Translation (acknowledging the script for Team America). "We are very unhappy with you. We are going to send you a letter, telling you how very unhappy with you we really are. Really."

The proposal continues, "Filing a complaint at the WTO will send a clear signal to OPEC countries that the U.S. is committed to an open, transparent global oil market. Such a step will give OPEC members an incentive to increase production as well."

The only signal OPEC is paying attention to is the price signal. Despite the bellyaching, the high oil price hasn't led to lower American demand. When that happens, we'd expect oil prices to fall. OPEC has every incentive to produce as much oil as it can at high prices. But as oil producers, OPEC nations have to manage their resource-and not for the benefit of American consumers, but for themselves.

Here's the great part of Hillary's proposal. She's going to change the law so Americans can sue OPEC! Here changes would, "Allow OPEC Production Decisions to Be Challenged Under U.S. Anti-Trust Law - Currently, OPEC countries cannot be challenged under U.S. anti-trust laws, even when they are engaged in coordinated, commercial activity to control the global oil market."

How unfair is that? You can't sue foreign companies for violations of your own national laws? Here you get a glimpse of the supra-nationalist tendencies of Hillary (and most politicians, to be fair). "Hillary supports amending the Foreign Sovereignty Immunities Act so that the Justice Department can bring suits against OPEC countries in U.S. courts for price fixing. Changing the rules would help hold OPEC countries accountable for their decisions."

Absolute first class grade-A garbage. OPEC only controls 40% of world oil production. It is a major force in the supply of oil. But getting OPEC to pump more oil isn't going to solve the problem of Peak Oil. It will only accelerate the rate at which we deplete existing reserves.

And really, is there a more heavy-handed, ham-fisted, lame-brained, anti-Liberal example of big government at its worst? Changing the rules to favour one group over another is the standard tactic of anti-free market do-gooders. The rules usually get changed to favour one group over another, depending on the political flavour of the day.

This reduces all politics to a contest over who gets to make the rules. It concedes that meddlesome rule-making is the appropriate role for government. Wouldn't it be so much simpler if governments stuck to general rules that were fairly applied, without prejudice, to all people?

In any event, it's going to be an entertaining few months in politics. Which American presidential candidate can make the biggest basic economic blunders. It's a three-horse race between Clinton, Obama, and McCain. They will all win... and it's a pretty sure bet the American people will lose.

Dan Denning
The Daily Reckoning Australia 

• Higher Oil Prices, the New Normal
• OPEC Agrees Not to Cut Oil Production Until it Meets in May
• Waiting for the Showdown Between Hillary and Obama
• Australia & China: Already Partners in the Commodity Boom
• Technical Analysts see the Market 80% Psychological and 20% Logical

In the United States, the main problem of finance for politicians comes from the cost of elections. The 2008 Presidential election will end up costing $1 trillion, or perhaps more. Much of the money goes on political advertising, of which the more effective half is spent on attacking the competence or integrity of the other candidates. The American lobbying system involves the lobbyists – who have their hands out for political favours – raising money from their clients to pay to politicians to spend on these negative campaigns.

In Europe, the personal expenses of candidates or sitting Members of European Parliaments, seem to be more of a problem. In Britain, a Member of Parliament has been suspended for two weeks for paying his son out of parliamentary funds for research work he did not actually carry out. About a third of Members of Parliament use parliamentary funds, intended for their political staff, to pay members of their families. This applies to all major parties, Labour, Conservative or Liberal Democrat.

Even the Speaker of the House of Commons has been accused of bad judgment, though not of breaking the law, for using Air Miles from official visits to pay for family travel and claiming his wife’s taxi journeys on official expenses.

There is another and graver scandal in the European Parliament, which has produced, but not published, a report on the claims for expenses of the European Parliament itself. This includes claims for club class flights when the cheapest airlines had in fact been used, but it also includes more serious matters, in which downright fraud is alleged, and the sums involved go up to five or six figures.

Naturally, politicians are reluctant to investigate their own, or their colleagues’, minor expenses fiddles. The judgment of a legitimate expense is usually left to the individual parliamentarian. No man should be a judge in his own cause. Many politicians have given up well-paid jobs, or even highly rewarding partnership in law firms or fund management. They know that they are out of pocket as a consequence of pursuing a public career. They may think that a somewhat inflated expenses claim is a way to redress part of their loss of income.

It is also true that young politicians often find it hard to finance their careers. Very often the first stages of a political career are assisted by the earnings of a husband or wife. A young married couple, perhaps with children, can afford to live on two incomes after one of them has won a seat in Parliament or Congress, but may find it difficult to live on a single income while the political partner is still a candidate.

In most countries, there are pressures to keep down the pay of politicians. In Britain, median pay of all workers is about £20,000 a year, and Members of Parliament are paid about £60,000 a year, but enjoy additional staff and other expenses of over £100,000. If one compares Members of Parliament with doctors in the National Health Service, the MPs seem underpaid. General Practitioners are the professional basis of health care; they are paid £100,000 a year, sometimes more, sometimes less. That is £40,000 more than MPs.

There are measures which could remove some of the temptations which face even honest politicians. All election expenditure could be limited. If the nominees in the United States accept public funding, they will apparently be limited to $85 million each, a reasonable sum to spend on an election. Unfortunately Barack Obama has raised more money than anyone else, more than Hillary Clinton, more than John McCain. He will be tempted to make use of his advantage, though that would make his statements on Campaign expenditure seem hypocritical.

In Europe, the Members of Parliaments may need to be paid more, and related to some acceptable standard of professional pay. Democracy is undermined when voters think that the politicians are on the take, and the present reliance on expenses to supplement income is a temptation for too many politicians who are, in Shakespeare’s phrase, “indifferent honest.”

William Rees-Mogg
for The Daily Reckoning Australia

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If the Presidential election is finally a contest between the two Senators, McCain and Obama, it will at least be a contest of major political figures. I would myself vote for Senator McCain, because he has the experience, and the proven character, to fill the role of Commander-in-Chief. Nevertheless, like most other observers, I have been struck by the inspirational appeal of Senator Obama. I have been following U.S. Presidential elections since 1952, and there have been very few in which both candidates have been of such high quality. In recent years one might have to go back to the Kennedy-Nixon election of 1960 to find a pair of equally gifted candidates, and Senator McCain is a man of far better character than Richard Nixon.

It is probably a good thing that none of the three surviving candidates is an economist, or is known to have any personal ideas of economics. It is not a President�s job to take specialist decisions on major issues of policy. When presidents have imposed their own economic fads, such as Franklin Roosevelt and the price of gold, that has meant an overconfident amateur deciding issues of major international policy. Presidents are not employed to have technical opinions but to take decisions between the different opinions advanced by professionals. General experience and strength of character are the qualities a President needs.

Probably Hillary Clinton has the greatest experience of economic policy. The Clinton administration was relatively successful in optimising U.S. economic opportunities in its period of office from 1993 to 2000. One can imagine that the Presidential couple discussed Alan Greenspan�s latest mystic pronouncements over the grapefruit juice in the White House, if it was their custom to have breakfast together.

The other two candidates, who are more likely to be nominated, lack that experience. Nevertheless, they can do what Bill Clinton did, which is to employ the best available talent in the key positions. The best U.S. Secretary of the Treasury in the last twenty years was Bob Reuben, who is now overseeing the recovery of Citibank. Either Senator Obama � who is a fellow Democrat � or Senator McCain could either try to bring Reuben back, or could at least take his advice on the key appointments.

From what we know, Senator Obama is the more dangerous of the two candidates, in that he holds liberal views which have not been put to the test of experience. There is a rule of experience in the formation of economic policy. Liberal ideas are politically attractive, but have the disadvantage that they do not work. If social intervention by the state really did work, then everyone would operate in that way, because state socialism is always attractive to many voters.

The opposite error is na�ve supply side economics, and that does not work either, or, at least, not very well. Senator McCain is not an economic ideologist, as he says. He does not know much about economics. He was suspicious of President Bush�s tax cuts. He is a conservative, but not a neo-Conservative. Given the right advice, there is a good chance he would take it.

William Rees-Mogg
For The Daily Reckoning Australia

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