Tuesday, May 13, 2008

Weeding Through Clinton's Economic Mish-Mash

Fire of Liberty

Though I have a good working knowledge in economics and tend to turn to this science to explain why ideas being pushed on the election stump or in the well of the Senate are bad for this country. One bit of nonsense that has been getting under my skin lately is Senator Clinton's continued insistence that the oil companies are making "too much money" and should be forced to fork over tons of money in the form of "windfall profits" taxes to the federal government because she says so. Though such populist rhetoric might sound pretty appealing to the general listener of the nightly news broadcast or listen to news snippets on the radio after buying a tank of gas, it doesn't seem to great when they realize such a tax will harm them in the near future. Not only will it such a tax be passed on to the consumer when the oil company tacks this onto the price of gas but it also will push the oil companies to think twice about pulling oil out of the ground or the amount they refine(Even though a new refinery hasn't been permitted to open for the last 30 years due to Clinton and company) for the fear of being taxed for being successful by producing a product that the American people need. The sad thing about this issue is that Senator Clinton and her economic team are a little lax on reading their economic history(And know the everyday voter doesn't have time to do the research) or they'd know that such a policy was launched by the Carter administration and ended up in the waste bin just like the former president was upended be the Reagan juggernaut in 1980. Someone who has read their history is Bloomberg columnist Amity Shlaes who pretty much demonstrates how such an idea of a "windfall profits" tax bad for the economy and will create higher prices to be passed on to the consumer in her May 2, 2008 column "Clinton Caught in Time Warp With Windfall Oil Tax," when she noted the following:

But in 1980 the economy's refusal to recover was baffling some economists. One of their conclusions, published in the New York Times, was that the windfall-profits tax was being passed along to consumers, reducing disposable income and so demand. In other words, it was doing the opposite of what the tax-rebate checks are supposed to be doing this month and next.

Specifically, the Windfall Tax made investment and production at domestic oil companies more expensive. Mobil was right. You needed incentives to want to drill. That deterrent slowed the sort of research that might have made energy less expensive earlier.

A Congressional Research Service paper suggested that the 1980 law actually increased foreign imports relative to domestic production.

So where we are now is that Clinton and her colleagues are backing a move that would strengthen the position of Middle Eastern OPEC members and Hugo Chavez of Venezuela.

What's more troubling to more is the fact such profits are not deposited to a big Swiss bank account in the name of a select bit of CEOs like the junior senator from New York portends to her audience but is distributed to taxes(Already in the double digit billions), future exploration, dividend payments to shareholders and holders of mutual funds, as well as paying employees and other entities that they deal with as they pull up and refine this "Texas Tea," into gasoline. I for one would say that the Clinton team and others in the Senate should read more economics books before they promote such costly policies but then again you can't expect much but all talk but no thinking coming from the biggest hot-air balloon factory in the country. Thank G-d we have folks like Amity Shlaes and hear wealth of knowledge in economics to weed through such economic nonsense.

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