Robert H. McElroy 2008.
"Let the market work its' will" was frequently invoked through 12 years of Republican Congresses when consumer interest was discussed. Consumers, the demand side, can control the price of goods by purchasing decisions, it was held. It works when deciding between retail items, but with gasoline the market's will favors the supply side leaving consumers with few choices to lower costs.
Let's see what happens when the market works its will towards $6.00 per gallon gas and millions of Americans start riding bicycles.
First, bike makers will lobby for a government ad campaign promoting bike riding as healthy, patriotic, and chic. Congress will pass a $600 million energy tax credit for bikers and $300 million for bike makers, but the bill will overlook abuse potential and, for a while, Americans who never intend to ride bikes will buy them to get the credit. Abuses, akin to farm conservation subsidies abuse, will surface when newspapers report on a 350 pound man who owns three unused bikes and received credits for $3600. But it will take Congress 78 years to change the law. The Highway Trust Fund will be deluged with requests for bike path funds.
Once millions take to their bikes, and begin running into each other, health insurers will stop covering bike-related injuries without a more expensive policy rider. Other insurers will press states to make theft and damage coverage mandatory. States will comply. Some will require uninsured bicyclist coverage.
State government revenue schemes such as a yearly bike registration fee, new bike laws, and fines for violations will follow. The revenue will be spent to staff bike courts and the rest on unrelated general fund items. A debate will begin over whether or not illegal aliens should be allowed to register their bikes.
As the market works its will, bike prices will rise meteorically. We will be forced to endure endless TV ads aimed at creating a class structure based on the type and cost of bike ridden. Once Americans believe that their bikes are who they are, not what they ride, bike prices will become valued-added, raising prices even more. India will build a fifty dollar bike but will be prohibited by the State Department from importing them because it continued discussions with Iran about building a natural gas pipeline.
As bike prices reach $3,000 lenders will offer bike loans with interest rates adjusted to the price of crude oil. Investors urged on by low Fed rates will buy up bikes to flip them for a quick profit eventually creating a bike bubble.
A far reaching bike bubble. Bike makers will have dumped millions of profits into markets causing growth in industries unrelated to bicycles. Trade with manufacturing countries increased. US foreign policy will impose humanitarian and government transparency requirements on developing countries that want the bike manufacturing action and the credit industry, having been relieved by earlier Congress' of any reasonable requirement for cash reserves, will have lent to the max.
Crude prices will increase due to a third US carrier in the Persian Gulf. Bike loan interest rates will rise accordingly, leading to mass defaults as borrowers, unable to pay the loans, try to sell bikes at prices below the money owed on them. The cash flow to other companies from bike maker profits will dry up causing layoffs in many industries. Insurance companies losing revenue from cancelled policies will look to raise rates elsewhere. State governments relying on bike fee revenue will cut the budgets of programs the waning fees funded. Bankruptcies will rise, Wall Street lenders will need a $30 billion bailout and Congress will increase the deficit to provide more unemployment insurance. The CBO will estimate the cost of energy-saving bike riding, including the cost of tax breaks and incentives at $21,345 per taxpayer. Candidates for office will offer quick solutions such as the 18 cent gas tax cut and increasing ethanol production.
Americans will realize that the only safe, energy cost-saving effort they can take is walking...until the shoe industry lobbies 'government for an ad campaign assuring us that to walk is healthy, patriotic, chic...'well, you know how it goes. ##