Kudlow and McCain Discuss Economics

High comedy courtesy of the April 15 edition of Kudlow and Company! So much to choose from but let’s start with John McCain’s plan to increase aggregate demand:

KUDLOW: Recently, you’ve talked—you’ve said pretty clearly that the US economy is in recession. In terms of your speech today, can you tick off your major recovery points?

McCAIN: Bring spending, obviously, under control. That is very obvious.

Excuse me but what’s obvious? If we cut government spending, we reduce aggregate demand. OK, I left off all the chatter about reducing tax rates to balance the budget as I wanted to move onto his proposal to cut gasoline taxes:

KUDLOW: Come back to this summer gas tax holiday that you unveiled in your speech today. It’s a pretty interesting point. I don’t think anybody’s talked about anything like that. Let me just ask you, though, you’ve been very tough on the issue of carbon emissions, for example. Now, if you waive the gas tax…

McCAIN: Yeah.

KUDLOW: …for motorists, isn’t that going to actually spur gasoline consumption and increase carbon emissions?

McCAIN: Look, I’d love to tell you that would happen. We’re talking about 18 cents a gallon for regular fuel and 24 percent—24 cents for diesel. I’m not sure that it stimulates it. I think it eases the burden. The people that drive the furthest in America are the lowest income people.

Oh my God – McCain really doesn’t get the incidence of the tax issue, which was explained by a couple of links to my update to this post. Dean Baker gets it:

According to the oil industry, they have their refineries running flat out, producing all the gas they can. This means that the price is determined on the demand side. We have a fixed amount of gas entering the market, the question is simply what price clears the market. In this context, if we reduce or eliminate the gas tax, the price doesn’t change, the lower tax will simply allow Exxon and other oil companies to keep more profits (unless of course they were lying about running their refineries at capacity).

By God – even a Klown like Kudlow get this:

KUDLOW: ‘…isn’t this going to provide, ultimately, more revenues for Saudi Arabia and OPEC, which is the reverse of what you have argued for in the past?’

McCAIN: No, I don’t—look, I do not believe that we can continue our efforts to alternate fuels and alternate energy sources, including nuclear, which is vital, and still give Americans a little bit of relief and let them afford a vacation this summer.

But even after Kudlow tried to explain this to McCain – he still doesn’t get it. He really does not understand anything about economics – and yet he wants to be our next President?