Streetwise Professor

December 19, 2014

Obama’s Press Conference: Bad Economics, Dissing a Friend, Embracing an Enemy

Filed under: Climate Change,Economics,Energy,History,Politics — The Professor @ 9:43 pm

Hard on the heels of Putin’s press conference, Obama held one of his own. Blessedly, it was shorter. That’s the only good thing I can say about it.

At least Putin’s pressers offer some entertainment, some of it intentional, some of it accidental. Obama’s appearances are as entertaining as a root canal performed to the accompaniment of fingernails on a blackboard.

I will limit myself to comments on two issues.

First, yet again Obama slagged on Keystone XL. And yet again, he delivered a disingenuous, economically ignorant attack on the pipeline:

“There is very little impact – nominal impact – on U.S. gas prices, what the average American consumer cares about,” Obama told reporters during an end-of-year press conference.

. . . .

“It’s good for the Canadian oil industry, but its not going to be a huge benefit to us consumers,” he said.

Obama stressed that the issue at hand for Keystone is “not American oil, it is Canadian oil.”

“That oil currently is being shipped out through rail or trucks and it would save Canadian oil companies, and the Canadian oil industry enormous amounts of money if they could simply pipe it all the way down to the Gulf,” Obama said during his final press conference of 2014.

“It’s very good for Canadian oil companies, and it’s good for the Canadian oil industry but it’s not going to be a huge benefit to U.S. consumers, it’s not even going to be a nominal benefit to U.S. consumers,” Obama said.

Where to begin?

  1. What the hell did the Canadians ever do to him? Does he hate them because they are members of the British Commonwealth? (And we know he loathes Britain.) It is truly astounding to see a president who is so solicitous of many thuggish regimes be so dismissive of a longtime friend and ally. Speaking about Keystone, Obama turns into an American Firster nativist, rather than his usual pose as Citoyen du Monde.
  2. Last time I checked, the oil would be refined-and value added to it-in American refineries.  That would benefit American oil companies, American workers, and the owners and employees of companies that supply the refineries. The money savings would be split between American and Canadian companies. But maybe because the refineries are located in Texas and Louisiana, which have repudiated Obama massively, that’s a bug not a feature. Or maybe Obama doesn’t understand that oil doesn’t magically transform itself into gasoline, diesel, etc.
  3. Or maybe Obama persists in the delusion that the oil will be exported, disregarding basic economics, common sense, and the analysis of his own State Department.
  4. There would be no impact on gas prices only if the supply of Canadian crude is completely inelastic: in this case, the quantity of oil produced and refined would be the same, regardless of how costly it is to transport it to market. If supply is somewhat elastic, lowering transportation costs increases output, which lowers product prices; moreover, holding output fixed, reducing transportation costs reduces the final product price. And perhaps most importantly, the alleged justification for stopping Keystone is the environmental damage Canadian heavy crude inflicts. But if supply is perfectly inelastic, there is no environmental benefit of raising transportation cost, because this will not affect the amount of oil produced, and hence will not affect the amount of CO2 it produces. (Not to mention that pipelines are a safer, more environmentally sound way of transporting this oil.) So if Obama is right about gas prices he is wrong about environmental benefits, and vice versa.


Come to think of it, I think that Obama’s real reason for opposing Keystone XL is that the Venezuelans would be the biggest losers. I am pretty sure he has much more of an affinity with Chavistas than Canucks.

Which brings me to the other issue: Cuba.

I am ambivalent about the embargo, or the lack of diplomatic recognition. I can argue either side. But there are many things about this initiative that make me uneasy.

For one thing, Cuba is in dire straits. This is where Venezuela comes in. The Bolivarian paradise has been carrying the Castros’ shambolic regime for years, but is now itself on the verge of economic collapse. Default is imminent, and at the current level of oil prices economic collapse is a real possibility. Venezuela is already cutting back support to the Cuban regime, and will cut it back further. Given that, the Castros are desperate, and Obama could have extracted a much better deal. A deal that would have given some benefit to the Cuban people, rather than bailing out the regime and allowing to continue its repression and depredations.

Obama’s rhetoric was also offensive, and at times historically ignorant. He characterized the embargo as a “failed policy.” Pretty rich for a serial failure to insult 9 previous presidents and 26 Congresses. He could have made an affirmative case for a new policy, and recognized the reasons for the previous policy, without such condescension.

Moreover, he made mention of the need to move beyond “the legacy of colonialism and communism.” Communism isn’t a legacy in Cuba: it is a daily reality. Insofar as colonialism is concerned, is Obama referring to Spain? Because he sure as hell can’t be referring to the US: Cuba was never an American colony. The Teller Amendment to the declaration of war against Spain in 1898 forbade the US from annexing Cuba. It was under US administration for four years, but achieved full independence in 1902. (Obama made the colonialism/communism remark in a discussion of Latin America generally, but this doesn’t really save him. Cuba is the only longstanding Communist country in Latin America; colonialism ended in Latin America in the 1820s; the US-via the Monroe Doctrine-kept out colonial powers in the 19th century; and colonialism is the least of Latin America’s problems, which tend to be very much home grown. In mentioning colonialism, Obama was just regurgitating a standard prog trope.)

Obama also engaged in his self-indulgent habit of making history all about him. He noted that Fidel Castro assumed power two years before Obama’s birth, and the Bay of Pigs invasion occurred soon before he was born. (Interesting that he uses the “I” word to refer to Bay of Pigs, but not Ukraine.) Who cares? What does this have to do with anything?  Does he have to bring himself into everything?

I’ve therefore decided that I will hereafter designate all dates by BO and AO: Before Obama and After Obama. Castro assumed power in 2BO. Bay of Pigs occurred in Year Zero. Obama elected in 47 AO.

The means by which Obama pursued this policy was also typically high handed, and failed to include or consult with anyone in Congress. And no, I don’t include corrupt tax scofflaw Charlie Rangel, who was photographed lounging like a beached whale in the Cuban sun after helping in the negotiations.

The means and the outcome of the Cuban opening also make me uneasy about deals with Iran.

I could go on, but I’ll close with one point. People have compared this to Nixon’s opening of China. Superficially, this is plausible. But there is a major difference.

Nixon could go to China because his stalwart anti-Communist credentials (which had won him the intense enmity of the left) made it credible that Nixon was acting in the interests of the US, rather than indulging his ideological preferences: if a McGovern or a Henry Wallace had attempted the same there would have been justifiable suspicions of their motives and the benefits to the US. In contrast, Che is worshipped has a hero rather than condemned as a psychopathic murderer in Obama’s political circles. His administration has taken a very benign approach to leftist Latin American regimes, including Venezuela and Nicaragua. This raises doubts about what his Cuba initiative will entail, and whether it will advance American interests or benefit the long-suffering and repressed Cuban people.

So to summarize Obama’s last press conference: he slammed a long-time ally and sucked up to a long-time enemy. Which pretty much summarizes his foreign policy, generally.

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  1. I agree that the timing is particularly awful, the US could have waited for an opportune moment, like an economic crisis to actually hit, or for Castro to die. Instead, the shift in policy was linked to a “prisoner” exchange with Cuba, where Americans held as political prisoners were exchanged for actual criminals held in the US. Good thing we don’t negotiate with hostage takers. I have been thinking a lot about the Alexander Hamilton quote made famous by Reagan lately: “A nation which can prefer disgrace to danger is prepared for a master, and deserves one.”

    This looks a lot to me like Obama just trying to do things for the sake of doing them in order to create some sort of legacy. The timing of this policy change is determined entirely by domestic politics and the state of the Obama presidency. Is it a way for Obama to do something very flashy at no real cost to him.

    Comment by JDonn — December 20, 2014 @ 10:22 am

  2. SWP…
    His attack on the pipeline wasn’t ‘disingenuous’, and his approach to leftist Latin American regimes isn’t ‘benign’. That sugar-coats it. His approach to every issue reeks of ‘maleficence’.

    “Does he have to bring himself into everything?” Let’s see: gives a CD of his speeches as a gift to a head of state; to commemorate Rosa Parks, has a picture of him seated on a bus; space exploration” a picture of him looking skyward. presenting the case for the site of the Olympics? Used ‘I’, ‘me’, and ‘my’ so often that the Olympic committee gave the fewest votes EVER to an entry at that final round; got a vanity/celebrity TV show? he is a guest fielding softballs; an arrest of a professor who should have been more civil in Cambridge, puts himself into the case; a teen high on purple drank attacks someone who defends themself with lethal force? it could have been his son.

    He is a hyper-narcissist. Along with the overestimation of his intellect, it is a big problem for us. What else would he do to harm American interests and draw attention? I suggest that a deal with Iran, at once bad for peace and for Israel; some attack on capitalism (capital controls, reaching for retirement accounts, more administrative law); having a socialist rewrite of the Constitution;some horrible concession of sovereignty to the U.N.; pardons for the Blind Sheik, John Corzine, Terry Bean, [insert criminal here]; and some reward to his puppetmasters, Bill Ayers and Bernadine Dohrn. That list was for starters, you probably could add some other dreadful things. The Republic has to endure 25 more months of this.

    Comment by Richard Whitney — December 20, 2014 @ 1:21 pm

  3. How much more evidence do we need that engaging with corrupt, authoritarian nations DOES not lead to political and socio-economic convergence?

    Then again, as you so clearly illustrate here, fact-based decision making hasn’t been an Obama strongpoint, and empowering and enriching corrupt hypocrites is probably second only to golf among BO’s favorite hobbies. Considering that he is willing to give credence to ‘moderate’ Iranians its not surprising that he conveniently forgets that the Castros once urged Kruhschev to start a nuclear war, and I don’t think their perspective has changed too much.

    Engaging with the Chinese was a colossal mistake; allowing authoritarian regimes to clothe themselves in the guise of market-based institutions has been an enormous money maker for the political class in these nations, but has been a tremendous negative for geo-political and macro-economic stability, the environment, developed world labor… I could go on and on.

    At least the Chinese are rapidly headed towards economic irrelevance…

    Comment by Nick — December 21, 2014 @ 10:45 am

  4. Craig I think you missed something very important when Obama was discussing Keystone. In discussing Canada and Canadian oil companies and stating it would have nominal impact on prices here in the US; he made the statement that it would impact global prices of oil, but not the price of oil in the US. Just so you know Craig and you are now school in economics, because Obama tells you, the US is in a bubble when it comes to oil prices. So for the future just remember, global prices for oil, which the US does not operate in, and US prices for oil. I can’t believe you didn’t know that the US doesn’t operate in the global marketplace for oil. Here I thought you were a good economist.

    BTW…I think this was the most ignorant argument that he made when discussing Keystone and I immediately knew that you were going to have a field day with that particular part of his discussion.

    Comment by Matt C — December 23, 2014 @ 10:29 am

  5. @Matt-Shooting fish in a barrel. Hardly even sporting. Obama is the one in the bubble, completely sealed off from any understanding of economics.

    There is a lot of company in the worst anti-Keystone argument category. But you’re right, this one and the “it will all be exported” arguments are the worst.

    The ProfessorComment by The Professor — December 23, 2014 @ 12:24 pm

  6. The Canadian oil would be a great relief to refineries in the South as they are geared toward refining heavier oil (the South is the gateway for heavy foreign, mainly Saudi, oil). Canada produces heavy oil. The shale revolution in the US has led to huge quantities of sweet, light crude which has to be refined on the East coast. So either refineries on the South coast spend billions of dollars and possibly a couple of years retrofitting in able to refine lighter oils or the US can import heavy oil from Canada. Retrofitting comes with a price tag not just in dollars spent but in time lost retrofitting which could’ve been used to refine (heavy) oil. Obama’s statement betrays his complete lack of knowledge on the issue.
    Some more details here:
    Other than that, google should provide more details.

    Comment by Kristjan — December 26, 2014 @ 11:56 pm

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