Re: Oil and Congress don't mix

I agree with your thoughts. The profits belong to the shareholders, not the
gov. or the public at large.

--
Jerry


"s_knight8" <s_knight8nospam@xxxxxxxxxxx> wrote in message
news:e3fq9p$kpv@xxxxxxxxxxxxxxxxxxxxxxxxxx
http://money.cnn.com/2006/05/04/news/economy/oil_pluggedin_fortune/index.htm

Let's start with some basic math. The U.S. consumes about 322 billion
gallons of gas a year. America's five biggest oil companies made a
combined
$69.3 billion in 2005. So, if a windfall profits tax took every penny of
those profits, and all that money was returned to the public, the price at
the pump would fall - all of five cents a gallon.

Of course, you say, the thinkers (most, but not all Democrats) are not
talking about taking all profits, just some "unfair" or "excessive"
portion
of them.

"This is not a time for greed, and that is what we have on this,"
explained
Sen. Edward Kennedy (D-Mass.) with typical clarity.

"We need a windfall profits tax because these profits have been absolutely
obscene'' is the sweet reason of Sen. Carl Levin (D-Mich.).

The proposal to impose a 50% tax on oil sold for more than $40 a barrel
necessarily would shrink the alleged windfall to a vanishingly small sum.
It
would also reduce the dividends and rising stock prices that millions of
Americans enjoy from their holdings in oil companies. And it would leave
Big
Oil with less money to invest in exploring for more oil (and therefore to
increase the supply of it).

Besides, anyone who thinks Congress would actually ship the proceeds of a
windfall tax into the wallets of ordinary Americans really should get out
more. It wouldn't, and given Congress's record of economic mismanagement -
rising deficits, the gross misuse of benchmarks and a resolute disdain for
dealing with real problems like entitlement spending - feeding the beast
is
stupid.

Some Republicans came up with their own bright idea to deal with rising
gas
prices: Give $100 to taxpayers to help them fill the tank. That plan would
get money into the hands of consumers - except the cash wouldn't arrive
until the fall. That's before the midterm elections, to be sure, but gas
prices could already be lower by then. And $100 doesn't go very far -
perhaps a few fill-ups. Remember, too, the federal government is already
spending more than it takes in - and no, you haven't missed the carefully
calibrated list of spending cuts and management innovations that will
cover
the cost of this program. It doesn't exist. Chalk up another stupid idea.
No conspiracy here

So far, oil at $70 a barrel has not devastated the U.S. economy, but it
is,
in effect a tax without a shelter. When consumers have to spend more on
gas,
they are not spending it on things like bicycles or spiked heels;
businesses
don't have as much money available for wages or capital investment. High
oil
prices do hurt.

That does not mean they're a plot designed by Big Oil (and their lackeys
in
the White House) to reap riches at everyone else's expense. Attention,
conspiracy theorists: Exxon does not set the price of oil. A global market
of traders does. The rising price of oil is driven by real things - like
growing demand, bottlenecks in refining, OPEC policy, concern about Iran,
political risk in Venezuela, and speculative pressure. Nothing Congress
has
mentioned is going to budge any of these factors an iota.

Two things make this particular round of nonsense extra troubling. First,
it
demonstrates just how few capitalists there are in national politics right
now. You don't have to feel warm and fuzzy toward Big Oil companies to ask
just what it is they are supposed to have done wrong. They made a lot of
money: So what?

Exxon's profit as a percent of revenues was actually pretty mediocre in
2005, ranking it only 116th in the FORTUNE 500. It's a very big company
that
sells a commodity whose price rose. Since when is that a problem? And if
making a lot of money fast is a sin, should we then look at punishing,
say,
gold traders? Or the investors in Titanium Metals, whose stock price rose
422% last year? To ask the question is to answer it.

The rush to "do something" about oil prices is an illustration of
Congress's
tendency to see every economic issue as a problem that it needs to solve.
Imbalance with China? That can't be good. Let's impose "voluntary"
restraints and decide where its currency should be, for good measure.
Troubles in agribusiness? More subsidies, please. Steel tariffs; textile
safeguards; restrictions on foreign investment; the nasty blather on
outsourcing - the examples go on and on. This is a political class that is
profoundly anti-market.

No question, the economy needs rules. But the point of them should be to
correct failures, and to make the market work more smoothly, not to
attempt
to rig the outcome to fit this week's headlines (i.e. royalty relief and
tax
breaks for oil companies last year, punishment this year). Economics 101
has
it right: The market itself is a self-correcting mechanism. In the case of
oil, that means high prices will do more to induce change away from fossil
fuels than any Congressional twitterings. One suspects, though, that
anyone
noting the utility of the price signal on Capitol Hill these days, among
either Republicans or Democrats, would be regarded as a wild-eyed lunatic.
Economic fantasia

The other problem with Congress's proposed solutions to rising oil prices
is
that they are an insult. Fortunately, their sheer stupidity has sent them
into legislative limbo - for now, anyway. (Note, however, that this is the
second time in the past year Democrats have brought up the idea of a
windfall profits tax; the first was after Katrina). Members of both
parties,
though, are sure to brag on the campaign trail how committed they were to
a)
sticking it to Big Oil or b) helping the little guy. That a considerable
proportion of these elected representatives are nervy enough that they'll
pretend that this stuff was serious - and expect voters to believe them -
is
disgraceful.

Most people in the U.S. actually live and work in the market economy, not
the economic fantasia that is today's Congress. It is no surprise, then,
that members of Congress got a hostile earful about the $100 rebate.
Americans know that not everyone is a winner in a free economy all the
time;
so they cope, with diligence, optimism and creativity. At a minimum, they
have a right to expect that the people they pay to make policy should do
so
with a similar seriousness of purpose.

Instead, they got this garbage.




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