Orwellian nuttiness incarnate

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Orwellian nuttiness incarnate

By Colin McNickle

TRIBUNE-REVIEW

Sunday, May 4, 2008

The New Deal never dies; it merely comes back as a new shade of pig lipstick.

Witness a proposal by U.S. Rep. Paul Kanjorski, D-Pa., who's represented the 11th Congressional District over in Northeastern Pennsylvania since what seems like the 18th century but actually since 1985.

Talk about beating a dead gasoline pump: Mad as hell at Big Oil and urging the public to "shout out, dammit, we've had enough," he's back with the latest incarnation of his Consumer Reasonable Energy Price Protection Act.

Not only does Paulie the K want a "windfall profits tax" on oil and gasoline, he proposes the establishment of a "Reasonable Profits Board" to determine when those earnings exceed a "rational" threshold.

Can you imagine empowering the government to determine when your profits no longer are "reasonable" and "rational"? This is Orwellian nuttiness incarnate, the stuff not only of misguided New Dealism but of communistic five-year planning.

First, the more you tax something, the less you get of it. In this case, that means less domestically discovered and procured oil and refined gasoline and more foreign oil. Right-wing theory? Hardly. Review the data from the 1980s, the last time "windfall" oil profits were taxed:

Domestic production dropped between 3 percent and 6 percent and dependence on foreign oil increased between 8 percent and 16 percent, reported the Congressional Research Service.

How Kanjorski concludes his proposal would force oil companies trying avoid a tax on their "windfall profits" to reduce prices suggests a very nasty case of brain flatulence. What's more likely to happen? Unable to maximize the return on their investment, oil companies would start withholding product, diverting it where they can. It's like handing the Chinese an endless supply of succulent Cantonese roast duck.

Second, an analysis by the Tax Foundation (in 2005) found that, since 1977, governments collected tax revenues "more than twice the amount of domestic profits earned by major U.S. oil companies." Of course, Congressman Kanjorski's "windfall profits" levy would not apply to the only true "gouger" in this equation -- state and federal governments.

Third, there are many other industries whose profits per dollar of sales equal or exceed those of Big Oil; they're not targeted by Kanjorksi. Apparently, "windfall" is in the blind eye of the tax 'em beholder, usually holding a lifetime membership in The Club for the Economic Ignorami.

Fourth, this concept of a "Reasonable Profits Board" is an incredibly slippery slope that, when applied by slippery politicos, could leave no business standing. Today, Big Oil; tomorrow, Big Software. Why risk any investment when the extent of your rewards is either predetermined by government or trampled by government when your enterprise is "too successful"?

Indeed, gasoline prices are high. The demand curve has exploded; the supply curve would be wise to ingest a cocktail of Viagra and Cialis. Greater domestic drilling and refining capacity would go a long way to start fixing the problem. It also would send a strong message abroad and bolster the weak dollar, said to account for about $40 of each barrel of crude.

As for Paul Kanjorski, let's try a windbag politicians tax.

Colin McNickle can be reached at cmcnickle@tribweb.com or 412-320-7836.

http://www.pittsburghlive.com/x/pittsburgh...e/s_565665.html

Compare profits margins of other industries:

Pharm/Biotech - >19%

Banks - 18%

Software - 9.9%

S&P Energy Sector- 8.5 - 9.7% (S&P 500 - Thomson Baseline)

Telecomm - 9.1%

Food & Beverage - 8.3%

Google - 25%

The University of Texas Football - 73%. (2005)

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Short memories, or short-sightedness. Take your pick.

After all, remember the oil crisis in 1973 and 1974. Rather than allow the market forces to dictate the price of gasoline, the government began to impose price ceilings in a ham-handed attempt to curry favor with the American voter.

Of course, the Law of Unintended Consequences came into full effect, chiefly because oil companies realized that they couldn't make a profit based on the arbitrary, government-determined prices, and stopped delivering gasoline.

Reminds me of Santayana's old saw, "Those who don't remember history are doomed to repeat it."

[AURaptor 1,126]

Reminds me more of Atlas Shrugged