The president doesn’t change the prices. So why all the tweets?
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President Joe Biden, or his designated representative, has been having a good time tweeting about petrol prices lately. Almost every time the national average drops below a penny, the White House is tweeting about it. We reached peak panic over gas prices about a month ago, Biden resolved to bring them down, and they fell. Sure, the White House wants to take credit. That’s just politics.
Now, the decline is due to a confluence of factors including weak demand, fall in crude oil prices and continued release of oil from Strategic Petroleum Reserves. At some point the SPR will run out and it will have to be refilled – potentially at higher prices. Biden also tried to put some moral pressure on gas station owners, but most of the business community laughed at him – the profit margin on gasoline is small, and gas stations practically sell it for the price it already has. This represents a policy victory of sorts, however short-lived it may be.
Other presidents have sought credit for favorable moves in economic variables. During most of President Donald Trump’s first term, he tweeted obsessively about the stock market, almost daily for some time. He thought his pro-growth policies lifted stocks, and he probably did, at least initially. But as Trump repeatedly took credit for the stock market, it was inevitable that it was going to end badly, and in 2020, it did. Biden’s attempt to take credit for the drop in gas prices could face the same fate. Trump may blame the stock market crash on Covid, and Biden will probably point to Vladimir Putin or the oil companies when gas prices reverse.
I’m not sure why the president does this. Taking credit for a drop in gas prices that won’t last forever – Biden leads the public to believe that the president has control over an economic variable over which he has virtually no real control . There is no planning or forethought about messaging when that policy measure ceases to be in effect. Gas prices will inevitably rise, blame will shift, and Biden will appear weak and ineffective – the exact opposite of what he intended. President Trump didn’t need much help looking silly at times, but when the stock market crashed his opponents jumped quickly.
The question is, do presidents have the power to move the markets? The answer is yes – at very long intervals. A president can create the necessary conditions for high stock or low oil prices, but they can’t actually push prices in one direction or the other for any length of time. For example, I’m a big believer that President Ronald Reagan’s supply-side reforms led to gains in the stock market over the next 20 years. He created the conditions that were necessary for individuals and businesses to flourish. But importantly, the government did not buy the stock, and stock growth was not the end goal of the reforms – just a nice byproduct. If he chose, for example, by allowing drilling on federal land, Biden could create the prerequisites for lowering oil prices. This may not cause prices to drop immediately, but they can occur over a period of years. Unfortunately, few people think about the next election cycle.
President Barack Obama was also to blame for this, though not as much as Trump and Biden. Obama was a bit obsessed with the unemployment rate and thought there was some immediate nexus between his policies and unemployment, although his inauguration took place at the bottom of the financial crisis, and unemployment may have improved over time as the economy recovers. Went. One could argue that the decline in the unemployment rate was actually delayed by offering 99 weeks of unemployment benefits, which slowed the recovery.
I’m fond of saying that for someone who has spent his entire career in politics, Biden is sometimes very bad at politics. In such a situation, his tweets about gas prices are short-sighted. When prices go up, it will disenchant them and possibly even lower their already sinking approval ratings. The temptation for presidents to take credit for positive economic moves beyond their control is too good. It seems they forget that when things go awry they open themselves up to blame.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Jared Dillian is the editor and publisher of Daily Dirtnap. An investment strategist at Mauldin Economics, he is the author of “All the Evil of this World”. He may be interested in the areas he writes about.
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