OMT One Man's Trash...from Norman Leahy



Saturday, October 01, 2005 :::
 

Savage Dog Attacks DP Editorial Office

Or maybe it's just a bad case of distemper. Casting a longing look at the Other Candidate, the DP's scribblers note:

The campaign for governor of state Sen. Russ Potts is truly out of the ordinary, if for no other reason than Potts is going around the state, looking people in the eye, and telling them that Virginia needs massive infusions of cash - higher taxes, tolls and fees - to improve its transportation system.

And they have turned the hose on him. But then we get an elightening lesson in economics:

Maybe we'd all benefit from a little "demand destruction." What better incentive to conserve than to face higher prices? Ramp up the tax on gas, and people will cut down on discretionary use, which will cut demand, which will relieve pressure on the supply, which will help hold the price down. Meanwhile, the higher tax revenue could be used for ... take your pick. But perhaps it could go for better mass transit, which would cut down on gasoline consumption, which would relieve pressure on the supply, which would help hold the price down.

In case they haven't noticed, rising prices alone have a tendency to tamp-down demand, and incomes as well. From today's Wall Street Journal:

Personal income fell $5.3 billion in August from July in part due to the impact of Hurricane Katrina. Consumer spending fell by $42.7 billion, the largest drop since November 2001, hurt by cooling auto sales and surging energy prices. Inflation jumped 0.5%, the biggest increase in 15 years.

So it seems consumers are already retrenching in light of soaring energy prices. Incomes have fallen, spending has fallen even more. And wouldn't you know it? The higher prices go, the more people will pull back.

But that's not enough for the DP. They want to further diminish incomes and further diminish spending (at least in Virginia) with higher gas taxes.

"Demand destruction" indeed. With that sort of economic brain-power at work, we'll all be riding bicycles before Christmas. If we can afford them. Though I can imagine that if the DP got its way, one of the first discetionary cuts people might make would be newspaper subscriptions. Be careful what you wish for, fellas.



::: posted by Norman Leahy at 10/01/2005 3 comments





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