Did you see Tim Russert ask Vice President Dick Cheney on Sundays “Meet the Press” why President Bush did not call for price caps to lower gasoline prices and other energy costs?
Mr. Russert kept returning again and again to the same hare-brained, left-wing idea, as Mr. Cheney patiently explained why government price controls have never worked, either to control inflation or to increase the supply of anything. On the contrary, price caps inevitably restrict supplies, boost demand and lead to higher prices.
While Mr. Russert seemed to be promoting the news media´s party line that California´s energy crisis was caused by deregulation, Mr. Cheney effectively and repeatedly argued that just the opposite is the case. The state´s problems were caused by “a screwy regulatory scheme” that imposed rigid rules that prevented the energy industry from building power plants and buying and selling power at the cheapest price.
Journalists are supposed to ask probing questions to challenge officials to defend their policies. But when simplistic, dangerous ideas like price caps are so discredited, the news media has a responsibility to say why this is so, and why they have not worked.
Yet here was a major media star, once a top aide to former Democratic Sen. Daniel Patrick Moynihan of New York, pushing the idea that if greedy U.S. oil companies would just cut their profit margins, they could lower gas prices at the pump.
“But why not call in the oil companies” to the Oval Office, Mr. Russert said. “Why not lower your profit margins a little bit so we can lower the price of gasoline? This is the way the consumer sees it.”
This presupposes that profit margins are driving up gas prices, when in fact the price is being driven up by increased demand and limited supplies. Limited, that is, as the vice president explained, by the failure to expand exploration and build new refineries in this country because of federal and state laws, rules, regulations and bureaucracies.
Mr. Russert brought in a number of liberals to plead the cause of price caps or government jawboning to accomplish the same thing. He ran a tape of Teddy Kennedy urging President Bush to call in the oil industry and order them to reduce their prices.
He quoted California Gov. Gray Davis saying Mr. Bush was “allowing the price-gouging energy companies … to get away with murder” without producing a scintilla of evidence to back up that charge.
Then Mr. Russert, unabashedly making the Democrats´ case for them, said: “People in California, Mr. Vice President, pleading for price caps. Just don´t let those profit margins be so high, cap the price short-term, so California can get some plants online and then have low-cost energy.”
But if the government did limit the oil companies´ profits, would that increase supplies and lower prices? Not very likely. Such an action would drive down the value of their stocks, reduce investment capital, and thus shrink the resources they need to explore for more oil.
In 4,000 years of recorded history, price controls have never worked. They will not work now in California or anywhere else.
“Price caps don´t increase supply. Price caps don´t reduce demand. In fact, they do just the opposite. They lead people to believing that they don´t have to pay the full cost for the power or discourage investment in additional supplies,” Mr. Cheney said.
Yet here are the Democrats running ads on television against the Bush plan, charging that it does not, among other things, call for “a temporary cap on electricity prices.”
At the same time, Democratic leaders rejecting the laws of supply and demand are actually attacking Mr. Bush´s plan because it calls for more energy production here at home to increase domestic supplies and make us less dependent on OPEC countries overseas.
When you increase the supply of anything, relative to demand, the price of that commodity eventually comes down. Yes, we must conserve, which this plan calls for, and of course we need to develop alternative sources of energy, which it also calls for. But we must produce more of our own resources as well: oil, natural gas, coal and nuclear.
As Weekly Standard editor Bill Kristol pointed out this week, the Democrats are against using cleaner coal, against drilling for more oil, and against using nuclear power. “What do they want us to do, ride bicycles around and have windmills on our houses?” Mr. Kristol asked.
Thoughtful, centrist-leaning Democrats are also rejecting their party´s regressive, anti-supply-and-demand, price-control proposals.
“There´s probably no short-term solution,” said Louisiana Sen. John Breaux, leader of the New Democrat coalition. “We´re going to have to work our way through it and be aggressive in trying to increase domestic supplies.”
“We aren´t going to solve this problem just with windmills and solar power. You have to have alternative fuels, but you also have to have regular domestic oil and gas production. You have to have balance,” he lectured his party.
The bulk of Mr. Bush´s plan will become policy, because 80 percent of it can be done through executive orders. But it would help if the national media explained to the public how we got into this fix to begin with. It was not through deregulation. It is the result of far too much government regulation. Price caps will only make the situation worse.
Donald Lambro, chief political correspondent of The Washington Times, is a nationally syndicated columnist.