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The Tentacle


May 7, 2008

Pandering of Tulipomaniac Proportions

Kevin E. Dayhoff

In last week’s episode of “Democolypse Now,” the continuing saga of the deconstruction of America by the 2008 presidential campaign, we find Sen. Hillary Rodham Clinton proposing a summer suspension of the federal taxes on gasoline and diesel fuel.

 

To be fair, the idea was first floated by the presumptive Republican candidate, Sen. John McCain, who has otherwise never been mistaken for an economist.

 

In a breath of fresh air, Sen. Barack Obama does not support the “Clinton-McCain Gas Tax Holiday” initiative. He rightfully has cited that the idea to suspend the 18.4-cent federal gas tax and 24.4-cent diesel tax from Memorial Day to Labor Day would save the average American only about $30, and the federal government would lose about $10 billion in revenue.

 

(Of course, it is not fully known as to how his now-former pastor, the Rev. Dr. Jeremiah Wright, feels about the gas tax holiday idea. As an aside, please, never hold me responsible for some of the insufferable sermons I have endured from liberal pastors in my past.)

 

Speaking of voices from the past, who would have ever thought that Robert Reich, the longstanding friend of Bill and Hillary Clinton, who served in the Clinton administration as the nation’s 22nd Secretary of Labor, would ever criticize the Clintons?

 

Secretary Reich, who goes all the way back with the Clintons to the days they spent together at Oxford University and Yale Law School, was widely acclaimed for his populist brand of economics.

 

Now a professor at the University of California-Berkeley, Secretary Reich recently documented yet another bizarre moment in the presidential campaign: “Hillary Clinton doesn’t listen to economists.”

 

Senator Clinton appeared recently on George Stephanopoulos’ Sunday morning program. At that time, Mr. Stephanopoulos, to his credit, asked her “if she could name a single economist who backs her call for a gas tax holiday this summer.”

 

To which she stated the obvious: “I'm not going to put my lot in with economists.”

 

Truer words were never spoken by the person who will say – and do – anything to be president.

 

However, it was Secretary Reich’s analysis, in ever so scholarly terms, which amused many: “The gas tax holiday is … economically stupid (as) it would increase demand for gas and cause prices to rise.” Duh!

 

Moreover, Thomas L. Friedman, in a column in The New York Times titled, “Dumb as we wanna be,” stole the best lines when he wrote:

 

“It is great to see that we finally have some national unity on energy policy. Unfortunately, the unifying idea is so ridiculous, so unworthy of the people aspiring to lead our nation, it takes your breath away. … This is not an energy policy. This is money laundering: we borrow money from China and ship it to Saudi Arabia and take a little cut for ourselves as it goes through our gas tanks. What a way to build our country.”

 

Indeed! For those who feel that the Economic Stimulus Act of 2008, otherwise known as the Bipartisan Pandering Act of 2008, was populism at its best, the idea of suspending the gas tax for the summer, lights the candles on the cake.

 

At anytime soon most will be looking forward to receiving a $600-$1,200 “rebate” from the Uncle Sam in a mailbox near us. The legislation, signed into law in February, amounts to more that $152 billion, or about 1 percent of the Gross Domestic Product – freshly borrowed from the Chinese so that Americans can go out and purchase products from China and oil from the Middle East.

 

The Arab oil barons and the Chinese lead-mining industry want to take this opportunity to thank our august leadership for their generosity and thoughtfulness. Rumors that the checks will bear the likeness of the famed radical populist demagogue Huey Pierce (“The Kingfish”) Long, Jr., of Louisiana, have yet to be proved untrue.

 

Moreover, rumors persist that the checks will be accompanied by a personal note of thanks from Chinese premier Wen Jiabao, or an Arab Sheik yet to be named.

 

For the economists among us, we are truly living the “Age of the Never-ending Nightmare.”

 

For those who are students of economic history, about the only thing left for our national leadership to explore is for them to encourage us to invest in tulip bulbs.

 

Yes, you read that correctly, tulip bulbs.

 

We may have to go all the way back to Holland in the 1630’s to find economics this bizarre.

 

In 1593 Conrad Guestner imported the first tulip bulb into Holland from the Ottoman Empire. The “exotic” plant quickly became a coveted luxury status symbol for the rich and famous in Holland and neighboring Germany.

 

So much so that by 1636 the Dutch parliament had passed laws that facilitated a market in tulip bulbs as an alternative financial vehicle in lieu of the economic uncertainties caused by The Thirty Years War.

 

Coined “tulipomania,” the resulting sale of tulip bulbs quickly attracted profiteering of spectacular proportions to the point that people traded in their farms, livestock, and life savings to acquire a single tulip bulb on market exchanges that are forerunners to today’s stock exchanges.

 

The price of a tulip bulb (I’m not making this up.) rose to what in today’s money was the equivalent to $76,000, and financial institutions began marketing options on a fraction of the cost of a bulb so that average citizens of meager means could participate in the mania.

 

Of course, the craze was ultimately unsustainable and in a six-week period beginning in February 1637, the market collapsed and prices fell by around 90 percent, causing a financial panic throughout Europe.

 

Draw your own analogies. The possibilities are endless. It represents perhaps the only pandering left unexplored by our current presidential hopefuls: “The Clinton-McCain Tulip Bulb Investment Act of 2008.”

 

Kevin Dayhoff writes from Westminster: E-mail him at: kdayhoff@carr.org



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