Creating a self-fulfilling prophecy
Bookworm on May 11 2008 at 1:59 pm | Filed under: Barack Obama, John McCain
To my mind, senior Republican leaders are digging the grave, preparatory to burying themselves:
Senior Republicans expressed grave fears on Sunday about the prospects of Senator John McCain, their candidate, against Senator Barack Obama in November’s general election.
The “senior Republicans” to which the article refers are Fred Barnes and Newt Gringrich. I’m not pleased.
While irrational exuberance is stupid and should be avoided, an American political party is going nowhere quickly if it’s big on self-immolation. While Americans like winners, they’re also fairly tolerant of optimistic people who can see their way clearly through a down-turn.
As for me, I’m fairly optimistic about the American people. When push comes to shove, I refuse to believe that, in a dangerous world they’re going to choose an utterly untried young man with a shady past and a penchant for lying over a man tempered by time, with vast political experience, and with a greater degree of personal honor than anything the young man has to offer. And I phrase that last clause so carefully because I know that, if I say McCain is an honest man, someone will hit me with an example of a broken promise or prevarication. McCain may not be the man Diogenes is looking for, but he’s a whole heck of a lot better than Obama — and I refuse to believe that, when push comes to shove, American voters will go for a soiled flash in the pan. I see this less as irrational exuberance and more as faith in the collective wisdom of Americans.
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5 Responses to “Creating a self-fulfilling prophecy”
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My fear is that Republicans will play this out as a values election. I do not see this as a values election.
You can make a little headway with Rev. Wright, Ayers, and God and gun-gate, but I don’t think you can make much of it. I think it will be a nuts-and-bolts election based on economics and foreign policy, and conservatives are behind the eight ball here. Eight years of a Republican Congress and Presidency that ended up about as far from decent and conservative as you could end up - runaway deficits, profligate spending, corruption everywhere you look…
The “American people” as a whole seem to be tuning out the usual Republican platitudes. I don’t know that they’re embracing Democrat platitudes, but we’re in trouble here. Which is why I’m not interested anymore in the simplistic mantras that circulate in Republican echo chambers. I asked a question a few weeks back and didn’t really get an answer beyond the usual trite phrases: Why do oil companies make record profits when the price of their inputs (oil) goes up? All my sense of how free markets work would indicate that profits would go down. Why do they go up?
If the profits go up because the management of oil, as an input, is NOT free market based, and we’ve had oil men in the White House for eight years now, then we are in very deep sh**t on the economic arguments for this election. (as one example).
I know it’s up to me to research the issue and discover for myself why usual market forces don’t seem to apply to oil. But I did find it troubling that no one bothered to answer.
This will be an election on economics and foreign policy, and my sense of it is that the people in general are tuning out to the Republican arguments on economics; and they’re against the war in Iraq still even though it is going very well. Conservatives need deeper, more compelling arguments, I think, or we will lose this election.
Maybe they’re just managing expectations. If they cast McCain as the underdog, then in a couple of months they can say: look, Obama should be killing it, given Bush’s abysmal polling numbers and strained conservative support for McCain; but instead he is merely neck-and-neck with the great maverick candidate who has a knack for come-from-behind victories…
>>Why do oil companies make record profits when the price of their inputs (oil) goes up? All my sense of how free markets work would indicate that profits would go down. Why do they go up?>>
I don’t have an answer to this - I don’t know enough - but I _do_ have some questions! How is “record profits” defined? My guess is that we’re talking numbers of dollars. But numbers of dollars doesn’t address percentage of profits. Do we know if the value of the dollar has dropped against other currencies? We’re paying $110 per barrel of oil - twice the number of dollars paid about a year ago - is China paying twice the number of yen per barrel as they did a year ago? Number of dollars may increase, but when you talk investment, the percentage return on investment is the critical issue, not the number of dollars. If you earn 4% on $100,000, you’d earn $4000. If you earned 8%, you’d only need $50,000 to make the same number of dollars. How does the percentage of profit earned by the oil companies compare to the percentage earned in previous years?
How does it compare to other industries? (I understand Microsoft earned 30% - why aren’t they accused of making windfall profits?)
As to the topic - Newt better get on board…or there isn’t going to _be_ a GOP to rebuild. Fred’s just a media person, but Newt’s a political person - he _needs_ the party to have a raison d’etre. I’m not happy with McCain either, but we’re going to have to support him unless we want to let one of the Dems win. I like that even less. You don’t win by badmouthing your possibilities. Newt’s smart…he knows this. I’d like to think he has something very clever in mind - and not his own candidacy…that won’t cut it - but I’m not going to count on it.
Ok, I can answer that question. The oil industry should be thought of as upstream and downstream segments. Upstream companies hold oil reserves that they sell on the market, and they obviously generate higher profits when oil prices are higher. Downstream companies (aka refiners) make money on the spread between oil (their input) and gasoline and other products made from oil. The refiners have done well because the supply of refining capacity is very tight due to at least two decades of underinvestment. This underinvestment came from the very low prices on gasoline that held for much of the 80s and 90s, and it will take time to address it because refineries are not built overnight.
Record profits are usually defined in absolute dollar terms rather than margin terms, although I think last year’s record profits at Exxon were all-time highs on both metrics. Suek is asking the right questions, I should add, since oil company profits tend to be cyclical and should be judged by mid-cycle profitability rather than peak-cycle profitability (where we likely are now). Microsoft generates higher average profits than oil companies (more than the 30% operating margins cited) because it enjoys a natural monopoly position in operating systems and key applications that ride over them (e.g., Office suite). Courts in the US found that the company has a natural monopoly but opted not to break the company up because technological change was/is expected to erode its advantage over time. The government tends to intervene on behalf of the consumer more frequently than on behalf of struggling competitors, which is why there is more pressure on oil and drug companies to lower price and expand supply than for Microsoft or Cisco to lower their profitability. The right course of action, in my opinion, is to stay out of the market unless there is a persistent natural monopoly, in which case anti-trust law should be enforced.
suek and echeccone : Thanks!
I did not know about the upstream and downstream segments, which does make a big difference.
Another important point is that our oil companies report profits in dollars. Since the value of the dollar has absolutely PLUMMETTED over the last few years - in relation to any global market - it makes sense that the profit expressed in the number of dollars would have to go way up.
I appreciate the points made so far!