Joe’s Blog!

Related to yesterdays post regarding the gas tax holiday, where I stated

Both Clinton and McCain have it wrong, I imagine they contacted their campaign advisors rather than their economic advisors before suggesting its repeal.

Apparently it’s at least in part true. Over here I found

John McCain, the presumptive Republican presidential nominee who should know better, was the first presidential candidate to endorse the gas-tax holiday for the summer driving season. Reportedly, the idea originated with a political pollster, not among Mr. McCain’s economic advisers.

Why all the hoopla over the gas tax holiday? Both Clinton and McCain have it wrong, I imagine they contacted their campaign advisors rather than their economic advisors before suggesting its repeal. The numbers simply do not work out on the side of the consumer. The way I see it reducing gas prices by $0.184 will reduce the national average ($3.611) for regular grade gasoline to $3.427. So currently a 15 gallon tank takes $54.165 to fill. If we remove the tax it costs $51.405, a savings of $2.76. This means that you get about 8/10’s of a gallon more for the same money. It’s a bit of a savings but nothing to write home about.

The way I understand it, when the cost of a good goes down, demand increases due to an individual being able to purchase more of it with the same amount of money. This means there is less supply of that good since more is being purchased. This is especially true since in this case because the raw materials (oil) used in the production of this good (gasoline) is a finite resource that is controlled by a cartel (OPEC). So as a result the price of gasoline goes back up since there is less of it.

Here comes the economics.

All this is due to the demand for gasoline in the US is inelastic. That is demand hasn’t changed much with the increase in price this is because there is no realistic substitute for gasoline. There are options (E85, electric and etc) but they cannot yet be considered developed to the point of being a substitute for gasoline. Additionally gasoline is a normal good, this generally means that with the decrease in price there is higher demand. What I am talking about here is price elasticity of demand:

In economics and business studies, the price elasticity of demand (PED) is an elasticity that measures the nature and percentage of the relationship between changes in quantity demanded of a good and changes in its price.

Obama gets a gold star because in the end you have slightly lower prices in the short run and the same or higher prices in the long run. I imagine that a gas tax holiday would lower prices for a couple months (at most) and shortly there after we would be back to the same (if not higher) price we are today. The price will go back up because our demand of gasoline will likely not decrease from present levels, additionally when the price goes down we will likely see an increase in demand since the price is lower.

Also, we must not forget that we would be out millons/billons in tax revenue. At this point I don’t think the government has the cash to lose. We need it for Iraq, the helping our neighbors with the global food crisis and to help the people effected by disaster in Myanmar. So there are plenty better ways to spend the gas tax than on our poor oil addiction.

Interestingly (but not surprisingly) the effects of higher gas prices are causing increasing demand on smaller cars, which is a prime example of cross price elasticity of demand. Greg Mankiw’s blog has an example of this in a NYT article and how camels are making a comeback. He knows his stuff, is a Harvard prof and has a decent economics blog. He also wrote the text book for my macro class in college, it’s one of the few text books I didn’t sell after graduation.

Here is the email I received today from Claire McCaskill regarding the FISA and telecom immunity. I contacted her a few weeks ago by phone and email. Below is my response, I hope making her and my emails public it will shed some more light on this issue.

Dear Mr. Williams:

Thank you for contacting me regarding efforts to revise the Foreign Intelligence Surveillance Act, also known as FISA. I appreciate hearing from you, and I welcome the opportunity to respond.

On February 12, 2008, after months of debate, the Senate passed the FISA Amendments Act of 2007 (S.2248) by a vote of 68-29. I voted in favor of this effort to modernize the 30-year-old FISA in order to allow us to effectively monitor terrorist communications overseas.

As the FISA Amendments Act was debated on the Senate floor, I voted in favor of three amendments introduced by Senator Feingold (D-WI), all of which sought to add further safeguards against Executive Branch surveillance on innocent Americans. Unfortunately, these amendments failed to garner enough votes to pass. However, the Senate-passed FISA Amendments Act does include several measures to improve our national security without violating the constitutionally protected privacy rights and civil liberties of law-abiding Americans. For example, it would require the government to obtain a warrant whenever the target of surveillance is a U.S. citizen as well as bolster the authority of the FISA courts to oversee the eavesdropping activities of the National Security Agency.

As you may know, I joined 18 other Democrats in voting against Senator Dodd’s (D-CT) amendment to remove provisions granting retroactive immunity to the telecommunications companies (telecoms) that cooperated with the Bush Administration’s wiretapping program. Please keep in mind that this is a limited immunity that applies solely to the telecoms, not the government. I just don’t think we should punish these companies for their good-faith reliance on government assurances that they were assisting in a legal effort to combat terrorism. If the government violated our surveillance laws by eavesdropping without the necessary warrants, then it is the Administration – not the telecoms – that needs to be held accountable. That’s why I supported Senator Specter’s (R-PA) amendment, which would have substituted the federal government in place of telecoms as the defendant in lawsuits, allowing existing legal actions to move forward in an appropriate manner. While this measure was rejected, the underlying legislation would still allow citizens to sue the government for past violations and telecoms for future violations of the new law. As your United States Senator, I remain determined to get to the bottom of any government misconduct.

Currently, the Senate-passed FISA legislation needs to be reconciled with the House-passed version. I will be sure to keep your thoughts in mind as Congress continues to debate this important issue.

Again, thank you for taking the time to share your thoughts with me. Please do not hesitate to contact me in the future regarding other matters of interest or concern to you.
All best,
Senator Claire McCaskill

Here is my response:

Thanks for your email regarding the FISA bill. I understand your argument regarding telecom immunity but humbly disagree. I am concerned that giving immunity sets a precedent that the executive branch can tell corporations what they need and the corporations will automatically get a trump card against any law suits should they give the executive branch what they asked for.

There are two issues here, one, the executive branch needs more oversight from the legislative. I hope that the bill proposed will do this. Two, corporations should consider the legality of their actions before taking them regardless of who is asking. The latter is something that this immunity directly effects, giving immunity allows them to act without thinking about the ethical and legal issues surround the actions.

From what I understand (http://www.usatoday.com/news/washington/2006-05-10-nsa_x.htm) Qwest communications was the only telecom to not comply according to the mentioned article “it was uneasy about the legal implications of handing over customer information to the government without warrants”. This type of protection of customer data should be commended and I wish the other telcoms would have done the same.

Lastly, as a consumer and citizen I believe that the wiretaps need to be investigated. Since everyones data (internet usage, email and phone services) was effected by these wiretaps we should know, as owners of that data, the extent of this operation.

I hope this finds you in good health and spirits. Thank you for taking the time to listen to a constituent.

-Joseph Williams

Support the EFF and Senator Dodd’s fight against telecom immunity and the encroachment on our privacy by our own government.

In this article at the Washington Post they describe the experiences of a few travelers that have their laptops taken and they forced to type in their passwords so TSA/Customs could search for “information possibly tied to terrorism, narcotics smuggling, child pornography or other criminal activity”. The individuals in the article are rightfully concerned about their sensitive data on their electronic devices (Blackberrys, laptops etc) but also proprietary information to their employers. Whats more is one individual never got their laptop back. The cases in the article also bring up questions of racial/religious profiling. The whole notion of “let me read your email or you can’t get on this flight” and to quote the article, “the government’s laptop-equals-suitcase position” seems awfully ridiculous to me. The worst part of this is that the innocent people are the ones that are hurt. I have nothing to hide but that doesn’t mean I want government officials rummaging through my apartment or laptop. Here’s an interesting excerpt:

“It’s one thing to say it’s reasonable for government agents to open your luggage,” said David D. Cole, a law professor at Georgetown University. “It’s another thing to say it’s reasonable for them to read your mind and everything you have thought over the last year. What a laptop records is as personal as a diary but much more extensive. It records every Web site you have searched. Every e-mail you have sent. It’s as if you’re crossing the border with your home in your suitcase.”

If the government’s position on searches of electronic files is upheld, new risks will confront anyone who crosses the border with a laptop or other device, said Mark Rasch, a technology security expert with FTI Consulting and a former federal prosecutor. “Your kid can be arrested because they can’t prove the songs they downloaded to their iPod were legally downloaded,” he said. “Lawyers run the risk of exposing sensitive information about their client. Trade secrets can be exposed to customs agents with no limit on what they can do with it. Journalists can expose sources, all because they have the audacity to cross an invisible line.”

I have a business trip this spring, there is a good chance that I will be enabling filesystem encryption (easily done with Ubuntu at install time) on my machine should they confiscate it. In the end I would rather not get on the flight than hand over my laptop. They not only take your laptop and password, they take your privacy and rights as a US citizen away as well. If this happens to you inside the US, ask for a search warrant before handing anything over.

Support the EFF.

If you remember we had this whole scandal regarding the wiretapping of US citizens within our own borders. For one reason or another the case seemed to drop of the news radar, partially to legal delays and also because Miss America was caught being naughty. Regardless, those same news companies/organizations are arguing for the release of the secret documents to the public [Wired]. We can only hope that they are released. Should be interesting.