Few issues focus the public’s attention on politics like the price of gasoline. It keeps going up, the public wants relief, and politicians are held accountable for not fixing the situation. Yet to solve the problem, you first need to know the cause of the illness.
Why do gasoline prices keep going up? Is it because Congress and President Bush have not fashioned energy policies to reduce our dependence on foreign oil? Clearly that’s part of the answer. Our government can do more to reduce demand and increase supply through conservation, auto fuel efficiency standards, tax breaks and subsidies for development of alternative energy sources, and incentives to drill more in the U.S.
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But that’s not the entire story.
The immediate cause of rising oil prices is the weak dollar. Oil-producing countries are requiring more dollars to purchase the same barrel of oil because the dollar is worth less today than it was a few years ago. Anyone who travels abroad knows about the weak dollar. In 2000, it took $1 to purchase one euro.
Today, it takes close to $1.60 to purchase a euro. A Canadian dollar is now worth the same as a U.S. dollar, whereas eight years ago it was worth considerably less than an American dollar.
And why do we have a weak dollar?
You can start with the economic policies followed by the Bush administration. During Bush’s 7½ years in office, we have maintained large trade deficits with the rest of the world and run up large domestic budget deficits to pay for our misadventure in Iraq and large tax cuts for the wealthy. Also, according to a monograph recently issued by the Center for American Progress, the Federal Reserve’s low-interest policy has caused a 14 percent decline in the value of the dollar since last September.
The center estimates that “nearly 40 percent of the increased price American consumers are paying for oil is attributable to the weak dollar,” even after factoring in the effects of increased global demand from countries such as China.
So what are we to do?
First, the public should demand that Congress pass comprehensive energy policy that adequately addresses both the demand side and the supply side of the issue. Republicans controlled both Congress and the executive branch for most of the first six years of the Bush presidency, and yet nothing was done. So you can’t just blame the Democrats for lack of action on the legislative front — even though pre-1995 Democratic Congresses didn’t take significant action, either.
Second, the public should demand that the next president follow economic policies that shore up the value of the dollar rather than run up big trade and budget deficits. Foreign producers will continue to raise the price of oil as long as the value of the dollar continues to drop. It was Democratic President Bill Clinton who last balanced the federal budget, and it may take another Democratic president to do this again.
Some may want to beat up on Congress for not acting more boldly now on energy policy. But don’t forget it’s “the man behind the curtain” and his Republican allies in Congress who pursued economic policies that have devastated the value of the U.S. dollar. When the history of this disastrous administration is written, the weak dollar should join the war in Iraq and Hurricane Katrina on the list of the effects of abysmal policy failures.
Martin Frost represented the Dallas-Fort Worth area in Congress from 1979 to 2005. He rose to caucus chairman and head of the Democratic Congressional Campaign Committee. He is now an attorney with Polsinelli Shalton Flanigan Suelthaus in Washington and serves as president of America Votes, a grass-roots voter mobilization and education effort.