November 8, 2005
Going After Profits
By Bruce
Bartlett
On Wednesday,
two Senate committees will hold a joint hearing on energy prices
and corporate profits. Executives from the leading oil companies
have been summoned so that senators can publicly berate them for
greed, price gouging and anything else they can think of that might
provide a good television soundbite.
We have
seen this many times before. When Democrats controlled Congress,
such kangaroo courts were a common occurrence every time the world
price of oil spiked. Congressmen and senators ranted and raved
for the cameras, while oil company executives were forced to sit
silently and take it, with little if any opportunity to respond.
What is
different now is that Republicans are doing exactly the same thing.
Their purpose seems to be to prove to the American people once
and for all that it makes absolutely no difference which party
controls Congress -- the same utterly stupid policies are pursued
under both Republican and Democratic control. And Republicans
wonder why their party's base is evaporating, with many political
analysts now predicting heavy losses for the GOP in next year's
congressional elections.
The ultimate
in Republican idiocy is growing support for a windfall profits
tax on oil companies. Mental diminishment is even affecting those
previously considered to be "conservative" -- a term
increasingly devoid of meaning in a Congress that spends money
even faster that liberal Democrats used to do. It is worth quoting
at length from one of these alleged conservatives, Sen. Judd Gregg,
Republican of New Hampshire. In an Oct. 28 press release, Sen.
Gregg had this to say:
"Over
the past few days, while the public and our national economy
are suffering under the huge burden of costs of oil and gas,
it is infuriating that one part of the economic sector is reporting
record-breaking profits, some in the $10 billion quarterly range.
With people being forced to pay $3 a gallon for gas and $2.50
for oil to heat their homes, it is apparent that the oil companies
have taken advantage of the trust of the American people.
"As
a result of this, I believe it is time to take a serious look
at reinstituting an excess profit tax on oil companies, with
the proceeds being put toward the low income home energy assistance
program and deficit reduction. I intend to pursue options in
this area over the coming weeks.
"Some
might call this a novel approach for me, but I cannot sit back
in good conscience while those in our society struggling to
heat their homes are being left in the cold by oil companies."
Of course,
the oil companies have made a lot of profit lately, but so have
many other businesses and industries. Although Exxon got big headlines
for earning $9.92 billion in the third quarter, few analysts bothered
to note that this only came to 9.8 cents per dollar of sales --
well below that of many other companies. For example, Citigroup
and Microsoft each made 33.2 percent profit. Among other major
companies that each made at least twice as much as Exxon in percentage
terms are Bank of America, Merck, Google, Eli Lilly, Coca Cola,
Intel and Yahoo.
An Internet
search turned up no evidence that Gregg or any of the other dimwits
calling for windfall profits taxes on the oil industry have also
called for windfall profits taxes on the banking, pharmaceutical,
software, hotel or other industries that earned much more per
dollar than the oil and gas industry. Nor is there any evidence
that windfall profits tax advocates have ever suggested compensation
to offset oil industry losses in years when the price of oil fell.
It's heads I win, tails you lose.
Others may
be inclined to be more charitable, chalking up ill-informed comments
from the Judd Greggs of the world to rhetorical hyperbole by an
overeager press secretary. Unfortunately, bad rhetoric sometimes
leads to enactment of bad legislation. In 1980, Congress enacted
a windfall profits tax on oil companies that even included newly
discovered oil, upon which there could be no conceivable windfall.
The Wall Street Journal's lead editorial that day was
titled, "Death of Reason." It was framed in a thick
black border to indicate mourning over the loss.
Fortunately,
the tax was repealed by Ronald Reagan before it could do too much
damage. But given George W. Bush's proclivity for signing every
bill that comes out of Congress, no matter how misguided, I have
no confidence that he would veto another windfall profits tax
should it reach his desk. Some political aide may explain that
it tested really well among focus groups and will add several
points to his approval rating.
Sadly, such
arguments appear to have won him over in the past, as with the
incredibly unwise Medicare drug benefit, Sarbanes-Oxley bill and
campaign finance legislation.
Copyright
2005 Creators Syndicate
