Every day, there’s a new story about the political importance of gas prices. Apparently, voters jump to blame their leaders (especially the President) whenever they’re facing high prices at the pump.
Of course, this is complete nonsense. There is virtually nothing that American politicians can do to change the price of oil. Mitt Romney talks about the need to keep “supply” in line with demand, but he neglects to mention that the relevant quantities are world supply and world demand, and that the US has nowhere near enough oil to make a dent in world supply. Although producing more oil would be financially beneficial for the US, this is only for the very simple reason that selling oil earns money, not the tiny impact that higher US production would have on prices faced by consumers. (Norway has probably managed to figure this one out by now.)
At the same time, however, there is an even more important price that politicians around the country can change: the price of housing. Especially in major cities like New York, San Francisco, Washington and (gah!) Boston, a tangle of zoning and building restrictions makes housing far more expensive than the direct costs of supplying it would suggest. Changes in population from state to state are dominated by a general trend of moving to where housing is cheaper. The costs of shelter account for more than 20% of consumer expenditures. Clearly this a very, very important issue for consumers’ well-being—yet we don’t see a popular response that comes close to matching the ferocity of the reaction to gas prices.
To be fair, there is some response, and it usually takes the form of misguided measures like rent control or top-down efforts to provide “affordable housing”. But I think it’s fair to say that housing is, most of the time, much less salient as a political issue than energy.
Why is this? The obvious explanation is that richer and older people—the ones who vote—are disproportionately more likely to be homeowners. According to the Consumer Expenditure Survey, 89% of the top quintile are homeowners, compared to 40% of the bottom quintile. If we look at the data by age, roughly 80% of households led by people 55 and older own their own home, versus 14% for households led by someone under 25. Homeowners, of course, generally benefit from an increase in housing costs: they own an asset whose price reflects both housing costs today (which they have to pay whether or not they own a home) and housing costs in the future. Since most homeowners are going to die long before their houses or land become uninhabitable, an increase in those future housing costs leads to a direct increase in their real wealth. (Unless, of course, they care about their great-grandchildren’s wealth just as much as their own.)
Perversely, their incentive is to choke off the housing supply as much as possible, not look into ways to create affordable housing. And now, in a world where higher house prices are (mistakenly or not) viewed as essential to economic recovery, this manipulation even acquires an air of legitimacy.
With energy prices, on the other hand, there’s an element of politicians creating their own reality. Since energy encounters price spikes so frequently, it’s an obvious target for popular anger, and thus an easy target for political pandering. Even if there’s absolutely nothing they can do on the issue, politicians are forced to say something about it. And since politicians talk about energy prices so much—and those prices become perceived as a legitimate topic of political debate—voters assume that government must be able to have some impact.
Meanwhile, hardly anyone in the US—save for Alaskans and investors piling into Exxon Mobil stock—benefits from high energy prices. It’s hard to imagine anything less politically risky than complaining about the price of gas. And so we’re left with a bizarre distribution of political attention: massive coverage of a less important price that we can’t change, but relatively minor interest in a more important price that we can.