John Kerry: Economically Nuanced Dunce

After reading the following I’m glad that Kerry is not President (although I’m not exactly thrilled with Bush either…definitely a difficult choice between two unpalatable candidates–at least for me).

But Kerry said the federal government must do its part to help businesses overcome obstacles to competing in the global economy – such as rising healthcare and energy costs, and lagging investments in education and research and development.

Kerry laid out what he called a ‘‘three-pronged competitiveness challenge’’ facing the nation’s economy – energy, education and incentives for business growth.

Kerry called for focusing on new technologies and alternative fuels to reduce the nation’s oil dependence and create new jobs. His proposal includes tax incentives for automakers to produce more fuel-efficient cars and for consumers to buy them, and developing energy alternatives such as bio-fuels and wind energy.

‘‘You just heard the president give a speech in the State of the Union message and he talked about how America is addicted to oil,’’ Kerry said. ‘‘Mr. President, the nation is not addicted to oil, your administration is addicted to oil.’’

On education and business competitiveness, Kerry called for using the same money that goes for tax cuts to instead be used to improve schooling and for new investments in research and development.–source

Here is my problem with the bulk of these kinds of proposals. They make sense without the government subsidy. What does your typical investor want in a company? A competitive company that is looking for new ways to grow and stay profitable? If the answer to this is yes, then why do we need a government ‘‘three-pronged competitiveness challenge’’? We don’t. Granted some businesses will fail to find new ways to grow and remain profitable, but that is just the way the market is. We don’t want to continually prop up failures.

Consider the energy-efficiency nonsense that Kerry is pushing. Suppose I have a company and we’ve just come up with a slick new battery system for hybrid cars that really does allow for 75 mpg of gasoline. Is this going to be a good thing or not? My guess is it will be a good thing. Granted I may not be able to set up a huge factory that cranks out millions of hybrid cars, but I could sell the system to the highest bidder. How much would GM, Ford, Toyota or Honda be willing to pay for such a system? With such a system they could get a jump on their competition in the hybrid market, and with gasoline prices still quite high given prices of the last 10 to 15 years this could be a very lucrative move for whichever company buys the new battery system. Hence there is plenty of incentive to do research on hybrids and their battery systems.

The only possible justification for the government to get involved in such research is if the external benefit of such a battery system is large and the country as a whole would benefit if such technology was not protected with patents and other restrictions. That is, if the hybrids cut pollution then the benefit of this might be sufficient to justify government involvement. However, this is not the justification that Kerry is relying on. Kerry is instead focusing on reducing dependency on foreign oil and creating new jobs. As I’ve argued in this post, using the government to try and “pull ourselves up by the bootstraps” is likely to have precisely the opposite results.

Kerry called for focusing on new technologies and alternative fuels to reduce the nation’s oil dependence and create new jobs. His proposal includes tax incentives for automakers to produce more fuel-efficient cars and for consumers to buy them, and developing energy alternatives such as bio-fuels and wind energy.

Let me translate this propaganda. What Kerry is saying is that he’d rather take the money that we are spending on oil and put it into the hands of American corporations. Funny how Bush is considered to be the Kelptocrat in Chief when Kerry has been making these kinds of statements since he first announced his candidacy for President.

Now to head of charges of being a Bush lickspittle or partisanship, I think many of Bush’s policies are equally dumb. Bush has come out in favor of subsidizing hybrid cars as well. See my posts here and here that are critical of Bush. This kind of nonsense seems to cut across party lines.

FILED UNDER: Economics and Business, , ,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. Steve says:

    You can go at least as far back to 1992 and hear how Bill Clinton was promising tens of thousands of “good high paying” jobs manufacturing windmills, solar cells, hydrogen powered cars and other pies in the sky.

    It has been part of every Democratic stump speech since.

    Dream jobs making the tools of the “green” revolution. All our jobs will be above average AND environmentally friendly.

    Talk about a feel good twofer!

    I think Bush has committed the classic blunder that does not involve Asia or Sicilians. The need to be perceived as “doing something”.

    For Bush, “doing something” translates into a goody bag full of subsidies for technologies and fuels (ethanol/methanol/biomass) that have been weighed by the marketplace and found wanting.

    What he really needs to do is give the nation a lesson in economics.

  2. Steven Plunk says:

    Rather than “help” business why not just get out of the way? It can be that simple.

  3. ytba says:

    Kerry’s energy policy is based on technology that DOES NOT YET EXIST. What does exist is still not widely affordable, or able to replace systems requiring oil. What’s more, we don’t know when (or even if) it will be, or at what cost. Oil we already have, and need to rely on till that other technology is in place. Blaming Bush for that is dishonest, as are many, if not most, of Kerry’s promises and accusations..

    Governments have almost NEVER been involved in breakthrough technology. NASA is an exception, but even it’s contributions were mainly from an unrestrained civil sector, not the government. Generally, the more regulations on research and industry that are imposed, the fewer discoveries are made. Kerry’s promises of a government sponsored utopia are, therefore, nothing more than a few magic beans..

    We could be energy independent, or nearly so, as the administration wants, if we were able to disengage from Kerry’s “tree hugging” friends. We have a lot of oil in Alaska, yet they prefer to force us to continually rely on Mid East oil, instead of our own; plus they get the benefit of blaming Bush..

    In fact, if you look carefully at Kerry’s “solutions” to problems, they consist of:
    1. my opponent is always wrong.
    2. if I’m elected, I’ll invest in a magic wand that will make everything better.

    Thank G-d most Americans weren’t fooled by his fantasies.

  4. floyd says:

    never forget, it was the democrats who put the republicans in power.like a choice between tweedle-dee and tweedle-dung.