Ezra Klein addresses two issues associated with the recent increase in gas prices. First, can the president impact gas prices? No. Second do gas prices impact elections? Again, no. I recommend a quick read and a glance at the links. 2302 16 week students have been looking at the expansion of presidential power. Perhaps this subject applies. When presidential power increases generally, so we begin to think the office is more powerful than it actually is? That it can accomplish things - with a wve of the hand - that it really cannot?
There's a lot of hot air blowing around Washington over gas prices (see how I did that?), so let's take a moment to go through what we actually know -- and what we don't -- about their relationship to the president, the economy, and the campaign.
There's not much the president can do about gas prices. Presidents -- and, more to the point, presidential candidates -- don't like to admit that, of course. When Barack Obama was campaigning in 2008, he told Ohio, “you’re paying nearly $3.70 a gallon for gas — 2 1/ 2 times what it cost when President Bush took office.” Now the Republicans are using much the same line on him. But as Steve Mufson writes, there's no dial in the Oval Office marked "price of gas." Rather, "today’s oil prices are the product of years and decades of exploration, automobile design and ingrained consumer habits combined with political events in places such as Sudan and Libya, anxiety about possible conflict with Iran, and the energy aftershocks of last year’s earthquake in Japan." There's not much a president can do to radically change gas prices in the short term.
Gas prices can hurt the economy, of course. A U.S. Energy Information Administration analysis proposed a good rule of thumb for this: a $20 increase in the cost of a barrel of oil shaves about 0.4 points off GDP growth hikes unemployment by 0.1 percentage points. As Brad Plumer wrote, "In 2011, the United States paid about $125 billion more for oil imports than it did in 2010 (thanks, in part, to the disruptions caused by civil war in Libya). That 'oil tax' was essentially enough to wipe out the entire stimulative effects of Barack Obama’s middle-class tax cut." The question here, of course, is how large the increase in gas prices will be, and what's happening in the rest of the economy.
Finally, there's less evidence than you may think that gas prices determine elections. There's a famous chart that seems to show gas prices drove President George W. Bush's approval ratings, but careful analysis largely debunked it. Political scientist Alan Abramowitz studied gas prices and presidential approval ratings going all the way back to President Jimmy Carter and found that "gas prices alone certainly are not a perfect predictor of approval ratings or, indirectly, reelection." Nate Silver took a broader look at the political ramifications of gas prices and concluded that “there’s not a lot of evidence that oil prices are all that important” in deciding elections.
So gas prices matter. But the main way they matter is that a large spike could slow the recovery. But the key indicator to see how the recovery is doing isn't gas prices, but GDP growth, and unemployment, and other measures of the national economy. And unlike gas prices, those are measures that Congress, the White House, and the Federal Reserve can actually influence. So if the federal government is worried about the cost of energy crimping the recovery, the best way to deal with it might be to enlarge the payroll tax cut, or invest in infrastructure, or otherwise provide a boost somewhere else in the economy.
