Over at the Volokh Conspiracy, Jonathan Adler, parroting Karl Rove, manages to criticize both Obama and McCain for "economic nonsense" in a post that is, itself, economic nonsense. A impressive feat. Adler writes:
In today's WSJ, Karl Rove observes both John McCain and Barack Obama are proving "that in close elections during tough economic times, candidates for president can be economically illiterate and irresponsibly populist." He criticizes Obama for embracing a Carter-esque windfall profits tax, and McCain for seeking to direct how oil companies invest their own profits. ... Rove is not known for his mastery of energy policy or economic principles, but in this case he's right on target.It should be painfully obvious that Adler isn't known for his mastery of economics either. Basic economic theory tells us that Obama and McCain are acting completely rationally by advocating these "economically illiterate" policies. They are both trying to win an election, and thus must maximize the number of votes they receive. Obama is advocating a windfall profits tax because gas prices are incredibly high, and voters are likely to be particularly responsive to a politician who promises to lower gas prices. The benefits (i.e., more votes) of advocating a windfall profits tax are thus very high. The costs are low because Obama won't ever have to actually follow through on his promise. Windfall profits taxes on oil companies are proposed every summer (when oil prices go up, usually due to the summer driving season). These bills are always drafted in such a way as to make it them ineffectual even if they were passed. Usually they include a clause stipulating that the tax only becomes effective if the President declares a "national gas crisis." That's how you know they're not serious. The costs of advocating a windfall profits tax are limited to losing the votes of people who oppose a windfall profits tax, i.e., hard-core pro-business Republicans and oil industry employees. The number of votes lost is not only numerically smaller than the number of voters potentially gained by proposing a windfall profits tax, but it also includes virtually none of the most valuable voters: independents. The same analysis applies to McCain. What's "economically illiterate" is the assertion that Obama and McCain's populist proposals "reveal a disturbing animus toward free markets and success."