Sure enough, the politicians are at it again.  This week cries went out from presidential candidates to Congressional leaders that something must be done to alleviate the ill effects of high gas prices on the economy.  Of course, instead of being honest and considering what Washington has done to create the problem, the politicians are focusing on oil companies and a gimmick.

The gimmick was originally proposed by Republican presidential candidate John McCain and usurped as her own idea by Hillary Clinton.  The proposal is to temporarily suspend the federal gas tax during the high travel months of June, July, and August.  The concept behind it is to give consumers a break by lowering the price of gas per gallon by eighteen cents.  For every ten gallons purchased, Americans would save $1.80.  This savings then would allow them to purchase Big Gulps and snack treats, thus providing a boom to the convenience store industry.  In all seriousness, the proposal is an election year gimmick – a shell game if you will.  The minimal relief that consumers will experience will be more than offset by the inflation caused by the Federal Reserve printing additional dollars to make up for the gas tax shortfall estimated at twelve billion dollars for the three months.  So while politicians will take credit for “helping” consumers in their time of need by providing “cheaper gas” this summer they won’t mention the hidden tax they are imposing on us through the Fed’s inflationary printing of money.

Then there is the more direct focus on oil companies with talk of reenacting our old friend the windfall profits tax (WPT).  Jimmy Carter imposed this tax on oil companies starting in 1980 and it lasted until 1988.  Carterite candidates Clinton and Obama want to reenact it today to get oil companies to pay their “fair share” and help those hurt by economic hard times.  The WPT was and is a tax on business entities that experience both “abnormally high and unanticipated profits”.  Other than who decides what “abnormally high and unanticipated profits” are, there are two other problems with the tax scheme.  First, forty-one percent of oil company stocks valued at over $267 billion are currently held in various forms of pension plans and retirement accounts.  As dividends and the share price of oil stocks decrease because of the WPT will Washington implement another program to help retired Americans with the losses or is it believed that they also need to pay their “fair share” to support the less fortunate?

Secondly, as Ronald Reagan use to say, “When you tax something, you get less of it”.  According to the Congressional Research Service, the 1980 windfall profits tax reduced U.S. domestic oil production by three to six percent.  This happened because the tax increased the marginal cost of production, thereby reducing the quantity of gasoline produced.  Cutbacks in domestic production now will only worsen the price situation.  This, of course, will give Washington another opportunity to legislate and help us again.

So where do we go from here?  What is a constitutionally proper course of action for Washington to pursue in dealing with the current high price of fuel?  First of all, the U.S. should completely pull out of Iraq.  By pulling out of Iraq, we lessen the possibility of a wider Middle East war (e.g. Iran and Syria) and probably lower violence in Iraq because al Quada and Iran will not have the Americans to fight.  These developments will calm speculators and stabilize the price of oil.

Next, Congress should move to abolish the Federal Reserve.  According to Ron Paul, the Fed has roughly tripled the amount of dollars and credit in circulation since 1990.  Because oil is priced in dollars worldwide, by looking at the current price of a barrel of crude one can plainly see the damage done by the Fed’s inflationary policies.  The high price of oil is directly related to the low value of the dollar.  In other words, it takes more dollars to buy the same amount of gas than it did in 1990.  Question is: why are the politicians ignoring this issue and proposing a phony gas tax holiday and a harmful to the middle class windfall profits tax?

The bottom line is that we have a better chance of seeing lower gas prices by eliminating speculation, uncertainty, and the political whims of a central bank then we do through fake government gimmicks and schemes.  Contrary to popular belief, Americans are not entitled by birth to cheap gas.  If we had a true free market and the price of gas was still high, then nature would be telling us something – “supply is low and endangering your environment, so maybe you should use the genius of your species, you know the one you have always used in the past to progress and survive to come up with a new technology to make life happen”.

Kenn Jacobine teaches History and English for the American International School of Lusaka, Zambia.  Send him email at lovesliberty@gmail.com.