Dumb & Dumber?

The debate over skyrocketing gas prices and what impact, if any, that should have on auto insurance rates, made me realize that both oil and insurance are industries plagued by a glaring lack of understanding on the part of the public about basic economic facts–ignorance shamefully exploited by politicians like John McCain to create scapegoats and win votes.

The way Sen. McCain is pushing for more offshore oil drilling, you would think that all one has to do to “solve” the problem of rising fuel costs is to go to the beach, stick a straw in the sand and fill up your car with the gasoline spouting out of the ground.

Of course, this is total nonsense. The Department of Energy (reporting to an oil-friendly White House) readily admits it would take two decades for drilling in currently restricted areas to have any real impact on domestic production, and that the price charged for such oil would be subject to the global market.

Yet far too many in this clueless nation appear to believe that offshore drilling could deliver gas into their tanks within, what, a few months? And that American oil somehow would (or at least should) cost less than whatever we're paying to those pumping liquid gold out of the ground in Saudi Arabia, Russia and Venezuela.

Sen. McCain no doubt knows all this, but that didn't stop him from running silly ads suggesting that his rival for the White House, Sen. Barack Obama, was to blame for sky-high gas prices because of his opposition to drilling in certain offshore areas. (An opposition once heartily shared by Sen. McCain, by the way, until he realized it might help him win the election.)

For those upset with my picking on Sen. McCain, my only response is, he started it!

But that doesn't mean Sen. Obama is exempt from criticism. He proved he can pander with the worst of the political flip-floppers, feeling obliged to follow suit on McCain's call, or risk surrendering the hot-button issue to his opponent. Thus, he modified his opposition to offshore drilling, while only half-heartedly noting that even if we start tapping our offshore resources right now, it would have no impact whatsoever in satisfying our energy needs for years to come. In this Era of Blissful Ignorance, most people probably wouldn't believe him, anyway.

Sen. Obama went even further, suggesting that we should tap our Strategic Petroleum Reserve, which is utterly ridiculous. Are we saying that gas between $3.50 and $4.00 per gallon qualifies as a national crisis??? That's insane!

But Sen. McCain raised the stakes in terms of pandering by suggesting that we suspend the tiny 18.4-cent-per-gallon federal gas tax. If anything, we should RAISE the gas tax–perhaps even set a sliding scale to keep the price of gas at $4 per gallon. That way, we will have strong incentives to cut back on energy use and give up our gas-guzzling SUVs, which is in our long-term interests.

But long-term economic interests and short-term political interests never mix, and energy is no exception. Neither is insurance, with politicians and the public clammoring for quick fixes and ignorning broader problems and trends.

Again, the problem is ignorance. People in this country, for the most part, are better informed about the life of Paris Hilton than about the reasons behind the cost of gas, as well as insurance.

Indeed, who here is even aware that our own fiscal policies are in large part responsible for the rising price of gas? As we dropped our interest rates, the value of our dollar fell like a stone, and since oil is priced in U.S. dollars on the global market, who could blame oil producers for raising their price to compensate? Why should they accept money that is literally worth less than before, for the same amount of oil? If the value of the dollar falls, the price of oil rises, period.

Add in the increasing global demand for oil prompted by the rapid growth in the Chinese and Indian economies, and it's easy to see how the price of this precious commodity is largely out of our control. We literally cannot drill our way out of this mess. We need to cut down on consumption (perhaps by keeping gas prices over $4 per gallon, via a gas tax), while aggressively developing alternative energy sources.

The insurance industry has long been similarly victimized by such consumer ignorance, and the propensity of politicians to pander to the demands of an ignorant public. I don't blame the politicians, because the American people do not seem to be able to handle the truth, as they punish any politician who tells them what's really going on and what really must be done by withholding their votes.

Why else would a “maverick” like John McCain and a “change agent” like Barack Obama toss the truth to the winds and pander away? We get the politicians and government we deserve.

What do you folks think?

Note: For two terrific commentaries on this subject, check out The New Yorker (click here) and Newsweek (click here).