Freedom New Mexico
We cannot spend our way out of economic despair, yet we keep on trying and expecting a different result. The latest effort by the Obama administration to spend our way out of trouble involves the president’s agreement to tap our country’s strategic oil reserves, liquidating a strategic asset to spend it now and create an illusion of economic well-being. Those on the left are delighted, as they believe all things — including fuel — come from government.
A day after Federal Reserve Chairman Ben Bernanke all but ruled out another round of inflationary quantitative easing, the International Energy Agency — which includes the United States — announced plans to release 60 million barrels of crude from strategic reserves. Half of the release will come from the United States. This waste of our fuel is expected to save consumers up to 10-cents a gallon, or about $6 a month for average consumers.
The reserves are intended to save us in the event of a genuine oil crisis — such as an embargo or the destruction of a canal — not a temporary and typical summer price spike. Our reserves were not built up as a mechanism to manipulate prices, and this abuse of our reserves may be the only form of economic stimulus the government has left. A round of QE3 won’t work because QE2 already hurt consumers and small businesses with inflation, the result of too much currency chasing too few goods.
By releasing our reserves, the government will artificially inflate the fuel supply — as QE2 inflated the money supply — in hopes of giving consumers a break at the pumps and at grocery stores, where food prices are directly affected by the cost of fuel. It is also believed that businesses will be able to retain more employees, and keep unemployment from rising, if the government can keep fuel prices in check over the summer.
“The stimulus levers have all been pulled,” said David J. Ward, CEO and founder of NorthStar Economics Inc., an economic consulting and research firm in Madison, Wis., as quoted by the Wall Street Journal.
Just as inflationary money policy has the effect of reducing the incentive to work and produce — as it devalues currency — the release of crude reserves will reduce market pressures to find and produce more oil. It’s like a junkie’s fix. It feels good now, but we will pay when the party is over.
The decision to spend oil reserves is typical of the Obama administration’s approach to the economy. It is big on spending and short on production.
Tapping the reserves is tantamount to tapping an emergency savings account and selling assets to avoid working, selling, inventing or producing. It is foolhardy. To be safe, the oil — like the money in an emergency reserve account — will need to be restored. That means we are creating a debt without a plan to pay it off, all the while putting ourselves in a potential lurch should a bona fide oil shortage arise.
It is another example of the left believing that wealth, including energy, is something government gives us. It is the latest example of the Obama administration doing nothing to facilitate prosperity and everything imaginable to fritter away our country’s assets and security. It also may be the last example of this foolish approach to engineering our economy, if our reserves are indeed the last lever available in Obama’s economic carnival fun house.