This past week White House Press Secretary, Robert Gibbs, suggested that had the government not bailed out two failing auto manufacturers, “that’s a million more people that would have been on unemployment benefits.” As will be explained herein, this claim of the Press Secretary is wrong and misleading.

Mr. Gibbs also suggested that critics of the auto bailout wanted to walk away from a million jobs. Such talk is unfounded political speak. One would have a hard time finding any serious critic who advocated such a thing.

Quoting Mr. Gibbs,

“I’ll let those that sat in the cheap seats a year and a half ago and wanted to walk away from a million, explain to every one of those workers why they made that decision and… whether they thought the decision they made 16 or 18 months ago, different than that of the president of the United States, whether they still stand by it.”

As one who sat in the so-called cheap seats, Mr. Gibbs, I never advocated walking away from a million jobs, but I absolutely do stand by the position that the GM/Chrysler bailout was a terrible thing to do and made no economic sense.

It seems that the President is unable to grasp – or unwilling to accept – some of the most basic economic principles surrounding this issue.

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Isn’t it interesting how every time a state government is in fiscal trouble that the first thing they decide to do is to raise taxes on the sale of tobacco?  Somehow, legislators have it in their heads that the only people who might be upset by raising the cost of tobacco are smokers.  And, since smoking is bad for smokers, and smokers shouldn’t be smoking anyway, maybe making smokes more expensive will dissuade smokers from smoking.

Of course, this is government we’re talking about.  So it never works out they way they think it will, no matter who tries to tell them.  In fact, this plan to raise revenue from tobacco taxes doesn’t actually work at all.

See, governments don’t understand free markets.  If you raise the price of a certain good or service beyond a certain point, people who want the product badly enough will find a way to procure it more cheaply.  Remember Prohibition? Same thing.  To avoid paying the higher taxes, they will cross state lines, buy from an Indian reservation, buy over the internet, or even resort to black market purchasing.

And, if raising taxes does actually cut down the number of smokers, then the expected revenue from this tax increase will be less than expected…because there will be fewer smokers!

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