“Rick Santorum Is Right: Gas Prices Caused the Great Recession,” Derek Thompson writes at the Atlantic, though he cautions high gasoline prices were but one of several factors. It’s a fascinating post, especially considering the pro-Obama publication running it. It was, not coincidentally, home to the MSM’s uterus detective during his most manic phase, obsessed with destroying a vice-presidential candidate who had the obvious solution to reducing energy prices — and thus jump-starting the economy:
In 2009, economist James Hamilton published a paper that retroactively forecast what an oil shock, like the one we experienced in 2007-08, would do to GDP. And guess what? His model accurately predicated much of the collapse in GDP that resulted from the Great Recession — as if there had been no housing bubble or financial crisis! The oil spike was that bad.
Still, there was a housing bubble. And there was a financial crisis. How do we account for them and still hold onto the gas story? Here’s a one-paragraph theory of the Great Recession that begins with gasoline. Cheap gas ruled in the 1990s. This encouraged families to settle down farther from the cities where they worked. In the 2000s, super-low interest rates, declining lending standards, and an appetite for mortgages on Wall Street (among other factors) further encouraged sprawl and residential development in the ‘burbs. As the price of gas went up, families stopped buying homes 30 minutes from the city. For folks shacking up in the exurbs, higher gas bills ate into mortgage money. For companies, higher energy bills shocked productivity. Classic oil-shock + housing development arrested + financial crisis = Great Recession.
There appears to be pretty strong correlation (if not causation) between national gas prices, which accelerated after 2005, and housing starts, which declined after 2005.
Say, what was different about America in 2005?
The video above provides the answer. And how did the entire elite media react in late 2008 when gas prices had temporarily cratered? NBC, the New York Times and the Washington Post all begged the Office of the President Elect in lockstep unison to tax the daylights out of energy and get those prices back into the stratosphere — and the economy stuck in the mud of Obamaville.
(Update: Video moved to top of post to avoid positioning conflict with our advertisement.)