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Obama Lectures Romney On Cargo Cult Economics

There were several surreal moments in the debate last night between the Democrat candidate for president, Barack Obama, and the American candidate Mitt Romney. While most are focused on Obama’s stunningly brazen lie about his statement of the attack on our Benghazi embassy, the more telling episode showed that Obama is simply disengaged from reality as it is experienced by most people. From the transcript:

ROMNEY: That was a statement. I don’t think the American people believe that. I will fight for oil, coal and natural gas. And the proof, the proof of whether a strategy is working or not is what the price is that you’re paying at the pump. If you’re paying less than you paid a year or two ago, why, then, the strategy is working. But you’re paying more. When the president took office, the price of gasoline here in Nassau County was about $1.86 a gallon. Now, it’s $4.00 a gallon. The price of electricity is up…

CROWLEY: Mr. President, could you address, because we did finally get to gas prices here, could you address what the governor said, which is if your energy policy was working, the price of gasoline would not be $4 a gallon here. Is that true?

OBAMA: Well, think about what the governor — think about what the governor just said. He said when I took office, the price of gasoline was $1.80, $1.86. Why is that? Because the economy was on the verge of collapse, because we were about to go through the worst recession since the Great Depression, as a consequence of some of the same policies that Governor Romney’s now promoting.

So, it’s conceivable that Governor Romney could bring down gas prices because with his policies, we might be back in that same mess.

This is just another manifestation of the cargo cult economics we’ve talked about over the past weeks. In Obama’s world supply and demand are academic concepts. He thinks that when something is cheap that means demand is low and when something is expensive that means demand is high. If your market knowledge is based on buying the latest Apple product this is entirely reasonable. It fails to acknowledge that supply is the other part of the equation and even if demand decreases the price can still increase if the supply falls faster than demand. It also assumes the costs of production and distribution remain constant.

If Obama is correct, then the increase in gas prices should roughly correlate to economic activity and lower prices will indicated a failing economy. Let’s roll the tape.

First gas prices. This is the average price of a gallon of regular gas.

 

If you are really interested in the data, below are the data in tabular form. Click the thumbnail to enlarge:

 

So what did the GDP look like? If Cargo Cult Economics guru Barack Obama is correct, GDP should be very low over the past decade and now it should be soaring.

 

Hmmm. Not looking like there is much of a relationship, is there? Well, if the economy is kicking butt people must be working. What does unemployment look like?

So, much to Obama’s discredit, a quick look at other data shows that the skyrocketing gas prices are not the byproduct of an economy running gangbusters. To the contrary, it speaks to an economy in crisis. It is the result of a lot of factors, not the least of which the mismanagement of the energy sector by Barack Obama and his minions.

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