Party Like It's 1979 - Oil Rises, Dollar Weakens - Can Gas Lines Be Far Behind?

Gas Rationing Under Carter Produced Long Lines at the Pumps - image Todays Campus

2009 - The Stage is Set
The price of oilhas increased this week, up to $80 per barrel, causing an added burden to the millions of economically stressed Americans. Historically, when the dollar is in decline, and fuel costs rise, there is a spike in inflation.

1978 to 1979 – The Road to Ruin

In 1978 the rising cost of oil against a constantly weakened U.S. Dollar lent to a deepening recession and eventually, gas lines. Although there were several factors that contributed to the situation, a trade imbalance, Carter’s “Windfall Profit Tax” on Oil companies, which did not take into account the fact that oil companies would reduce production, added to the falling dollar, inflation rose above 9% in 1978, after the oil prices rose against a weakened dollar. Within six months these factors contributed to a gasoline shortage which led to long lines at gas stations and in the face of falling oil reserves, the Democrat controlled Congress gave President Carter, the green light to ration gas. In addition, the rise in the unemployment rate and the rate of inflation in 1979 was linked at the time to to the weakening dollar and subsequent fuel shortage.

Stimulus programs implemented under Carter in the beginning of his administration, failed to produce any significant results, and contributed to the increase in both corporate and individual tax liabilities, which, in the end, resulted in the loss of manufacturing jobs, a loss of corporate tax revenue, as companies fled or folded, an increase dependence on foreign goods, which resulted in a trade deficit and devalued dollar, high unemployment, and eventually, with the rise of oil, nightmarish inflation, and rationing of fuel.

To fully understand how this took place; the fact that President Jimmy Carter, with little to no governing experience (one term Governor of Georgia), in concert with a party majority in both the House and the Senate, entering the White House with an existing financial crisis, may have made decisions that were naive at best; Carter prescribed to a global and progressive point of view, and governed in like manner. Higher taxes on the “rich”, and an increase in entitlement programs, eventually pounded the U.S. economy into the ground. What is mind boggling, is that this historical road map, instead of being rejected, is being embraced by the current administration, tenfold.

Shell Game - Obama Proposes Bonus to Seniors of $250 While Insurance Companies Cut Subscribers Over Medicare Cuts and Prescription Premiums Increase

Obama and Carter, Striking similarities in Approach to Governing - photo neoavatra.com

The Obama Administration has called for a $250 per person stipend for the 2010 calendar year, in order to offset a zero cost of living increase in Social Security Payments. There will be no cost of living increase due to the “zero” inflation rate caused by a drop in fuel prices in 2009. Additionally, there is no plan on how to pay for the 13 Billion dollar “stimulus to seniors”; therefore, the monies will be added to the ever increasing deficit, increasing the risk to the U.S. dollar. Moreover, oil prices increased this past week, based on an increasingly weakened U.S. dollar which said increase will, in the end, be passed on to those consumers (seniors) through utility bills. It is reminiscent of the scenario under the Carter Administration, which saw a weakening U.S. Dollar coupled with increase in oil prices resulting in increased costs to to necessities such as groceries.

Additionally, cuts to Medicare already has several insurance companiescutting Medicare Supplement plans pushing those seniors to face an additional, often catastrophic, rise in health care costs – essential as Medicare alone is not sufficient. Add to the burden, the rise in Part D Prescription Drug Premiums in 2010 , which although slight, coupled with the threat of inflation, loss of medical coverage, increased consumer prices due to higher oil prices and a weakening dollar further adding to the mix, a $250 stipend appears to be more political than practical. The President is already under scrutiny over the 2010 general election; with overallpolls favoring the Republican Party in the majority of races. What is not addressed: the yet to be completed “health care reform” bill, which includes further cuts to Medicare

It appears, from the casual observers’ point of view, that the right hand does not know what the left is doing, either Obama is blindly following in Carter's footsteps or the President is still on the campaign trail; making promises and proposal designed to win hearts and minds, while having no clear method of delivery. Either scenario lends to a further erosion of confidence in this administration.