Now that the Democratic primary race is pretty much settled – or in other words barring a Howard Dean-esque immolation Obama is now the nominee – the candidates are now starting to trade jabs on actual issues. The "right now" issue of this week is the price of gas.
It costs so much to fill the average American car today that there are loan sharks hanging out at every corner gas station. Go to a mega station and you'll find it has its own bank branch just to handle the volume of cash it takes to fill a Suburban. Everybody has an opinion as to why prices are so high – and almost everybody has their own ideas as to how to bring gas prices down to earth. Some ideas are worth trying. Other ideas are plain nuts.
Obama's ideas are recycled from the 70s and 80s – i.e. Carter-esque. A good chunk of the population wasn't around when Mr. Peanut went to Washington. They don't remember spending hours in gas lines to fill the family station-wagon with the 10 gallon ration. Well, if Obama gets his way history will repeat itself in short order. Here are the highlights of Obama's "plan"
First we have the oft-toted liberal feel-good stick-it-to-the-man "Windfall Profit Tax" (WPT). Here's Obama's pitch for the tax:
I'll make oil companies like Exxon pay a tax on their windfall profits, and we'll use the money to help families pay for their skyrocketing energy costs and other bills.
Now here's what Uncle Jimmy said back in 1979 as he pitched the same kind of tax Obama is championing:
Unless we tax the oil companies, they will reap huge and undeserved windfall profits.
No matter how much perfume or lipstick you put on a pig, its still a pig. Obama may try and change the façade of Jimmy Carter economics, but the underlying effects are still the same.
First of all, someone should sit Obama down with an undergraduate Economics textbook and explain to him that corporations like Exxon-Mobil don't pay taxes. Well, they might pay taxes, but they push the cost of those taxes – like every other expense – down to the consumer. So, in a sense, Obama will levy a tax on Big Oil which Big Oil will then pass right down the line to the very consumers Obama claimed the tax was meant to help. The end result? Government gets more money. Tax payers have less money. Big Oil? Most likely Big Oil keeps doing exactly what it's doing right now – selling a product at market to the highest bidder.
How much money would be generated from a WPT on Big Oil? Well, a brief glance at history shows us that WPT proponents claimed it would generate $320 billion over its lifetime. After the WPT was finally killed off by Ronaldus Magnus in 1988, the tax had generated a paltry $40 billion. Add to that the deleterious effect it had on the domestic oil industry and you come up with a net loss.
Obama's overall economic strategy can be summed up in one single word. TAX. He wants to double the Capital Gains Tax. He wants to raise the amount of your income subject to the Social Security tax. And, true to the default setting of liberal socialist Democrats, he wants to soak the rich.
Barack Obama is no doubt a learned man. He's got degrees from Columbia and Harvard Law to prove it. He may well be an intellectual but in and of itself his education has not made him wise. No country in history has managed to tax itself from a soft economy into a prosperous one. That which a government taxes it gets less of. Carter proved this. Reagan's tax cuts actually doubled revenues to the US Treasury. W's tax cuts had much the same effect.
The depths of Obama's economic naïveté have yet to be plumbed. Personally, I'd rather he not do his supply and demand on-the-job-trainng in the Oval Office.
Here endeth the lesson.