Tuesday, October 30, 2007


High Price of Gasoline

Finally, here in Southern California, the cheapest unleaded gasoline costs more than three dollars a gallon. Some of us wonder why and what the government can do to get the cost down. Last night on the TV news I saw the report on the latest price for crude oil. It has reached a new high. Gasoline is made from crude oil and the price of crude affects the price of gasoline.

Why does crude oil cost so much? The same news account reported that the dollar has become cheaper. When the euro was introduced in Europe to replace the various national currencies, it was on a par with the dollar. Now it costs about $1.40 to buy one euro. The cheap dollar helps domestic firms to export their goods. It helps farmers to export their crops. It makes imported goods, like crude oil, more expensive. In time, it will make it less profitable to ship labor-intensive manufacturing operations to countries with low wage scales. There are advantages and disadvantages for a cheap dollar.

Why is the dollar becoming cheap? It's a result of a deliberate policy of the present Bush administration. The administration is running the country partly with borrowed money. Rather than increasing taxes to pay for the cost of the war in Iraq, the administration sells treasury bonds to many foreign countries, such as China and Japan. Eventually this increasing debt tends to make the dollar cheaper. The cheap dollar can be traced to the Bush tax cuts that have created a permanent deficit and caused us to increase the national debt each year by hundreds of billions of dollars.

The tax cuts were justified as (1) gifts to the wealthy supporters of candidate Bush, who deserved a reward for their generosity in funding his campaign in 2000; (2) stimulants to the economy, by putting more money in the hands of the wealthy so that they would be able to invest in new factories and employ additional workers; (3) rewards to conservative ideologues who believe that the government is too big and spends too much money and the way to make it smaller is to reduce its revenue so that those wasteful Congressmen won't be able to spend money on things not specifically called for in the constitution of 1787.

There's a moral in all of this. Perhaps one of these sayings will express it:

What do you think?

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