I had a busy media day yesterday. In the morning, I did an interview with Here & Now, a syndicated radio program that airs out of Boston's WBUR and is carried by many NPR stations. The interview focused on calls to boycott Citgo, the gas station chain owned by Venezuela's PDVSA. Host Robin Young wanted to know where I stand on the issue.
I gave her two answers. I said Vahan the Economist thinks the boycott would do more harm to Americans than to Citgo and Venezuela. That's because Citgo employs thousands of Americans, and a successful boycott could put many of them out of work. Furthermore, if we refuse to buy gasoline from Citgo, we'll simply have to buy it elsewhere. Because U.S. refiners are already stretched, chances are we'll have to import more gasoline at a higher cost. Citgo, on the other hand, will simply sell its gasoline to some other market. Take a look at Iran. The U.S. buys no oil from Iran. Yet Iran has absolutely no trouble selling all the oil it wants. Other countries are happy to buy it.
However, Vahan the American supports the Citgo boycott. I was extremely offended by Hugo Chavez's remarks at the United Nations and in Harlem. While I have no problem with him criticizing U.S. foreign policy, I object strongly to his personal attacks on our president, and to his calls to overthrow our government. Although the economist in me realizes that boycotts are not very useful, I have consciously been avoiding Citgo stations for about six months now.
Last night, I appeared on Hannity & Colmes on Fox News. First of all, I'd like to say that even though I have conservative leanings, I thought Alan Colmes, who plays the liberal on the show, is an extremely nice guy.
Colmes wanted to know why Americans don't feel better about the economy. He pointed out that gasoline prices are way off their highs, yet people still seem nervous. As I've explained before on this blog, a 50 cents per gallon drop in gasoline prices amounts to only about a $30 per month savings for the average driver. When you're paying $10,000, or $20,000, or more each a year in property taxes, you're not going to get very excited about saving $30 a month on gasoline. Furthermore, this myth that gasoline is once again cheap is false. Despite coming off its highs, gasoline prices are still very expensive.
I pointed out that people are more focused on the slowing housing market. Sean Hannity didn't buy that. He said housing is healthy. Indeed, new home sales were up slightly from July to August. But they were down 17% year-over-year. That's the more relevant comparison.
Hannity also said the stock market is near an all-time high. Unfortunately, there wasn't time to respond to that remark. The fact is the market is not near an all-time high. Only the Dow is near an all-time high. Most other indexes are still well off their highs. The reason the Dow is doing better than the rest of the market is because investors are getting nervous. When investors get scared they tend to rotate out of smaller-cap issues and flock to large cap stocks--the kinds of stocks you find in the Dow. Furthermore, it gives me no comfort that the best performing stock in the Dow by far is General Motors (GM), a money-losing company.
I finished up by saying a tax cut would do wonders to give the economy a boost. Hannity agreed with that. Colmes didn't. Yet what we need is a real tax cut. Bush's tax cuts were a folly. Although he lowered tax rates, he forgot to get rid of the Alternative Minimum Tax. I don't know about the rest of you, but after factoring in the AMT, state taxes, and property taxes, my after-tax income has gone down, not up.