Today’s Phrase for Latin Lovers

Rex in Regno suo superiores habet Deum et Legem.

Translation:
The King in his Realm hath two superiors: God and the Law. -- Henry Care (1646-1688) on English liberties and the Magna Carta

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The Tale of a Little SC Town and the Fatal Flaw in Obamanomics

Barack Obama has apparently forgotten in what category he was awarded a Nobel Prize. His was in Peacefully Waging War From Behind. His Energy Secretary, Steven Chu, received one in Physics. Neither of them received one in Economics, though that is the field both are trying to claim an expertise in as they try to choke off America from her below-ground energy resources.

Addressing skyrocketing gas prices, Obama claimed that decreasing demand for oil will lower the price. In a speech to a North Carolina trucking firm, he said:

“That’s the only solution to the challenge because as we start using less,” Obama says. “That lowers the demand, prices come down.”

That may true in Obama’s fantasy land, but here in the real world, it is increased supply that lowers prices. A highly probable result of decreased demand is…increased prices. [Watch Jim Angle’s excellent Special Report segment at the link above, if you missed it, because amazingly, all but a few non-business media outlets have little interest in challenging Obama on his math.]

Is there a real world example that proves Obamanomics wrong? Why, yes, there is:

Take the town of Mt. Pleasant, South Carolina, a quiet suburb of Charleston. The citizens there are civic-minded, anxious to do their part in the world. So when the water department told them that if they could reduce their consumption of water, they would not only save the environment, but would save money, too, they dutifully conserved.

Ample rainfall helped keep the lawns green without having to use town water for the sprinklers. The town was booming with development as the housing frenzy of the mid-2000s brought the water company extra money in connection fees and new customers. The waterworks was rolling in revenue.

Then came the housing crash. Building stopped, along with the new connection fees. Water usage further declined with fewer homeowners.

That’s when all the good unsuspecting conservationists got smacked with a nine percent increase in their water rates—about $50 per household a year—to make up the lost revenue from the decrease in water consumption.

Even then, the Mt. Pleasant Waterworks couldn’t make ends meet. They had a minimum amount of revenue they needed to make. The MPW director Clay Duffie said:

We took drastic action to lower our expenses. We laid off nine employees, froze salaries with no raises, reduced health benefits, cut travel and education by 70-percent, and paid off debt to reduce our debt coverage requirements. These actions helped us avoid a rate increase in FY 2010.

The same scenario has been repeated all across the country. Demand for water goes down, due to conservation and loss of customer base, then prices have to go up on the conservers to cover the shortfall.

Substitute the commodity of oil for water and an oil company for the waterworks, and little in the equation changes.

So while Obama expected his mere presence to cause the waters to recede and the Earth to “heal,” he apparently also has expected to be immune to the laws of supply and demand. Yeah, that’s worked out about as well as his other megalomaniacal expectations.

2 comments to The Tale of a Little SC Town and the Fatal Flaw in Obamanomics

  • I can’t agree with the example, although I do agree that Obama’s stupidity about supply and demand couldn’t be exaggerated.

    The above is an example of a city utility being unable to lay off manpower and reduce man-hours in the face of reduced expansion. It’s a water-works “bubble”, but it is a brilliant microcosm of our government’s economic delusion that income is not based on production but merely on historical return.

    “It’s there, it’ll be there tomorrow because the base is ever-expanding.” We’ve proven that mindset wrong with shrinking population, production, growth, and innovation.

    Mt. Pleasant is a great little community,for all that.

    • Prudence

      Good point about the waterworks bubble, Ms. Argghh. [By the way, have I ever told you how much I simply love your name? It never fails to make me giggle.]

      But even if the bubble hadn’t burst, I think my imperfect analogy does illustrate how conservation—and therefore, reduced demand—alone would not have led to lower prices, as little in the expenses could be reduced. (As it happened, jobs had to be slashed to meet the reduced revenue, but I don’t think that’s an approach Obama wants to promote.)

      For the same dollars, they could have enjoyed longer showers, while propping up the waterworks by paying the lower rates for more water.

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