Phil Gramm is right, but don't let anyone know it

The U.S. economy is down. Luxury sales are standing pat. Phil Gramm is telling us to shut our yaps. Obama is in the hen house, and McCain is loading both barrels.

Nothing seems to be as it appears these days. Up is down, down is up. And I’m looking for some duct tape to keep my head on straight. So let’s settle down and examine this rationally.

The “receding” economy has two major things working against it: the price of oil and the weak dollar. So when Texas Sen. Gramm says Americans complain too much, it might be worth a listen. True, he’s no deft politician, but he was an economics professor and knows a thing or two.

First, take oil. What causes oil prices to rise? Many factors. But in the simplest form: supply and demand. The supply is shortened by controls in the Middle East. It is shortened by laws against drilling in certain domestic areas. And it is shortened by usage. The demand is high because so many Americans use gasoline and use a lot of it. They use fuel-inefficient vehicles. Falling supply versus rising demand equals increased prices. Duh. So why do Americans look to the presidential nominees to remedy the situation?

Because by their very nature, they’re lazy and want things fixed for them. University of Chicago professors Cass Sunstein, law and political science, and Richard Thaler, behavioral science and economics, have constructed a book called “Nudge: Improving Decisions about Health, Wealth, and Happiness.” It illustrates how people can be so lazy that simply by narrowing street lanes can get people to slow down, putting fruit at eye level in the cafeteria lines can get kids to eat healthier, and automatically enrolling employees in 401k plans can get them to invest wiser. Likewise, the presidential candidates are telling citizens how they’re going to get gas prices down.

The reality of the situation is new ways need to be utilized to get people to use less gas. It’s already happening. Chrysler announced Friday that it’s discontinuing auto leases because it’s not economically viable. Along with Ford and Chevy, the three major truck producers in the U.S. are hemorrhaging cash and fast. Ford announced Thursday that it lost over $8 million in the second quarter of 2008. The fact of the matter is that even if consumers wanted more cars and trucks that burn tons of gas it’s getting harder to get these vehicles.

It happened in Europe. Gas prices have been around the $4 mark and higher for quite a while. What did they do? Rode more trains, bikes, and Vespas. Gas is still high, but it’s not crippling them like Americans are allowing it to do. Maybe that’s a factor in why the Euro, pound and franc are all trouncing the U.S. dollar. Attitude.

Luxury sales, according to Saturday’s Wall Street Journal, are still holding their own in the U.S. despite a downward-leaning economy. Part of this is definitely due to the weak dollar. Europeans can get their money to go farther in the U.S., so high-ticket items are getting snatched up just fine by foreigners.

Maybe the fact that the Fed has tried to hold up companies like Bear Stearns, Fannie and Freddie have a lot to do with it all. It hasn’t let the economy naturally go through its cycle. Ben Bernacke has announced that the best course of action probably is to let these companies fail. And President Bush has echoed that notion. The investors will take the hit, yet, but it teaches them to more wisely allocate their money. It’s not a force or coercion. It’s a “nudge” in the right direction.

This all happened back in the 1970’s – stagnation as it was. The U.S. got out of that one just fine. Won the Cold War, business boomed in the 1980’s. The economy soared in the 1990’s. Now the U.S. is in the downward part of its economic cycle. It hasn’t even been down for a full quarter yet. This isn’t a “recession” yet, has Gramm has stated.

Gramm said a stupid thing. Not because what he said was stupid – it wasn’t, it was true. It was stupid because his pal, John McCain is trying to get elected president. Gramm is the symbol of McCain’s economic plan since McCain has plainly stated on many occasions that he’s not as educated on the economy as he should be.

We all need to take a chill pill and take this one up the back door for a piece. The U.S. economy goes down every once in a while. But it’s the fact that it goes up more often than down that makes it such a strong economy. Gramm is a smart man and should get a position of influence in the White House if McCain is elected in November. I only wish McCain had the gusto to stand up for a truth-speaker in the heat of the moment.