed by a public comment period and then a revised final rule, which must be published by next April to have an effect on 2008 models.

Gasoline prices have become a powerful counterweight to regulatory benefits given the biggest gas guzzlers. Many automakers, seeing the weakness in sales of large S.U.V.'s this year - they have recovered only after heavy discounting - are re-emphasizing plans for smaller, lighter S.U.V.'s in the future.

Under the Bush administration plan, about half a dozen size classes will be determined by the vehicle's length and width. Instead of an overall mileage requirement for the total fleet of light trucks a manufacturer sells in a model year, makers will have to meet some kind of target or average within each size class. As a result of the proliferating categories, it will probably become more difficult to predict fuel economy trends.

"It's an invitation to game the system and increase our oil dependence and the pollution that results," said Dan Becker, a global warming strategist at the Sierra Club. "The Bush administration is failing to use the most powerful weapon in its arsenal to save people money at the pump."

Gloria Bergquist, a spokeswoman for the Alliance of Automobile Manufacturers, a lobbying group for General Motors, Toyota and several other producers, said: "The one thing we haven't heard is what the values will be for the different categories, and that will really tell us what the system means.

"Once the proposal comes out, we will have to take a hard look at it and see what the benefits may be to improving fuel economy."

The administration has taken some steps to increase fuel regulations for light trucks, raising the mileage standard for trucks to 22.2 miles a gallon for 2007 models, from 20.7 miles a gallon in 2004 models. Environmentalists have argued that gains from that move were offset by credits given to automakers for making vehicles that can use ethanol, even though there are few gas stations that carry the required blend.

Under the administration's plan, for 2008 to 2010 models automakers will have a choice of complying with the new size-based system or the current system, though a further increase beyond 22.2 miles a gallon is expected in the current system. After 2010, the current system will be eliminated.

i wouldn't be surprised that the democratic congress people from Michigan had something to do with this

I just don't understand why we don't treat gasoline like we treat water or electricity. We try to conserve water by fixing leaky faucets and taking shorter showers. We try to conserve electricity, by turning off lights when we're not in rooms and setting the AC a couple of degrees higher. Why don't we have the same outlook towards gasoline? It's a resource, just like water or electricity.

i wouldn't be surprised that the democratic congress people from Michigan had something to do with this

:lol:

Anything - blame it on the Democrats.

I just don't understand why we don't treat gasoline like we treat water or electricity. We try to conserve water by fixing leaky faucets and taking shorter showers. We try to conserve electricity, by turning off lights when we're not in rooms and setting the AC a couple of degrees higher. Why don't we have the same outlook towards gasoline? It's a resource, just like water or electricity.

There's nothing wrong with realistic and workable CAFE standards.

Unfortunately, all to often, that is not what you see proposed - witness the Murray amendments to the energy bill in the Senate.

Newflash: We don't import water. :)

Newflash: We don't import water. :)
What does that have to do with it? It's still a resource.

Nevada does. California does too.

I just don't understand why we don't treat gasoline like we treat water or electricity. We try to conserve water by fixing leaky faucets and taking shorter showers. We try to conserve electricity, by turning off lights when we're not in rooms and setting the AC a couple of degrees higher. Why don't we have the same outlook towards gasoline? It's a resource, just like water or electricity.

We do that as individuals and individuals can buy smaller, lighter, more fuel efficient cars.

Would you like it if the government only permitted 25 W light bulbs to be sold because 60 W or 100 W light bulbs use too much power? That is more analogous. Would you like it if we only had small-flush toilets -- oh, wait.

I just don't understand why we don't treat gasoline like we treat water or electricity. We try to conserve water by fixing leaky faucets and taking shorter showers. We try to conserve electricity, by turning off lights when we're not in rooms and setting the AC a couple of degrees higher. Why don't we have the same outlook towards gasoline? It's a resource, just like water or electricity.

VinVega, that's crazy talk. It's every American's god-given right to be able to drive a huge gasoline-gulping vehicle 50 miles every day without feeling responsible for any consequences of this way of life.

Really though, do we conserve water or electricity? I give you Las Vegas, the city in the desert where people still want a lush front yard. Of course, even Las Vegas has laws about planting grass.

I just don't understand why we don't treat gasoline like we treat water or electricity. We try to conserve water by fixing leaky faucets and taking shorter showers. We try to conserve electricity, by turning off lights when we're not in rooms and setting the AC a couple of degrees higher. Why don't we have the same outlook towards gasoline? It's a resource, just like water or electricity.

Having a car is a sense of freedom. I see people coming from former communist countries and one of the first things they do is buy a car. Many don't take the subway because they prefer to drive.

Many people will save electricity or water because it's something they have to use. But a car is different because it's a sense of freedom that a person can do anything they want when they want.

The only conservation measure that's needed for any resource is the pricing mechanism. Gasoline prices should reflect supply and demand, which they do.

Las Vegas has a water shortage because the government keeps the price too low. If they raised the price of water by 1/2 penny per gallon, their water shortage would disappear. Having laws that regulate lawn watering is stupid. Just let water prices reflect supply and demand, and conservation will take care of itself.

90% of all the water that's used in the western U.S. is used by farmers to grow crops in the desert. And the farmers only do this because the government subsdizies the water. Get rid of farm subsidies, and this waste of water will end.

The article mentions that CAFE laws caused people to switch from big cars to even bigger SUVs, which caused an increase in gasoline use. Such is the unintended consequence when the government tries to plan the economy.

If the government wants people to use less gasoline, it should get rid of CAFE standards, and raise the gasoline tax so that the gasoline will be more expensive. If gasoline was $6 a gallon, like it is in the Netherlands, people would conserve. (I am against the government trying to get people to conserve gasoline, so I don't support raising the gasoline tax.)

We do that as individuals and individuals can buy smaller, lighter, more fuel efficient cars.

Would you like it if the government only permitted 25 W light bulbs to be sold because 60 W or 100 W light bulbs use too much power? That is more analogous. Would you like it if we only had small-flush toilets -- oh, wait.
When did I say the government had to regulate it? I was making a general observation.

The article mentions that CAFE laws caused people to switch from big cars to even bigger SUVs, which caused an increase in gasoline use. Such is the unintended consequence when the government tries to plan the economy.
I would argue that in this case it's an example of when the government tries to plan the economy in a hack-handed, politically motivated way, by exempting one group of passenger vehicles.
If the government wants people to use less gasoline, it should get rid of CAFE standards, and raise the gasoline tax so that the gasoline will be more expensive. If gasoline was $6 a gallon, like it is in the Netherlands, people would conserve. (I am against the government trying to get people to conserve gasoline, so I don't support raising the gasoline tax.)This would have the effect of raising prices on anything transported by any vehicle that uses gasoline.

I don't know what the solution to this problem is, if there is one. Any government controlled attempt at solving the problem will have, as you say, unintended consequences.

I don't know what the solution to this problem is, if there is one. Any government controlled attempt at solving the problem will have, as you say, unintended consequences.
The solution is to let the free market work.

Here's a challenge to peak oilers - they should put their money where their mouths are.

It's funny how the people who claim to be so sure about peak oil are never willing to back up their prediction by investing in the oil futures commodities markets. If peak oil was really true, they'd make a fortune. I guess they're scared that peak oil is really just a lie:

http://www.lewrockwell.com/featherstone/featherstone37.html

The solution is to let the free market work.If petroleum wasn't such a national security issue I would agree 100%. Since it is I don't have a fundamental objection to governmental involvement of some sort. But, like I said, I don't know what sort of involvement would be appropriate.

The solution is to let the free market work.

Here's a challenge to peak oilers - they should put their money where their mouths are.

It's funny how the people who claim to be so sure about peak oil are never willing to back up their prediction by investing in the oil futures commodities markets. If peak oil was really true, they'd make a fortune. I guess they're scared that peak oil is really just a lie:

http://www.lewrockwell.com/featherstone/featherstone37.html

Interesting interview with Matthew Simmons:

http://www.financialsense.com/transcriptions/Simmons.html

Hopefully the cost of oil will rise faster than the damage it can do to our economy.

At $5 a gallon for gas even California residents will want offshore drilling. They may still want their SUVs but they'll be drilling for oil in school playgrounds to fuel them.

I just don't understand why we don't treat gasoline like we treat water or electricity. We try to conserve water by fixing leaky faucets and taking shorter showers. We try to conserve electricity, by turning off lights when we're not in rooms and setting the AC a couple of degrees higher. Why don't we have the same outlook towards gasoline? It's a resource, just like water or electricity.

I feel better now. I do not try to conserve water or electricity. :)

If people are willing to pay the price for gas, I think they should be able to drive whatever they want. I understand that some people prefer to rent dvds instead of buying them. They choose to use their money differently than I do. Gas is not in short supply, it is merely exensive. If people want to spend more on gas guzzlers because they prefer them, I have no problem with that. I will buy more efficient vehicles, but I don't care if others do, nor will I complain that they are raising the price on all of us.

The only conservation measure that's needed for any resource is the pricing mechanism. Gasoline prices should reflect supply and demand, which they do.
Yeah, screw the poor people. If they want water and gasoline, they should find a way to make more money. Stupid lazy poor people.

My point should be obvious. Everyone needs water, so we can't tie rationing solely to price. If the wealthy are <i>so</i> wealthy (as they have become here) that water is essentially free at any price, then their ability to waste it can cause intolerably high water prices for the poor.

In general, this kind of reasoning only works when there's a fair distribution of wealth among competitors. We have essentially broken that model in America with a ridiculously large economic class gap. A small group of people for whom any reasonable price is essentially no deterrent, the system breaks down. That's what we have now.

- David Stein

unless you implement rationing, controlling the rise in gas prices will only lead to shortages

this is economics 101

unless you implement rationing, controlling the rise in gas prices will only lead to shortages

this is economics 101
Rationing <i>is</i> a shortage. It's just a redistribution of the short resource to guarantee that the poorest people get a necessary amount.

- David Stein

Rationing <i>is</i> a shortage. It's just a redistribution of the short resource to guarantee that the poorest people get a necessary amount.How exactly does this work? The poorest people tend to have old, large gas-guzzlers.

How exactly does this work? The poorest people tend to have old, large gas-guzzlers.
The masses in a city want 100,000 gallons of gasoline today. You only have 80,000 gallons. This is a shortage, regardless of how you deal with it.

Now, you can:
(a) Raise the price until demand drops to 80,000 gallons;
(b) Divvy up all 80,000 gallons equally among all city residents at a certain price; or
(c) Some combination of the two.

<b>grundle</b> opts for A. I opt for C. No one, most likely, opts for B.

- David Stein

How exactly does this work? The poorest people tend to have old, large gas-guzzlers.This isn't necessarily true, any more. There are enough late-70s/early-80s Toyotas and Hondas available now so that poor people <i><b>can</b></i> drive fuel efficient cars.

Yeah, screw the poor people. If they want water and gasoline, they should find a way to make more money. Stupid lazy poor people.

My point should be obvious. Everyone needs water, so we can't tie rationing solely to price. If the wealthy are <i>so</i> wealthy (as they have become here) that water is essentially free at any price, then their ability to waste it can cause intolerably high water prices for the poor.

In general, this kind of reasoning only works when there's a fair distribution of wealth among competitors. We have essentially broken that model in America with a ridiculously large economic class gap. A small group of people for whom any reasonable price is essentially no deterrent, the system breaks down. That's what we have now.

If there were only a way in which we could obliterate the different classes and form a large single class of equality and common property, I do believe we could create a utopia on Earth.

The only conservation measure that's needed for any resource is the pricing mechanism. Gasoline prices should reflect supply and demand, which they do.

Not currently - they don't.

Fear & the speculation based on uncertainty is a big factor in determining the price.

This isn't necessarily true, any more. There are enough late-70s/early-80s Toyotas and Hondas available now so that poor people <i><b>can</b></i> drive fuel efficient cars.Older cars still waste more gas. And there are still several reasons why poorer people tend to spend more on their cars as a percentage of income. Such as not spending it on housing.

If there were only a way in which we could obliterate the different classes and form a large single class of equality and common property, I do believe we could create a utopia on Earth.:hscratch:

http://www.historyguide.org/images/marx-bio.jpg

Karl, is that you?

Your final question, who won the Cup Final in 1949?

The masses in a city want 100,000 gallons of gasoline today. You only have 80,000 gallons. This is a shortage, regardless of how you deal with it.

Now, you can:
(a) Raise the price until demand drops to 80,000 gallons;
(b) Divvy up all 80,000 gallons equally among all city residents at a certain price; or
(c) Some combination of the two.

<b>grundle</b> opts for A. I opt for C. No one, most likely, opts for B.

- David Stein

doing a will result in b as people use gasolline according to their budget

do you seriously propose giving out ration cards so people can only buy so much?

If there were only a way in which we could obliterate the different classes and form a large single class of equality and common property, I do believe we could create a utopia on Earth.
You're right; the <i>only alternative</i> to the enormous economic divide that we have now is pure communism. It's solely those two options. Guess we're screwed.

- David Stein

The masses in a city want 100,000 gallons of gasoline today. You only have 80,000 gallons. This is a shortage, regardless of how you deal with it.

Now, you can:
(a) Raise the price until demand drops to 80,000 gallons;
(b) Divvy up all 80,000 gallons equally among all city residents at a certain price; or
(c) Some combination of the two.

<b>grundle</b> opts for A. I opt for C. No one, most likely, opts for B.


With B, you will have ambulances showing up late for calls so some teenagers can cruise around town on a Saturday night, or non-existant delivery trucks for Sunday drivers. With A, the people who seriously need gasoline will be able to get it, while folks who don't need it so desperately will find other means.

I believe we could use the tax code (as we have in the past) to at least not make the economic divide so great. We don't have to go to communism.

Of course that will require a change in administrations and a change in the congress - which has widened the gap by using that same tax code.

Of course that will require a change in administrations and a change in the congress - which has widened the gap by using that same tax code.And a change in the laws of economics and a change in mankind's basic motivations.

You're right; the <i>only alternative</i> to the enormous economic divide that we have now is pure communism. It's solely those two options. Guess we're screwed.
Perhaps if we had a mix of Capitalism and Socialism, we could have the best of both worlds. We could call it a Mixed Economy, and all will be well.

Of course, that is assuming that class plurality is a problem, and that Capitalism by itself does not work, which we know to be true, despite not having any evidence to the effect that it creates a lower standard of living for all classes, and that individual liberty is undesireable.

Older cars still waste more gas. And there are still several reasons why poorer people tend to spend more on their cars as a percentage of income. Such as not spending it on housing.I'm not sure I'm following you on the bit about housing.

When I started this thread, my intention was to highlight the Bush administration's hypocrisy regarding the auto industry, and to also see if we could discuss the idea of indivudual vs. collective resposibility with respect to energy consumption. IMO, this issue is far from cut and dried, since, as one of my previous posts mentioned, in addition to being an economic issue it's also one of national security. With that in mind, fuel conservation is likely far too important to be left to a solely market solution. Otherwise, that's probably what I'd advocate.

Here are my problems with increasing the gasoline tax:

1. It will increase the prices of nearly everything else.

2. It will be an undue burden on poorer working people who live in more remote, rural areas. Why should they take it up the ass because the rest of us can't conserve on our own?

Personally, I can get on my high horse with this issue unlike few others, since the car I drive, a 1993 Honda Civic, gets excellent gas mileage, plus I don't even drive it except on weekends, since I either bicycle or walk to work every day. On the one hand, I think people should be free to buy and drive whatever vehicle they want. On the other, hardly anything pisses me off more than my liberal friends who scream "no blood for oil", yet drive their V-8 powered SUVs to work every day. My next door neighbor, a radical lefy if ever there was one, works even closer to her house than I do, yet can't be bothered to walk it, in spite of the fact she works out daily. I guess a brisk eight block walk isn't "cardio" enough for her...

But I digress. This is an issue of extreme national importance, yet we (as a society, as a forum) seem to be arguing along the margins. Petroleum is the largest commodity market in the world, our country is essentially handcuffed by a region that is the most volatile in the world, yet nothing seems to change. Should a drastic change be made? If not, when. If so, how?

doing a will result in b as people use gasolline according to their budget
You've <i>got</i> to be kidding me. Yeah, I'm sure the guy with the SUV will forego a nice, long leisurely drive because he can make a small profit by selling the gasoline to the poor McDonald's worker.
do you seriously propose giving out ration cards so people can only buy so much?
No. That would be option B. I didn't choose option B.

How about setting aside half of the gasoline for rationing, and letting the market decide the price for the other half? That way, everyone gets access to some amount at a reasonable price for critical purposes, like driving to and from work. Those who don't use their rationed amounts can sell their rights, if they'd prefer the market value to the use of the gasoline.

- David Stein

With B, you will have ambulances showing up late for calls so some teenagers can cruise around town on a Saturday night, or non-existant delivery trucks for Sunday drivers.
That's an awfully weak argument. Is it impossible to reserve the first part for emergency services as part of any rationing plan?
With A, the people who seriously need gasoline will be able to get it, while folks who don't need it so desperately will find other means.
Yeah, I'm sure the poorest people who "seriously need gasoline" will find a way to buy a full tank at $10 a gallon. I mean, who <i>doesn't</i> have $150 socked away for a rainy day?

- David Stein

Perhaps if we had a mix of Capitalism and Socialism, we could have the best of both worlds. We could call it a Mixed Economy, and all will be well.

Of course, that is assuming that class plurality is a problem, and that Capitalism by itself does not work, which we know to be true, despite not having any evidence to the effect that it creates a lower standard of living for all classes, and that individual liberty is undesireable.

that only works in star trek

i'm not spending $235 for a year's subscription to Investor's Business Daily for my own personal growth or to be equal with everyone else. I want to be wealthy.

that only works in star trek
Uh, he was being facetious - trying to equate any suggestion of capitalism control with hippie communism. It was a poor attempt, so it's understandable that you missed it.

- David Stein

And a change in the laws of economics and a change in mankind's basic motivations.

No, that's not required.

You're under the illusion that rich people will cease to make money if their taxes are raised.

I'm under no such illlusion.

No, that's not required.

You're under the illusion that rich people will cease to make money if their taxes are raised.

I'm under no such illlusion.They'll cease to make it in a way that employs the people you think you're helping. And the gap will get bigger.

However the gap between Europe and the U.S. will get smaller, if that's what you want.

Here's what amazes me about these "any capitalism control = communism" arguments: Did we not have capitalism before five years ago? What's wrong with advocating a return to the closer and fairer economic class system that we had 30 or 40 years ago - was that not capitalism? Look -

<img src="http://www.faireconomy.org/images/image006.gif">

Does capitalism only truly exist at the right edge of this graph?

- David Stein

what your graph doesn't show is that many people who used to be in the 20th moved into the higher percentiles. 20 years ago my parents couldn't afford anything more than $5 sneakers once a year and an annual trip to mcdonalds. 20 years ago my mom was in the 20th and is now close to the 60th.

They'll cease to make it in a way that employs the people you think you're helping.
I don't believe that. Businesses can't fire more people, or further reduce wages, without losing more money than they're saving. If they could, they'd do so now. In fact, they've done that to the point of exhaustion already; just look at American productivity rates over the past decade.

So the only remaining consequences are:

(A) The wealthy would suffer financial losses out of spite. I don't think the wealthy want any implication of this, since that malice would be returned en masse by the suffering public.

(B) The wealthy will just pack up and go elsewhere, like some kind of Atlas Shrugged scenario. Only they really don't have anywhere to go - they're here because <i>this is where they make the money</i>, so they really can't leave. Again, if they could make more money elsewhere, they would already have left.

- David Stein

what your graph doesn't show is that many people who used to be in the 20th moved into the higher percentiles.
And some people moved downward. Both points are completely irrelevant.

The point of the chart is the breakaway spread of the upper groups - regardless of how long the occupants have been there, the spread is not a sign of a healthy economy.

- David Stein

and like i said before i'm not reading IBD to be close to others, i want to be wealthy

my wife isn't working 3 jobs to be like others, she wants to be wealthy with me

i see nothing wrong with aspiring to be wealthy and i see something wrong with the government taking my money because i succeed

I don't believe that. Businesses can't fire more people, or further reduce wages, without losing more money than they're saving. If they could, they'd do so now. In fact, they've done that to the point of exhaustion already; just look at American productivity rates over the past decade.Raise tax rates significantly and people won't be putting their money into those companies, especially when the economy starts dumping.

Just ask Teresa Heinz Kerry how she pays so little taxes. Though it's probably true that she keeps some municipal employees working.

There was a much smaller gap between people in caveman days. So I suppose that's what we should strive for.

what your graph doesn't show is that many people who used to be in the 20th moved into the higher percentiles. 20 years ago my parents couldn't afford anything more than $5 sneakers once a year and an annual trip to mcdonalds. 20 years ago my mom was in the 20th and is now close to the 60th.
I think what you're missing from the graph is that the rest of the 95% of folks are basically on the same curve of improvement, while the top 5% are skyrocketing ahead of them. That's the richest of the rich, you, the favorites of the Bush administration (feel their pain). ;) Now, you can jump around those brackets all you want, but you can't squeeze everybody into that top bracket.

a family member keeps telling me to put some money into a municipal bond fund that pays like a 10% yield and it's tax free. that's my investment if taxes go up. I'll just leech off the taxpayers.

I think what you're missing from the graph is that the rest of the 95% of folks are basically on the same curve of improvement, while the top 5% are skyrocketing ahead of them. That's the richest of the rich, you, the favorites of the Bush administration (feel their pain). ;) Now, you can jump around those brackets all you want, but you can't squeeze everybody into that top bracket.


most of the people who were at the 20th 20 years ago are in higher percentiles today, that's the point. it's not like the same people stayed in the same percentiles over 20 years

<img src="http://www.faireconomy.org/images/image006.gif">Why is it that, when I look at that graph, I see things improving? Could it be because everybody is making more money?

Why should I care if the guy down the street is making three times what he made five years ago, especially is I'm making 50% more than I made at that time?

because it's a bad thing to make more money and to be successful

the real estate agent teaching my wife's orientation class and who drives a Porsche Cayenne doesn't need to be making $500,000 a year

Raise tax rates significantly and people won't be putting their money into those companies, especially when the economy starts dumping.
We're not discussing corporate taxes. We're discussing the growing gap in personal income. I think the issues can be handled separately.

- David Stein

We're not discussing corporate taxes.I'm not talking about corporate taxes at all.

Why is it that, when I look at that graph, I see things improving? Could it be because everybody is making more money?
Everyone is making more money. Simultaneously, everyone is working harder and longer hours. I'd love to see a chart with income increases normalized to productivity increases - I'm guessing it would shred your argument that "everybody" is doing better.
Why should I care if the guy down the street is making three times what he made five years ago, especially is I'm making 50% more than I made at that time?
You should care because it's a zero-sum game. The income gains at the shallow end of the pool are not because of the growing income gap, but in spite of it. Because you're not a party to the mechanics of the pay scale, money is leaving your pocket - that's why you should care.

- David Stein

Everyone is making more money. Simultaneously, everyone is working harder and longer hours. I'd love to see a chart with income increases normalized to productivity increases - I'm guessing it would shred your argument that "everybody" is doing better.

You should care because it's a zero-sum game. The income gains at the shallow end of the pool are not because of the growing income gap, but in spite of it. Because you're not a party to the mechanics of the pay scale, money is leaving your pocket - that's why you should care.I believe I posted some data a few weeks ago that showed that income was rising compared to average hours worked. And it's not a zero-sum game. If my income rises compared to inflation, then I can buy more and save more. That's positive sum.

nice thread hijack :lol:

nice thread hijack :lol:Get your own thread, wiseass. :grunt:

:lol:

I'm not talking about corporate taxes at all.
Misread your point. My mistake.

You were arguing that the money given to the wealthy gets reinvested by stock purchases. My response is that if you give that same money to the poor, they will buy something with it.

The main difference is that when the poor buy a good, the money becomes totally liquid business profit - but when the wealthy buy stock, it becomes corporate borrowing, which (a) must be given back when the stockholder sells, and (b) requires dividends in the meantime. Much of the problem with business these days is the need for continuous profits in order to appease stockholders, which is often detrimental to long-term business planning. If that money were simply profit, it wouldn't have the same effect.

We need both investment and capital. That's absolutely true. But I object to the justification of the income gap as the claim that the wealthy use money in ways that benefit the economy. My objection is that the poor also use money in different ways that also benefit the economy.

- David Stein

Misread your point. My mistake.

You were arguing that the money given to the wealthy gets reinvested by stock purchases. My response is that if you give that same money to the poor, they will buy something with it.

The main difference is that when the poor buy a good, the money becomes totally liquid business profit - but when the wealthy buy stock, it becomes corporate borrowing, which (a) must be given back when the stockholder sells, and (b) requires dividends in the meantime. Much of the problem with business these days is the need for continuous profits in order to appease stockholders, which is often detrimental to long-term business planning. If that money were simply profit, it wouldn't have the same effect.

We need both investment and capital. That's absolutely true. But I object to the justification of the income gap as the claim that the wealthy use money in ways that benefit the economy. My objection is that the poor also use money in different ways that also benefit the economy.We discussed the concept of borrowed money, sales, and profit a long time ago and I'm not sure you realized your misconception of thinking $1 of each was the same. This seems to be getting back into that area of discussion, however that's not at all what I was discussing in this thread.

I was only saying that if tax rates get too high, investment becomes less productive in terms of hiring people and that will result in even larger gaps between the haves and the have-nots.

http://chart.finance.yahoo.com/c/my/_/_gspc

I liked the SP500 going flat before Reagan cut taxes a lot better than it's upward slope later on

I believe I posted some data a few weeks ago that showed that income was rising compared to average hours worked.
If you find it, I'd be interested to see it (and know the source.) The whole phenomenon of the growing class of "working poor" involves an amazingly crappy wage/productivity ratio - working 60+ hous a week but being unable to make rent payments.
And it's not a zero-sum game. If my income rises compared to inflation, then I can buy more and save more. That's positive sum.
Yes, but if your income is rising because you're a manager who is reducing employee benefits, then it is a zero-sum game.

- David Stein

If you find it, I'd be interested to see it (and know the source.) The whole phenomenon of the growing class of "working poor" involves an amazingly crappy wage/productivity ratio - working 60+ hous a week but being unable to make rent payments.I believe while this is a mischaracterization of the situation, it does point out what we have done to ourselves. And it has little to do with tax rates or runaway wealth of the few.

It has more to do with women seriously entering the workplace and people feeling entitled as well as necessary to live beyond their means.

We discussed the concept of borrowed money, sales, and profit a long time ago and I'm not sure you realized your misconception of thinking $1 of each was the same.
They're certainly not "the same," and I never believed, stated, or implied as such. There are certainly unique consequences to spending that dollar either way.

But both kinds of spending are valuable to the economy. Defenders of the ultra-wealthy spend much time hyping the economic value of investment - as if the alternative is to just throw the money down a well, or set it on fire. I don't buy it.
This seems to be getting back into that area of discussion, however that's not at all what I was discussing in this thread.
That's fine. We can come back to it another day. But for the record, I don't recall our previous discussion ending in a clear victory for either argument.

- David Stein

Defenders of the ultra-wealthy spend much time hyping the economic value of investment - as if the alternative is to just throw the money down a well, or set it on fire. I don't buy it.There exists the real alternative of putting money at risk, which grows the economy, and parking money in municipal bonds which doesn't. Tax policy determines which alternative is more profitable.

I believe while this is a mischaracterization of the situation, it does point out what we have done to ourselves. And it has little to do with tax rates or runaway wealth of the few.

It has more to do with women seriously entering the workplace and people feeling entitled as well as a necessity to live beyond their means.
I think it has more to do with the downward pressure on head count as a "productivity" step in regular office jobs, and the replacement of regular middle-class jobs through Wal*Martization or outsourcing. But that's a topic for another thread - this one is supposed to be about gasoline - so I'll leave it at that.

- David Stein

I would just suggest thinking about why productivity has become so important.

There exists the real alternative of putting money at risk, which grows the economy, and parking money in municipal bonds which doesn't.
There are plenty of alternatives. The money could remain in the corporations for which the ultra-wealthy work; it could go to the working class, who would spend it; it could be absorbed by the federal government. And municipal bonds do benefit the economy - the wealthy don't get much return, but the city gets the capability to maintain and grow its facilities, which may attract new business or residents.

My point wasn't to argue the relative merits of these things. It's to point out that when people defend elite wealth as an investment pool, they remain silent on the alternatives - implying that there aren't any. It's like intelligent design: it's built-in silence on a gap in the theory that, if discussed, would destroy it.
Tax policy determines which alternative is more profitable.
No, I think tax policy is a political decision. Actually, it's a bundle of political decisions: both how much tax is needed, and how it should be allocated. While there are economic components to the political issues, there are many other related issues.

- David Stein

They're certainly not "the same," and I never believed, stated, or implied as such. There are certainly unique consequences to spending that dollar either way.

But both kinds of spending are valuable to the economy. Defenders of the ultra-wealthy spend much time hyping the economic value of investment - as if the alternative is to just throw the money down a well, or set it on fire. I don't buy it.

That's fine. We can come back to it another day. But for the record, I don't recall our previous discussion ending in a clear victory for either argument.

- David Stein

let's see

in the lat 20 years investment has given us intel, microsoft, home depot, yahoo, amazon, google and thousands of other companies that have prospered and gave us a better life. My mom still has an encyclopedia set she bought for me in 1984 at a cost of $200 or more.

today i have access to more information through my cell phone than in that encyclopedia set and i can communicate through a world wide network. i can instantly buy almost anything i want from a housewife in another state making extra money on ebay. The investment of the last 20 years made millionaires of the first people to open 401k's when they were introduced and now there is $17 trillion invested in retirement accounts

i guess we should have let people park money in municipal bonds and then only companies doing business with governments would prosper. without investment capital there would be no google, no dvd talk and no david stein studying for Microsoft tests because there would have been no money to invest in a scrappy start up software company 20 some years ago. why invest in a new business if you will pay out 70% of your profits in taxes when you can earn a ton of money tax free in municipal bonds?

because of investment capital rank and file employees were making $400,000 a year at Microsoft in the 1990's and someone I know who has an ex-girlfriend who works for google made a ton of money with the shares they gave her

No, I think tax policy is a political decision. Actually, it's a bundle of political decisions: both how much tax is needed, and how it should be allocated. While there are economic components to the political issues, there are many other related issues.I think you misunderstood me. Let's try it this way.

The tax rates on highly productive but risky investment compared with the tax rates on relatively non-productive but safe investment will largely cause the individual to determine which is a better place for them to invest their money.

I would just suggest thinking about why productivity has become so important.
Productivity = efficiency. That's fine, in the abstract. In fact, if we did away with minimum wage, we could become much more "productive," as measured by man-hours / wage-dollars. Either the business could hire more people for the same total wage output, or it could lower salaries of current workers (let's call it "homeland outsourcing.")

But productivity, again, is a zero-sum game - it works directly against the concept of paying employees a fair wage in light of the value they provide to the company. That's the whole point of "productivity": squeeze more work out of the workers without paying them any more.

So if your only measure of economic strength is productivity or GDP, then it's easy to miss the fact that the workers are miserable. On the other hand, if you factor worker happiness/healthfulness/stability into the metrics, the results change a little.

- David Stein

...

[Nevermind - I didn't realize I was replying to something from "out of the past"]

in the lat 20 years investment has given us intel, microsoft, home depot, yahoo, amazon, google and thousands of other companies that have prospered and gave us a better life.
Awesome. Thanks for proving my point.

You see this solely as a result of investment. You don't see the fact that Intel's business thrives not on investment, but on <b>sales</b> of its chips and motherboards; that Microsoft thrives on <b>sales</b> of Windows and Office and XBoxes; that online companies can't live on investment alone, but need <b>sales</b>, in the form of products or web space to advertisers.

You've solidly demonstrated the myopia of unilateral thinking about business finance. Thanks!
i guess we should have let people park money in municipal bonds and then only companies doing business with governments would prosper.
Jesus, again with the "the only alternative is communism" junk. Can you not acknowledge that the economy is a balance of several different uses of money - that businesses don't run on investment alone?

If investment were the sole determinant of business health, we wouldn't have had the 2001 crash.

- David Stein

who would buy this stuff if taxes were raised?

every new product is first bought by the wealthy and as technology improves, costs drop the price becomes affordable to everyone else.

a few years ago flat screen TV's cost close to $10,000. as wealthy people and business bought them, they are now close to being affordable for everyone else. You make people pay crazy taxes and there goes innovation since no one will be able to buy the products.

Productivity = efficiency. That's fine, in the abstract. In fact, if we did away with minimum wage, we could become much more "productive," as measured by man-hours / wage-dollars. Either the business could hire more people for the same total wage output, or it could lower salaries of current workers (let's call it "homeland outsourcing.")

But productivity, again, is a zero-sum game - it works directly against the concept of paying employees a fair wage in light of the value they provide to the company. That's the whole point of "productivity": squeeze more work out of the workers without paying them any more.

So if your only measure of economic strength is productivity or GDP, then it's easy to miss the fact that the workers are miserable. On the other hand, if you factor worker happiness/healthfulness/stability into the metrics, the results change a little.

- David SteinI'm not saying productivity isn't important, but I would still think some more about what characteristics of the American public have made that productivity (and its ensuing results) so important. And then think about who is really to blame for what you don't like about it.

No - I did. Then you asked me to think about "productivity." Then I explained how I was using the term. Now you tell me I'm using it wrong because you want to use it in a different context?

Fine - let me put it this way. When a worker contributes more productivity, the company has more resources to provide. This causes economic growth, which is good. Now, the <i>quid pro quo</i> for that productivity gain should be a wage increase. It looks increasingly like we're not rewarding him - we're rewarding his manager, or the shareholders. This trend does not make for a happy or productive working class.

- David Stein

the specific job may pay the same, but the person is free to move up like most people do over the course of their lives

I'm not saying productivity isn't important, but I would still think some more about what characteristics of the American public have made that productivity (and its ensuing results) so important. And then think about who is really to blame.
First, "who is really to blame" implies that one party is solely responsible. I don't think that's a realistic view of any system with as many complexities and actors as the U.S. economy.

But I think I know your intended destination: that companies have to be more productive because American consumers have created demand by being gluttons. Certainly, modern U.S. consumers have issues: too much spending, too much waste, too little attention to the actions of their consumption beyond their own immediate needs (e.g., saving $0.12 on toothpaste at Wal*Mart may put their fellow man out of work.) I don't dispute any of that.

I <i>do</i> dispute the fact that all of the blame can be heaped on the consumer. The view at that level is too microscopic to see the big picture, and the power to achieve change is too diffuse. That's why larger, better-organized parties - like, for instance, the federal government - are supposed to fill in the gaps. Only, they've forsaken this duty for the sake of GDP (among other factors.)

- David Stein

i've been reading the news and a lot of business news says that without wal mart and outsourcing there would be a lot more inflation and this would be a lot worse for the economy than what is happening now

anyone remember what runaway inflation did to the US economy 20-30 years ago? double digit unemployment? double digit interest rates that almost put some banks out of business?

And why do you expect the workforce to be as happy as they used to be (which I would love to see proof of) when you put twice as many people into the workforce (aided by big government policies I might add) just so they can continue to chase their consumerism tail?

And it sure seems people work pretty easy and have a lot of slack time for all the "horrible, slavery workplace" images I'm being presented.

a few years ago flat screen TV's cost close to $10,000. as wealthy people and business bought them, they are now close to being affordable for everyone else. You make people pay crazy taxes and there goes innovation since no one will be able to buy the products.
Flat-screen TV prices fell because (a) production plants got more efficient (as they always do) and (b) less expensive designs with comparable quality were invented. Oh, and (c) they realized that they can make more money selling 20 units at $2,000 than selling one unit at $10,000.

Ever hear of disruptive innovation? That doesn't begin by seizing the top end of the market. It begins by seizing the bottom end of the market, the cheapie goods with high volume and thin margins, and then expanding upward to the luxury-class components.
the specific job may pay the same, but the person is free to move up like most people do over the course of their lives
What's your point? It doesn't matter whether the same guy worked there for 30 years, with increasing responsibility but the same wage; or whether they replaced him 12 times, with each guy having more responsibility but the same pay. The effect is the same.

If you want to focus on the individual, we can do that. My argument changes to this: Today's workers will, throughout their lives, be expected to produce more value than the people who they replaced, but will be paid the same real wage.

- David Stein

And why do you expect the workforce to be as happy as they used to be (which I would love to see proof of) when you put twice as many people into the workforce (aided by big government policies I might add) just so they can continue to chase their consumerism tail?
So is this a population thing? That would be a pretty different argument - one with which I might actually agree with you. But that's a new front in this discussion.
And it sure seems people work pretty easy and have a lot of slack time for all the "horrible, slavery workplace" images I'm being presented.
You don't notice it because it's been a gradual but steady slip. Compare today's U.S. workers with similar U.S. workers from 30 years ago - ask about the length of the average work week, reduced vacation time, reduced benefits, the number and depth of responsibility, the need to multitask like crazy, etc. Ask professionals about the impact on their non-work lives of being available 24/7 by phone, email, and Blackberry.

I've gotta run - but it's been a fun discussion today. Thanks, all.

- David Stein

Flat-screen TV prices fell because (a) production plants got more efficient (as they always do) and (b) less expensive designs with comparable quality were invented. Oh, and (c) they realized that they can make more money selling 20 units at $2,000 than selling one unit at $10,000.

Ever hear of disruptive innovation? That doesn't begin by seizing the top end of the market. It begins by seizing the bottom end of the market, the cheapie goods with high volume and thin margins, and then expanding upward to the luxury-class components.

What's your point? It doesn't matter whether the same guy worked there for 30 years, with increasing responsibility but the same wage; or whether they replaced him 12 times, with each guy having more responsibility but the same pay. The effect is the same.

If you want to focus on the individual, we can do that. My argument changes to this: Today's workers will, throughout their lives, be expected to produce more value than the people who they replaced, but will be paid the same real wage.

- David Stein


almost every new product is expensive because someone has to pay for the R&D and the expensive manufacturing. As the wealthy buy the product, money comes in to improve manufacturing and then the cost drops. The earlt adopters are almost always the upper income ranges. Disruptive innovation can only happen in a mature market when it's cheap enough to produce something really cheap. Why didn't you see the cheapo off brand flat screen TV's 5 years ago when the first models hit the stores?

The extra productivity makes goods cheaper and people can buy more for their dollar. In the good old days with double digit inflation and interest rates a much higher percentage of income went to pay for housing, food and other things that one needs to live. Today the necessaties are a much lower percentage of a paycheck so people have money for things like cable TV, satellite TV, cell phones, computers, video games, DVD's, CD's, travel, home improvement, the crazy expansion of the baby industry, home furnishings and anything else that is disposable income that I can't think of. How much luxuries do poor people have today compared to 20-30 years ago?

Gasoline prices were $2.07 - $2.09 per gallon 9 days ago. Now they are $2.45 - $2.49.

Labor Day is coming - traditional Labor Day spike.

I guess I may be forced to buy one of those hybrids - not really. ;)

Yeah, screw the poor people. If they want water and gasoline, they should find a way to make more money. Stupid lazy poor people.

My point should be obvious. Everyone needs water, so we can't tie rationing solely to price. If the wealthy are <i>so</i> wealthy (as they have become here) that water is essentially free at any price, then their ability to waste it can cause intolerably high water prices for the poor.

In general, this kind of reasoning only works when there's a fair distribution of wealth among competitors. We have essentially broken that model in America with a ridiculously large economic class gap. A small group of people for whom any reasonable price is essentially no deterrent, the system breaks down. That's what we have now.

- David Stein

Raising the price of water by 1/2 penny per gallon would be enough of a price increase to pay for desalinizing as much water as we would ever want or need. Even if rich people bought huge amounts, the price increase for the poor would still be just 1/2 penny per gallon.

unless you implement rationing, controlling the rise in gas prices will only lead to shortages

this is economics 101
The 1970s OPEC oil embargo, by itself, would have caused prices to rise enough so that supply and demand would have been equal to each other.

But Nixon imposed price controls. So prices couldn't rise enough. So demand exceeded supply. So there were shortages, gasoline lines, and the energy crises.

After Reagan got rid of the price contorls, the shortages, gasoline lines, and energy crises disappeared.

In 2000, there was another OPEC embargo. But Clinton did not impose price controls, so prices rose enough, so there were no shortages, gasoline lines, or energy crises.

Gasoline can either be rationed by price, or by some other method. Rationing by price is the most efficient method.

Price controls on gasoline might save you $10 on a tank of gasoline, but if the resulting gasoline lines cost you 3 hours of your time, and your time is worth $20 an hour, then it has caused you a net loss of $50.

Here's what amazes me about these "any capitalism control = communism" arguments: Did we not have capitalism before five years ago? What's wrong with advocating a return to the closer and fairer economic class system that we had 30 or 40 years ago - was that not capitalism? Look -

<img src="http://www.faireconomy.org/images/image006.gif">

Does capitalism only truly exist at the right edge of this graph?

- David Stein
All 5 family income groups have higher income now than in the past.

Also, families are smaller now than in the past. So per capita income has risen more than family income.

You were arguing that the money given to the wealthy gets reinvested by stock purchases.
Cutting people's taxes does not mean that you are "giving" money to them.

All 5 family income groups have higher income now than in the past.

Also, families are smaller now than in the past. So per capita income has risen more than family income.

http://www.walmartstores.com/wmstore/wmstores/Mainabout.jsp?BV_SessionID=@@@@0840859707.1124241712@@@@&BV_EngineID=ccccaddfddgkihdcfkfcfkjdgoodglg.0&pagetype=about&categoryOID=-10466&catID=-8242&subCatOID=-10439&template=DisplayAllContents.jsp

that's impossible

everyone knows no one ever moves up in life

that's impossible

everyone knows no one ever moves up in life
......without direct government intervention.


Also, I don't trust the government because of the patriot act but have no problems sending more of my money to them because I trust that they won't waste it.

Also, I don't trust the government because of the patriot act but have no problems sending more of my money to them because I trust that they won't waste it.At least some of us are consistent. We don't trust the government with the Patriot Act, and we also don't trust it with our tax dollars. ;)

If you find it, I'd be interested to see it (and know the source.) The whole phenomenon of the growing class of "working poor" involves an amazingly crappy wage/productivity ratio - working 60+ hous a week but being unable to make rent payments.I found my original post. Here are the data I posted:

<b>Disposable personal income, Per Capita</b>
(2000 dollars)
<table border = 1><tr><td>1993</td><td>1994</td><td>1995</td><td>1996</td><td>1997</td><td>1998</td><td>1999</td><td>2000</td><td>2001</td><td>2002</td><td>2003</td><td>2004</td></tr><tr><td>21,493</td><td>21,812</td><td>22,153</td><td>22,546</td><td>23,065</td><td>24,131</td><td>24,564</td><td>25,472</td><td>25,698</td><td>26,229</td><td>26,570</td><td>27,281</td></tr></table><font size = -2><i>Source: US Department of Commerce, Bureau of Economic Analysis</i></font>

<b>Average Weekly Hours</b>
(Seasonally Adjusted)
<table border = 1><tr><td>1993</td><td>1994</td><td>1995</td><td>1996</td><td>1997</td><td>1998</td><td>1999</td><td>2000</td><td>2001</td><td>2002</td><td>2003</td><td>2004</td></tr><tr><td>34.4</td><td>34.4</td><td>34.1</td><td>34.4</td><td>34.6</td><td>34.4</td><td>34.4</td><td>34.1</td><td>33.8</td><td>33.8</td><td>33.8</td><td>33.7</td></tr></table><font size = -2><i>Source: US Department of Labor, Bureau of Labor Statistics</i></font>

lies lies

everyone knows that employers lie about the hours worked like wal mart does to get out of paying overtime

The question is how long will it be before the Bush administration takes some action about gasoline prices. They went up another 10 cents today in my area. I heard analysts say today that the nationwide average per gallon by this Labor Day will be $3.00.

The Bush Administration has already taken some action. That's why gas prices are so high.

At least some of us are consistent. We don't trust the government with the Patriot Act, and we also don't trust it with our tax dollars. ;)
The fact that the government is spending so much money on the Patriot Act is proof that taxes are too high.

The question is how long will it be before the Bush administration takes some action about gasoline prices. They went up another 10 cents today in my area. I heard analysts say today that the nationwide average per gallon by this Labor Day will be $3.00.

nothing they can do

latest report is that refiniries are running 93.5% at capacity and every little problem causes prices to shoot up since there is no spare capacity in the system. Combine that with the fact that the inventories report came in lower than expected today because people want to drive.

Only a reduction in demand is going to bring prices back down

The Bush Administration has already taken some action. That's why gas prices are so high.

There's little question that the invasion of Iraq and subsequent happenings has created uneasiness - no fear. IMO, that fear has driven up the price of oil considerably which in turn drives up the price of gasoline. I don't know how much effect it's had, but I think you have to have your head in the sand to deny that it has had some effect.

Only a reduction in demand is going to bring prices back down.

I don't believe that demand is the major reason for the high prices. It's due to speculation about what's going to happen to the price of oil. Oil is currently selling for over $66.00 per barrel.

There's a number of steps the government could take. How effective they would be - I really don't know.

However, congress returns from its recess after Labor Day. If the price continues to rise in these huge jumps, the Congress will demand something be done, because they will feel the pressure from their constituencies.

I don't believe that demand is the major reason for the high prices. It's due to speculation about what's going to happen to the price of oil. Oil is currently selling for over $66.00 per barrel.If people suddenly made a concerted effort to use less fuel you'd probably see that speculative bubble burst as soon as the consumption/stockpile figures came out. But people would rather bitch about the price than do anything about it.

If we pulled out of Iraq you might very well see that bubble burst also.

No, I'm not advocating pulling out of Iraq.

If we pulled out of Iraq you might very well see that bubble burst also.I don't know about that.

It seems to me that showing a will to stabilize the Middle East can assure people that oil will keep flowing. As opposed to what bin Laden has proposed

i've read that a lot of pension funds and other institutional investors have invested in oil because of the returns. There was even a thread on fatwallet about how one could speculate in oil.

Last year prices dropped in september and then went up because of heating oil and then dropped in november. I think the same thing may happen this year.

Gasoline demand in the U. S. shrank 1.8% in July. Gasoline prices have gone through the roof since July.

Overall demand for petroleum in this country shrank even more.

Let's not argue this supply & demand, Adam Smith crap anymore. This is the 21st century.

Let’s be honest here. What can the President or Congress really do to lower the prices of oil? I know Clinton tapped the Petroleum reserve during his Presidency, but that really didn't have much effect I think. I think it dropped prices less than a dime per gallon.

He can imprison all of the speculators.

He hasn't seem to be worry about due process in the past. :lol:

He can imprison all of the speculators.

He hasn't seem to be worry about due process in the past. :lol:
So if we're in an "Oil Bubble" so to speak, can't that pop just like the Real Estate or Stock Market? What can cause it to pop?

Bush came from the oil industry. His most reliable political backing has been from the oil industry. His Secretary of State and Vice President came from the oil industry. His favorite furriners are the Saudis. Oil profits are soaring. 2+2=?

Gasoline demand in the U. S. shrank 1.8% in July. Gasoline prices have gone through the roof since July.

Overall demand for petroleum in this country shrank even more.

Let's not argue this supply & demand, Adam Smith crap anymore. This is the 21st century.

Hogwash!
It isn't the demand in the US that is driving the price higher.

Hogwash!
It isn't the demand in the US that is driving the price higher.

You're right. It's world demand.

Hogwash!rotfl

You two are sounding more and more like an old married couple every day now. ;)

He can imprison all of the speculators.

He hasn't seem to be worry about due process in the past. :lol:

you want to imprison union pension fund managers

Gasoline demand in the U. S. shrank 1.8% in July. Gasoline prices have gone through the roof since July.

Overall demand for petroleum in this country shrank even more.

Let's not argue this supply & demand, Adam Smith crap anymore. This is the 21st century.


gasoline inventories were also down in the latest margin when everything was priced in for them to increase

you want to imprison union pension fund managers

They're not the speculators.

you would be surprised how many institutional investors are betting on oil these days

all the individual investors combined don't have the money to influence prices of anything like institutional investors do

Union pension fund managers are not playing the oil futures market.

http://www.washingtonpost.com/wp-dyn/content/article/2005/08/10/AR2005081002092.html


http://www.google.com/search?hl=en&lr=&q=pension+funds+hedge+funds&btnG=Search


http://news.tradingcharts.com/futures/2/9/69342392.html

http://www.google.com/search?q=pension+funds+oil+futures&hl=en&lr=&start=10&sa=N

unless you implement rationing, controlling the rise in gas prices will only lead to shortages

this is economics 101

Economics 101 is wrong.

and it must be living hell being the only one that knows this

Anytime there is a long term, chronic shortage of a basic commodity, it is <i>always</i> because the governnment is keeping the price too low.

You can create a shortage of anything, simply by keeping the price too low. Want to create a shortage of food? Just force all food stores to permanently reduce all their prices by 50%.

Want to permanenlty eliminate water shortages in Las Vegas? Just raise the price by 1/2 penny per gallon, which is enough to pay for desalinization.

It was Nixon's price controls, not the OPEC embargo, that caused the 1970s oil shortages, gasoline lines, and energy crises. There were actually some areas of the U.S. that had excess supplies of gasoline. But since Nixon didn't allow prices to communicate information about supply and demand, there were shortages.

By definition, the free market price is the price where supply equals demand.

Gold is very useful for jewelry and electrical components. But there's very little gold in the world. It's the high price of gold that prevents a shortage from happening. If the government regulated the price of gold so it was $10 an ounce, there would be a shortage of gold.

and it must be living hell being the only one that knows this

There are many people that don't buy the supply and demand crap.

Bush came from the oil industry. His most reliable political backing has been from the oil industry. His Secretary of State and Vice President came from the oil industry. His favorite furriners are the Saudis. Oil profits are soaring. 2+2=?

So he wants to push oil/gas prices higher so a few companies/cronies can make lots o' $$$? He's doing this on purpose?

There are many people that don't buy the supply and demand crap.
Yes.

And none of them are economists.

Yes.

And none of them are economists.

Oh yeah, they are economists.

krugman is not a real economist

krugman is not a real economist

Wow, it really is non sequitur week here in the Politics Forum!

Why exactly isn't Paul Krugman a "real economist", pray tell?

name one of his dire predictions that came true

I stopped reading his column because the exact opposite seems to happen

name one of his dire predictions that came true

I stopped reading his column because the exact opposite seems to happen

I agree he's better at analyzing current or past economic data than projecting into the future, but that doesn't make him a fake economist. Just not a precognitive one.

he's just not worth listening to when there is a problem that needs to be solved

Economics 101 is correct. The law of supply and demand is real. Higher gasoline prices encourage conservation:


http://www.miami.com/mld/miamiherald/12442461.htm

Spiraling gas prices start to hurt S. Florida pocketbooks, psyches

Miami Herald

08/22/2005

Some drivers are altering their routines, going out less, or even going to therapy as gas prices begin to strain family budgets.

South Florida drivers are cutting back on dining out, slowing down their driving and -- this is amazing -- even complaining to their therapists over rising gas prices.

''People are increasingly agitated,'' said Plantation psychologist Priscilla Marotta, who said she's seeing an increase in clients suffering panic attacks. ``They say they have no control over their budget. And they have to drive to work. They feel like their lives are spiraling out of control.''

This is South Florida, after all. We love our cars and we don't have a lot of other options for getting around. So we're tinkering with our routines -- in a few strange and unexpected ways -- hoping small changes will add up to big savings.

• If you see more tow trucks parked outside your neighborhood McDonald's, it's gas prices. Ron Self, owner of South Florida Towing and Transport, said he's begun telling his drivers to sit down and relax a while, when they're done with a call, rather than drive back to his offices in Perrine or Hialeah. ''Basically, we're trying to drive less or otherwise we're having to increase our prices and customers aren't really happy about that,'' he said.

• María Cárdenas, 29 and single, isn't going out to eat, spending money on clothes or doing as much shopping as she used to. The price of her 80-mile-a-day commute from home in West Kendall to work in Fort Lauderdale is holding her back. ''I'm feeling the impact,'' she said. ``It's adding up little by little.''

She's part of a three-car family with her mom and dad. Total family gasoline bill: $131 a week.

• Michael Bullard, 57, isn't dropping in on an elderly friend in a nursing home as often as he used to, because of gas prices. He's making fewer trips from his home in Pompano Beach to his church in Boca Raton. He's coordinating his errands to make fewer trips. As a result, he has reduced his three fill-ups a week to two.

But the biggest change he has made is the hardest. He's driving slower.

Bullard has turned his cruise control down from 70 miles per hour to 60. Now you might catch his 1999 Lincoln Continental in the far-right lane, with truckers rushing past. He made the change to steady his driving and make the car more fuel-efficient.

''I don't know if I'll be able to keep it up. It's hard to be out on the road and not to want to speed up,'' he admits.

Such trade-offs may be difficult, but when prices per gallon jump 18 cents in only a week, more and more people feel they must do something -- and quick.

Traditional solutions to lowering costs are gaining ground, too. Almost 6 percent more people in Broward are taking the bus than last year. A spokesman for Miami-Dade County Transit reports that Park N Ride lots were far more crowded last week.

CHOOSING TO CARPOOL

More people are carpooling -- or at least checking out how to do it. ''We have probably quadrupled since the beginning of the year in the number of people who have requested to find ride matches and alternate modes of transportation to commute to work,'' said James Udvardy, project director of South Florida Commuter Services.

But the numbers are still small.

Only a fraction of South Floridians ever board a bus or a train. Just 4 percent of Miami-Dade and Broward workers take public transportation and only 11 percent carpool, according to 2003 U.S. Census data. That's despite a recent survey showing the average commuter who drives to work in the Miami metropolitan area spends 51 hours a year stuck in traffic.

And drivers still love those gas-guzzling SUVs. Nationwide, SUV sales were falling all year until GM and other manufacturers offered discounts. Buyers jumped, despite steep gas prices, and pushed SUV sales up in July.

LIFESTYLE CHANGES

If gas prices stay high -- as they are expected to do -- one expert in finance and behavior says drivers will eventually be forced to make some major changes in lifestyle.

''There are some people who, in deciding whether to buy a house or rent an apartment that is a long way from work, will change their decisions because of high gas prices,'' Jay Ritter, the Cordell professor of finance at the University of Florida's School of Business Administration, wrote in an e-mail. Ritter is also an associate editor of The Journal of Behavioral Finance.

Some, he predicts, will turn down a job and take a slightly lower-paying one to save on the commuting costs. ''These decisions accumulate over time,'' he wrote. ``So they have very little short-run impact, but they have a moderate impact over the long run.''

The turning point may not be far off.

NEAR CRISIS POINT

In surveys earlier this year, the Gallup Poll pinpointed $2.50 to $3 a gallon as the range many consumers considered a crisis point.

We hit that range last week, and we're breaking through it.

Gas prices reached $2.57 in Fort Lauderdale and $2.65 in Miami on average for a gallon of regular. Which means, $3 a gallon is in sight.

''That's a concern that I have,'' Cárdenas, the Kendall-to-Fort Lauderdale commuter who fills up twice a week, said.

``You know, you budget a certain amount of money a month for expenses, what you have left over gets smaller and smaller.''

Maybe this is why the stock market has been tanking in the last two weeks?

Economics 101 is correct. The law of supply and demand is real.
Not really. Any economist will tell you that (a) the law of supply and demand expects people to act rationally, and (b) people, as a whole, aren't rational. (Particularly consumers.)

Notice the snippet from your article:
''I don't know if I'll be able to keep it up. It's hard to be out on the road and not to want to speed up,'' he admits.
Give it a month, and we'll see if conservation is still in high gear.

- David Stein

Not really. Any economist will tell you that (a) the law of supply and demand expects people to act rationally, and (b) people, as a whole, aren't rational. (Particularly consumers.)My understanding of economics is centered around human behavior since that's what drives it. As you say, people don't always act rationally (however I suppose it depends on how you define "rationally".) But they do act predictably.

And that's why I have so many proplems with some people's ideas of what the tax system should be. Been there, done that.

My understanding of economics is centered around human behavior since that's what drives it. As you say, people don't always act rationally (however I suppose it depends on how you define "rationally".) But they do act predictably.
Sure. And in some cases, "predictable" = "rational." I guarantee that price and sales of Coca-Cola are bound tightly by supply and demand.

But gasoline is not Coca-Cola. People just don't respond to price fluctuation on a smooth demand curve. It involves too many life changes and choices. The predictability is that demand does not respond well or proportionally to changes in price, because people see it as a necessity.

If people were rational about gasoline, you'd expect sales of hybrids and high-efficiency cars to swell, and SUVs to diminish, with steady trends over the last several years. In truth, there have been trends in both directions, but they're surprisingly slight and surprisingly recent.

- David Stein

But gasoline is not Coca-Cola. People just don't respond to price fluctuation on a smooth demand curve. It involves too many life changes and choices. The predictability is that demand does not respond well or proportionally to changes in price, because people see it as a necessity.

If people were rational about gasoline, you'd expect sales of hybrids and high-efficiency cars to swell, and SUVs to diminish, with steady trends over the last several years. In truth, there have been trends in both directions, but they're surprisingly slight and surprisingly recent.If the terms "elasticity" and "inelasticity" of demand aren't familiar to you, you should make them so. Supply and demand applies to gasoline, it just has a relatively inelastic demand curve in the short-term.

If the terms "elasticity" and "inelasticity" of demand aren't familiar to you, you should make them so.
Dude, seriously. My dad <i>teaches economics</i> at the college graduate level. I don't claim to be an economist by proxy, but basic concepts were dinner conversation when I was 12.

It's not that the demand curve is simply bowed outward - which is what inelasticity usually implies. Rather, it is horizontal for a significant (and relevant) portion of the demand curve. It probably has a precipitous drop at some psychological point, e.g., sales would be much different between $2.99 and $3.00 per gallon. My point is that the response chart is bent so far out of shape that one wouldn't even recognize it as a demand curve - not for the portion we're seeing.

So it's difficult to discuss something with such an odd shape as a normal demand gradient. You can't just take some market samples, project a curve, and choose a desired target for barrles sold - the results are affected by so many things (including consumer irrationality) that you can't forecast with any degree of accuracy. That's why arguments that it's just a demand curve are overly simplistic.

- David Stein

http://jewishworldreview.com/cols/sowell082305.asp

August 23, 2005

Thomas Sowell

An oil ‘crisis’?

With oil prices passing the record-breaking $60 a barrel level and heading even higher, the word "crisis" is now being used and all sorts of political "solutions" are being proposed. Is there really a crisis?

One of the dictionary definitions of a crisis is "the point in the course of a serious disease at which a decisive change occurs, leading either to recovery or to death." Is that where we are when it comes to oil? Are we either going to solve the problem of oil or see it destroy us economically?

Political and media definitions of "crisis" are much looser than the dictionary's definition. In political semantics, the word "crisis" has come to mean any situation that someone wants to use to justify doing something that will be called a "solution." Crises are a dime a dozen by political and media definitions.

Almost as common as crises are conspiracy theories. Whenever the price of gasoline shoots up, California's Senator Barbara Boxer can be depended on to demand an investigation of the oil companies. The fact that previous investigations have found no conspiracies is no deterrent.

Why, then, are oil prices so high?

There is no esoteric reason. It is plain old supply and demand. With the economies of huge nations like China and India developing more rapidly, now that they have freed their markets from many stifling government controls, more oil is being demanded in the world market and there are few new sources of supply.

What should our government do?

We will be lucky if they do nothing. But, with Congressional elections coming up next year, that is very unlikely. Candidates for Congress next year, and politicians hoping to run for President in 2008, are virtually guaranteed to come up with all sorts of "solutions."

These "solutions" will be packaged as brilliant new ideas, courageous and far-seeing. But most will be retreads of old ideas that remain untested or which have been tested in the past and found wanting.

Price controls, arbitrary new higher gas mileage standards for cars, "alternative energy sources," and other nostrums are sure to surface once again.

The last time we had price controls on gasoline, we had long lines of cars at filling stations, these lines sometimes stretching around the block, with motorists sitting in those lines for hours.

That nonsense ended almost overnight when President Ronald Reagan, ignoring the cries of liberal politicians and the liberal media, got rid of price controls with a stroke of the pen.

What happened is what usually ha