John McCain's "Big" Economic Plans

Here's John McCain's big plan for the budget: make a whole lot of noise about eliminating of the piece of the budget pie representing earmarks (and remember that most earmarks simply mandate where monies will be spent, they don't create any new spending):

[Note: The OMB estimates earmarks to be 16.9 billion in 2008. Current federal expenditures for 2008 are not yet available, so the chart uses the 2007 value of 2880.5 billion from the BEA (the ratio is approximately one half percent, i.e. 0.59%). Since federal expenditures for 2008 will exceed those of 2007, this means that the area for earmarks shown in the diagram is overestimated, i.e. it is larger than the true value. The NY Times also notes that "earmarks ... make up less than 1% of the federal budget."].

All the recent controversy over McCain lying about Palin's earmark requests, as he did most recently on The View, is noteworthy for what is says about McCain's (lack of) character, but more generally it is misdirecting us from more important issues. Earmarks are only a minor part of the overall budget, and issues such as health care reform are much more important since rising health care costs will absolutely dwarf any savings from earmarks.

Here's the centerpiece of McCain's economic plan: drill for oil, then pretend like it will help at the pump:

[via]

I can't even see the sliver of yellow until after 2015, and even after that it's not much of a contribution. That's supposed to lower gas prices?

With such a solid foundation for the polcy porposals - a couple of slivers of pie - I can't imagine why the McCain campaign would resort to lies, deceptions, misdirection, and misleading characterizations to sell these "big" plans.

Update: Brad Delong has a slightly more detailed version of the first graph here (scroll down).

Comments

[Mark Thoma]

The numbers come from the US Energy Administration (follow the link under the chart), so you may want to check your "facts".

The chart plots these numbers:

http://www.eia.doe.gov/oiaf/aeo/otheranalysis/ongr.html

You'll hear a lot of attempts to discredit these numbers, but nobody has really done so, and even if you increase or decrease the yellow area by, say, 50% it doesn't change the picture much, so it's all just a lot of noise about a very small contribution to satisfying our energy needs.

[Pierce Wettetr]

Are you sure you're an economist? Ever hear of effects on the margin?

Anyways, unfair to characterize McCain's plan as just drilling, I think how he describes it as "all of the above" is more accurate.

[odograph]

Great post Mark, keep it up.

[Mark Thoma]

The margin . . . hmmm . . . margin . . . I know I've heard that word somewhere, where could it have been?

I know!!!

It was the estimates that the marginal effects of the yellow area on price wold be a few cents at best.

If you want the economics, there they are. A few cents. At best.

[bullbust]

>It was the estimates that the marginal effects of the yellow area on price wold be a few cents at best.

You may want to add demand into the picture, if possible.

[Bruce Wilder]

Pierce Wettetr might have a point about the margin, if the world totals projected by the U.S. Energy Administration for 2030 were the least bit realistic. But there are the twin problems of Hubbert's peak and global warming. World oil production (net of energy used in extraction and refining) is never, ever going to be significantly higher than it is right now, and that puts a hard limit on consumption; and, even if it didn't, the planet's climate will change catastrophically, if we actually did continue to consume oil at current rates.

It is a very narrow, short-term vision that leads the Republicans to promote "Drill Here, Drill Now". It is a desperate attempt to conserve an economic paradigm that is not just obsolete, it is self-destructing, and taking the planet with it.

Al Gore, in remarks before the Democratic Convention:. . . Eight years ago, some said there was not much difference between the nominees of the two major parties and it didn’t really matter who became President.
Our nation was enjoying peace and prosperity. Some assumed we would continue both no matter the outcome. But here we all are in 2008, . . .
Take it from me, if it had ended differently, we would not be bogged down in Iraq, we would have pursued Bin Laden until we captured him.
We would not be facing a self-inflicted economic crisis, we would be fighting for middle income families.
We would not be showing contempt for the Constitution, we’d be protecting the rights of every American regardless of race, religion, disability, gender or sexual orientation.
And we would not be denying the climate crisis, we'd be solving it.
Today, we face essentially the same choice we faced in 2000, though it may be even more obvious now – because John McCain, a man who has earned our respect on many levels, is now openly endorsing the policies of the Bush-Cheney White House and promising to actually continue them, the same policies all over again?
. . .
With John McCain’s support, President Bush and Vice President Cheney have led our nation into one calamity after another because of their indifference to fact; their readiness to sacrifice the long-term to the short-term, subordinate the general good to the benefit of the few, and short-circuit the rule of law.
. . . we’re borrowing money from China to buy oil from the Persian Gulf to burn it in ways that destroy the future of human civilization. Every bit of that has to change. . . .
And it just so happens that the climate crisis is intertwined with the other two great challenges facing our nation: reviving our economy and strengthening our national security. The solutions to all three require us to end our dependence on carbon-based fuels.
Instead of letting lobbyists and polluters control our destiny, we need to invest in American innovation.
Almost a hundred years ago, Thomas Edison said, “I’d put my money on the sun and solar energy. What a source of power! I hope we don’t have to wait until oil and coal run out before we tackle that.”
We already have everything we need to use the sun, the wind, geothermal power, conservation and efficiency to solve the climate crisis – everything, that is, except a president who inspires us to believe, “Yes we can.”
So how did this no-brainer become a brain-twister?
Because the carbon fuels industry – big oil and coal – have a 50-year lease on the Republican Party and they are drilling it for everything it's worth. And this same industry has spent a half a billion dollars this year alone trying to convince the public they are actually solving the problem when they are in fact making it worse every single day.
This administration and the special interests who control it lock, stock, and barrel after barrel, have performed this same sleight-of-hand on issue after issue. Some of the best marketers have the worst products; and this is certainly true of today's Republican party.

[Mark Thoma]

That's all just the usual fog, same things that are trotted out every time. As I said, move the line back and forth a few years, or increase or decrease the yellow area, even double or halve if (you only cite errors on one side because you want to make a case, but there are also factors that push things the other way). It's all small potatoes. So you go from two cents to three cents off the price - maybe - if all errors are one-sided and everything comes out fairly high on projected values (not all will), so what? It's still nothing.

Arguing about these tiny details, things that don't matter much, simply steers the conversation away from more productive areas of inquiry. For many, that's the intent.

[Gegner]

Let's not ignore the costs associated with that kind of 'deep water' drilling. They aren't giving those pipes away and you need to factor in the cost of crossing the water as well as the underground portion. By the time you're through, there may not be any profits at all.

If you drill a 'blind hole'(don't strike oil), sometimes you can get the pipes out and sometimes you can't.

[donna]

We COULD just get rid of the gas guzzling SUVs and not need to drill any more at all, but Republicans hate hearing that kind of thing. They really are sure the splurging on cars and big houses and spending our grandchildren's income even if they aren't born yet can go on simply forever!

[napablogger]

Prof Thoma, I am glad you came in to respond to the criticism of your points. Few rarely do that and it is needed to help the public (like me for instance) see what the truth is.

thanks

[Lafayette]

Much ado about nothing

Here we are debating about meeting a present problem of current supply of gas for the American market, by tapping reserves. I suggest this is myopic.

May I further suggest that such consideration only begs the question, "Why are we focusing on a Supply problem, when the answer lies in rationalizing Usage?" Meaning this: We are NOT going to fix the gas supply problem by tapping continually diminishing petroleum reserves. Unless one adds the truly high cost of extracting those reserves because they are further from the surface. Will not amortizing those higher extraction costs only maintain the higher costs at the pump?

A truly rational Energy Policy is more holistic and addresses not only Supply but Demand (usage):
* New large capacity nuclear energy generation,
* Renewable energy sources augmenting total electricity supply,
* The lamentably long overdue demise of the internal combustion engine as a principle means of propulsion,
* Rationalization of mass transport systems around large urban centers, and the
* Introduction of long-haul surface transportation (people and shipping) by extensive usage of energy-saving hi-speed trains. (A multi-hundred million dollar infrastructure project generating jobs.)

[ken melvin]

If all cost were incorporated, I suspect hydrogen fuel produced using wind, wave, solar etc. would look dirt cheap.

[Whatever]

MHodak : You are partially correct. However, the wind and solar slivers will most probably go up, given enough funding and research. Not so for drilling offshore, specially oil prices go down.
We can see that with gasoline above $4, it is having an effect on behavior and lifestyle. We
need more off that.

[MHodak]

Whatever: Certainly spending more on alternative fuels can boost their volumes, and conservation would reduce overall demand (already is). I think Thoma's point was that given current and projected demand, off-shore drilling will contribute too little to move the needle on prices by 2030. My point is that even with significant, even uneconomical levels of investment in alternatives, we won't make much more of a dent in our foreign oil consumption while meeting projected demand. I was noting that both candidates are promising energy independence by 2018. Obama is promising to do it with alternative energy.

[Lafayette]

KM: I suspect hydrogen fuel produced using wind, wave, solar etc. would look dirt cheap.

That depends upon how you make the calculation.

Presume we do nothing. Presume global warming raises sea levels. Factor the cost of recuperating seaside cities, like New Orleans, from a rise of a meter and a half of water level in 50 years, into the cost of "doing nothing". Who is going to compensate the property owners for their loss in 50 years -- the oil/coal/gas companies?

So, presume the Federal government raises fossil-fuel taxes to feed a reimbursement fund. That makes the expense of the carbon molecule fuels go orbital. And, of course, the oil, coal and gas companies don't want us to do that, do they ... ?

So, we don't do it. And, it's the federal government that will pay property owners a dime on the dollar for the colossal lack of foresight.

[Ronald Rutherford]

What I think:
http://rdrutherford.blogspot.com/2008/09/john-mccains-economic-plansdr-thoma-is.html
Monday, September 15, 2008 John McCain's Big Economic Plans|Dr. Thoma

[Steve]

My question is: why are these graphs not on television? *this* is what the American public should be seeing.

[Joefucious]

Great post. The whole offshore drilling is a complete farce pandering to big oil.

[Joefucious]

Great post. The whole offshore drilling is a complete farce pandering to big oil.

[cate H]

HEY YALL I HAVE A QUESTION COULD SOMEONE HELP ME FIND AN ARTICLE ON JOHN MCAINS ECONMIC PLAN BECAUSE I CANT FIND ONE ANYWHERE!!!!!!!!!

THANKS

CATE

[Claire]

He really needs to step up the pace and get a grip on life.