Shorter Ben Stein:
High gasoline prices don’t much affect me, or my dentist, or other people earning more than half a million dollars a year. Now it’s true that people on lower wages feel the oil-price rise more keenly. But that just means they’re not earning enough. So short of balancing the budget, the main thing we can do on the oil-price front is all earn more money.
This week, Stein’s managed a twofer: not only is what he writes incredibly offensive to just about anybody making less than half a million dollars a year, but it’s also based on numbers which are simply incorrect. Dean Baker puts himself on fact-checking patrol:
It takes a newspaper with a great deal of self-confidence to turn over a regular Sunday column on business issues to someone who has no idea whatsoever what they are talking about. I have no idea how or why Ben Stein has a column in the NYT business section, but you have to admire the NYT’s editors for their willingness to put up with the regular embarrassment.
This time he really went all out. First he minimizes the problem of higher oil prices by telling us that "as of this spring, gasoline and oil and heating oil together amounted to about 2.5 percent of total personal consumption expenditures in this great country." …
If we look to the most recent consumer price index report (Table 1), we can find that motor fuel is 5.5 percent of consumption expenditures. Household energy would add another 4.2 percent to total consumption expenditures, if we want to take a broader measure of the impact.
Next Mr. Stein tells readers that after peaking in 1973 "real wages both hourly and weekly for all nongovernment workers, on average, have fallen by about 5 percent, very roughly." … First, Stein has used the wrong deflator…
The other problem with Stein’s statement is that this index does not include "all nongovernmental workers." … For the most part, this series excludes the "lawyers, doctors, investment bankers, accountants, dentists" that he refers to later.
Oh yes, and then there’s that bit about balancing the budget. It starts off with the old canard about how "the world price of oil is denominated in dollars" – the denomination fallacy which kicked off one the very first Ben Stein Watches. Get a load of this logic:
The world price of oil is denominated in dollars. The dollar is weak for many reasons, but a big one is the immense budget deficits run by our government. If President Bush and Senators John McCain and Barack Obama were to stand together in front of a camera and solemnly swear that they would balance the budget in four years, even if it required tax increases on people earning millions, the dollar would rise against the euro, and oil would fall in dollars.
As Baker points out, budget deficits do not mean a weaker dollar. Budget deficits cause higher interest rates, and higher interest rates mean a stronger dollar.
But the really weird thing is that Stein’s argument is predicated on his very own denomination fallacy being, well, false. Here’s what he wrote last year:
If oil, for example, becomes denominated in euros, the price in dollars rises — perhaps significantly.
This is a world where denomination matters: where it makes a difference whether oil is priced in dollars or euros. In such a world, the price of oil, in its currency of denomination, is the price of oil; while changes in supply and demand can move the price, changes in currency markets can’t. Yet now Stein is saying that if the dollar rises against the euro, the price of oil will fall in dollar terms – for all the world as though oil were denominated in euros, not dollars. It simply makes no sense at all. Which, of course, is hardly a surprise, given the author we’re talking about here.