Economics & Taxes Archives

Ten Questions for Senators

That is, the ones who are grilling oil executives.  Bruce McQuain at QandO notes questions suggested by the Institute for Energy Research.  The first 3:

1. Do you understand the fundamental economic principal of supply and demand for commodities pricing in the oil market?

2. Oil is a global commodity, bought and sold on the world market. Given that the nine largest private oil companies hold less than 5% of the entire world’s proven oil reserves, isn’t it more likely that the law of supply and demand is “manipulating” current prices than the five corporations represented at your witness table?

3. As a U.S. Senator, you have control over oil production on U.S. federal government lands. Taxpayers own these lands and the energy that lies beneath them, but 97% of the federal OCS and 94% of onshore government lands are not being used. Are you willing to help increase the world’s supply of oil – and thus reduce the price of oil and gasoline – by allowing more U.S. energy to be produced from these lands?

Read the whole thing.


Unintended, But Not Unforeseen, Consequences

Erik Erickson, a contributor to, also has a personal blog in which he talks about local politics (he lives in Macon, GA). Yesterday, he talked about a good local government program the finds summer jobs for high school students. It does its job well, he says, but it’s having a new problem.

Erik is on the Macon City Council’s Community Resources and Development Committee, and the lady who represents the program briefed the committee on it.

During the course of the lady’s presentation she lamented the increase in the minimum wage — this from a government bureaucrat who’d already blamed Bush for cutting other social program funding.

Because of the minimum wage increase, it is now more expensive to employ each student. Because it is more expensive per student, less students can be employed. The less students that can be employed through the program, the more students there will be on the street during the summer without jobs.

And that could very probably increase the rates of petty crime during the summer.

Way to go Democrats!

He titles the post “The minimum wage and unintended consequences“, but those consequences are certainly not unforeseen, as any honest economist would have to admit to it. Democrats, when arguing for an increase, however, never seem to mention that a minimum wage increase does not, cannot, happen in a vacuum. There are consequences to tampering with the free market, but the loss of jobs is minimized or ignored by a party that claims common cause with the poor.

[tags]minimum wage,free market,Democrats,living wage,unintended consequences[/tags]

Free Market Update

It still works.

News flash: Skyrocketing gas prices are driving historic shifts in the habits of car buyers, pushing them away from thirsty pickups and full-size SUVs and into four-cylinder compacts.

What a surprise.

Might all the smart people behind tougher federal Corporate Average Fuel Economy rules be watching? If they are, do they understand what we are witnessing? Namely, this: It’s not arbitrary mileage goals, mostly unhinged from engineering reality and focused on a handful of companies, that are dramatically changing the behavior of the driving public. It’s the price of fuel, stupid.

Cars outsold trucks in April for the first time in a generation, according to industry figures compiled by Autodata Corp., and four-cylinder powered cars outsold those with six cylinders under the hood. The shift, clearly a blow to truck-dependent Detroit automakers scrambling to dig out of their deep hole, is confirmation that market forces are a swifter disciplinarian than the collective wisdom of Congress, career bureaucrats and the environmental lobby.

Daniel Howes continues to discuss how the market, better than any government program, quick fix or temper tantrum, has made fuel economy a big issue with consumers. 

[tags]Daniel Howes,free market,CAFE standard,economics[/tags]

Multiple Economic Personality Disorder

While I don’t like paying $50 to fill my gas tank, every time I do I remind myself that this surge in oil prices is helping along the search for an alternative energy source.  When oil prices are low, there is little incentive to do R&D, especially if the cost of the new source comes in much higher.  But as the price of oil climbs, the incentive to innovate becomes stronger, and leads us closer to a solution.

But there are some that, while they proclaim they want the latter, also complain about the former.  Unfortunately, all 3 of the major candidates for President are among that crowd.

This tiff over gas and oil taxes only highlights the intellectual policy confusion – or perhaps we should say cynicism – of our politicians. They want lower prices but don’t want more production to increase supply. They want oil "independence" but they’ve declared off limits most of the big sources of domestic oil that could replace foreign imports. They want Americans to use less oil to reduce greenhouse gases but they protest higher oil prices that reduce demand. They want more oil company investment but they want to confiscate the profits from that investment. And these folks want to be President?

Higher prices are doing what they’re supposed to do; encouraging conservation.  This is a good thing.  I know it’s hard to understand when you’re watching the numbers fly up on the pump, but in the bigger scheme of things, it can be an aid to discovering the next big, clean energy source.  I have in the past covered those who are antagonistic to clean, renewable energy (oh please, read those links; just dripping with irony), but these politicians — these allegedly smart people who supposedly see the big picture — should be the ones educating the public on this issue, not pandering and just rounding up the usual suspects.

Prices convey information.  They affect demand.  Artificially manipulating them doesn’t do any long-term good.

[tags]energy,oil,gas prices[/tags]

Not-So-Free Press in Venezuela

“Give them an inch, and they’ll take a mile.” In Venezuela these days, that venerable saying could be morphed to, “Give Hugo a company, and he’ll take the industry.” Not content with RCTV, Chavez is gunning for one of the last independent voices in Venezuela.

President Hugo Chávez is trying to whip up public support to close down Globovision, the remaining Venezuelan television channel critical of his administration.

Chávez has called Globovision “an enemy of the Venezuelan people,” and fervent government supporters want the national tax office to investigate the station. Hundreds of them rallied outside of Globovision last month.

The threats against Globovision come less than a year after Chávez knocked RCTV, the country’s most popular television station, off the commercial airwaves. RCTV had broadcast unflattering news coverage of Chávez for years.

Alberto Ravell, a Globovision part owner who runs the 24-hour news channel, has come under personal attack.

“Ravell: Fascist, coup plotter, murderer, liar,” read signs held by Chávez supporters at one of the president’s speeches late last year.

One thought is that Chavez won’t really nail Globovision because, as Ravell notes, he needs the station as a foil; someone to blame and accuse. In fact, just accusing them of being an enemy of the people and reducing their credibility with rhetoric may be all he needs to do to marginalize them and effectively take them out of, or minimize their impact on, the equation.

Another thought is that Chavez is looking for a distraction from the (predictable) shortages that his utopia is failing to curb.

The tension between the news station and Chávez comes as the leftist president appears to have lost some of his popular support.

The pollster Datos, in a quarterly survey of 2,000 Venezuelans last month, found that some 34 percent said they support Chávez’s government, down from a high of 67 percent in early 2005, and the lowest level since 2003, the Associated Press reported.

Another survey, by Venezuelan pollster Alfredo Keller, found that 37 percent of Venezuelans queried identified themselves as Chávez supporters in February, down from 50 percent in mid-2007, AP reported.

I honestly hope that the Venezuelan people are turning against Chavez for something other than just not enough “free” amenities from this socialist experiment. Hopefully, this dose of authoritarianism, along with Chavez’s penchant to blame everything else but his economic policies, will help the people to see what a mistake they made.

But one of the most dangerous things in the world is an authoritarian who feels like he’s losing his authority. I am concerned for them.

The Religious Left

The Acton Institute for the Study of Religion and Liberty has, as it’s quick mission statement:

The Mission of the Acton Institute is to promote a free and virtuous society characterized by individual liberty and sustained by religious principles.

Among their web site’s many features is the Acton PowerBlog, and a podcast of the various lectures and radio appearances of Acton staff as well as their recently-started "Radio Free Acton" with a bit more production value (hosted by an old blogging friend of mine, Marc VanderMaas). 

Recently in the podcast stream was a talk by Acton President Rev. Robert Sirico entitled "The Rise (And Eventual Downfall) of the New Religious Left".  It is a 35 minute speech in which Rev. Sirico covers the fallacies of the Religious Left by noting history, scripture, and church writings.  He particularly notes the Left’s penchant for increasing the power of government (which history shows never ends well) in the name of caring, when the role of the church in society is to change hearts and allow human society to come naturally along. 

I’d like to suggest this quick listen to all my SCO comrades, and those, both on the right and the left, who would like to hear a well-reasoned examination of the role of government in Christian charity.  (The page linked above has an embedded audio player.)

Open Question for Venezuela

So how’s that socialism working out?

The pressure on both firms may signal a tougher line by the government against foreign companies in politically sensitive industries such as food. The increasing scarcity of staples such as milk, chicken and eggs is denting Mr. Chávez’s popularity and might worsen the political climate for food companies.

In a sign of how serious the shortages have become, looters last week ransacked government food warehouses in Mr. Chávez’s hometown of Sabaneta. About 100 soldiers and police were sent to restore order, according to the Associated Press.

Empresas Polar, Venezuela’s largest food producer, responded yesterday to nationalization threats, saying it has had no role in the country’s chronic food shortages. Mr. Chávez said Sunday that Polar was "a clear example" of a company that could be nationalized if it were caught hoarding food.

Shortages have become a problem because of price controls implemented by Mr. Chávez in an effort to stem galloping inflation caused by Venezuela’s oil-fueled spending. Companies in many industries complain official prices don’t leave room for profits. Mr. Chávez accuses the companies of hoarding food.

If nationalizing industry causes shortages and inflation, fix it by nationalizing more industries.  Brilliant.  After the Soviet Union, North Korea, communist Eastern Europe, Cuba and many other examples, you’d think people would come to understand that socialism, in spite of all the flowery talk about it being "for the people", is really all about the government and its power.  (Remember that when you hear the about all the "free" goodies you’ll supposedly get from Democrats this election year.)

No human or committee of humans can ever hope to manage something as incredibly complex as a national economy.  Regulate, yes.  Nudge, yes.  Manage, no.  If a business can’t make a profit, it won’t stay in business, and won’t provide the goods or services it was providing. 

Now, Chavez ain’t no dummy.  He knows that all this bullying of corporations gives him street cred as a "man of the people", but even that sheen is beginning to dull as reality sets in. 

Tell ya’ what, though.  I’ll bet Sean Penn, Harry Belafonte and the other glitterati that visit Venezuela won’t have to stand in those lines.  Bad for Hugo’s PR machine, dontcha’ know?

[tags]Venezuela,Hugo Chavez,socialism[/tags]

Live by the Asset Seizure…

…die by the asset seizure.

Exxon Mobil Corp has moved to freeze up to $12 billion in Venezuelan assets around the world as the U.S. company fights for payment in return for the state’s takeover of a huge oil project last year.

The company said it has received court orders in Britain, the Netherlands and the Netherlands Antilles each freezing up to $12 billion in assets of Venezuela state oil firm PDVSA. An Exxon spokeswoman said the total that could be frozen worldwide was $12 billion.

Exxon also won a court order from the U.S. District Court for the Southern District of New York in December freezing more than $300 million belonging to PDVSA, as Exxon argued it would have little chance to recoup its investment from PDVSA should it win its arbitration.

A taste of his own medicine that Chavez may find does not agree with his pallet. But somehow, socialists always seem to think that grabbing up whole industry sectors is the way to utopia. He’s been threatening to do it with the food sector as well because of food shortages caused by price controls.

And that is the lesson here, taught many times over the centuries but lost on socialists; price controls don’t work. And since that’s one of hallmarks of a socialist government, determined to control an economy down to every little detail, then socialism is doomed to fail as well.

A committee cannot hope to manipulate an economy to the degree that Chavez wants to. The sooner the people of Venezuela understand that, the sooner they can remove him from power before he starts expropriating that, too.

[tags]Venezuela,Hugo Chavez,socialism,economics,Exxon,PDVSA[/tags]

Record Profits, But…

When oil company revenues are reported under screaming headlines in the paper or on new sites, they’re only telling you part of the story. Dr. Mark Perry fills us in.

Corporate profits receive a lot of media attention, but what receives considerably less attention are the corporate taxes paid on corporate profits. Do a Google search for “Exxon profits” and you’ll get about 8,000 hits. Now try “Exxon taxes” and you’ll get a little more than 300 hits. That’s a ratio of about 33 to 1.

I’m pretty sure that Exxon’s tax payment in 2007 of $30 billion (that’s $30,000,000,000) is a record, exceeding the $28 billion it paid last year.

By the way, Exxon pays taxes at a rate of 41% on its taxable income!

Dr. Perry has a quick graphic to illustrate profits vs. taxes, and, after a little quick math, notes that this one corporation, Exxon, pays more taxes than the entire bottom 50% of all taxpayers.

Just asking for a little perspective.

[tags]economics,taxes,Exxon Mobile,profits,oil industry[/tags]

Wage Garnishing for Freedom

Yeah, right, this is the first thing I think about when I hear the word "freedom".

Democrat Hillary Rodham Clinton said Sunday she might be willing to garnish the wages of workers who refuse to buy health insurance to achieve coverage for all Americans.

The New York senator has criticized presidential rival Barack Obama for pushing a health plan that would not require universal coverage. Clinton has not always specified the enforcement measures she would embrace, but when pressed on ABC’s "This Week," she said: "I think there are a number of mechanisms" that are possible, including "going after people’s wages, automatic enrollment."

I’m sorry, but that does not give me a warm fuzzy about what other freedoms Hillary might take away from us for "our own good". 

"What the Public Wants"

That’s what many folks think that Hollywood produces, and it’s the excuse given when others lament what comes out of the movie industry.  The public wants it, and the movie houses’ job is to make money, so the produce what does it best.

If that’s so, it’s time for a change of direction in Hollywood.

Americans flock to movies with patriotic, moral content, according to a study that looked at thousands of movies released by Hollywood in recent years, but they avoid those with socialist and anti-capitalist themes in droves.

"Movies with very strong Judeo-Christian values, capitalist ideals, patriotism and pro-American attitudes do much better at the box office than movies promoting socialism, Marxism, left-wing political correctness and atheism," said Ted Baehr, publisher of MOVIDEGUIDE©: A Family Guide to Movies and Entertainment, and chairman of the Christian Film & Television Commission ministry in Hollywood.

The article goes on to note that the type of movies that Baehr supports make a lot more money, on average, that the others, and this trend goes back at least as far as 2002.  If that’s the case, Hollywood would be making more of them; that’s what the public wants. 

This also goes back to the fact that G and PG rated films make more money than R and NC-17 ones.  Shouldn’t we be seeing more of the ones that bring in the cash?  Well, we’re not likely to see that.

[Baehr] said the results also show that there are two reasons Hollywood releases movies. The first is to entertain and make a profit, while the second is to "show you’re just as Hollywood PC as the next producer."

"If you’re making a movie like ‘Redacted,’ you’re cruising for a box office failure," he said.

He said such projects will only do filmmakers good "in the small inner circle of the elite system that is contrary to the values of faith and tolerance and grace."

The results show the "average movie-goer" has more common sense than the average person who considers himself among those "elite," he said. He also noted that those are only a portion of the Hollywood industry, because "there are a lot of good people, producers, writers and directors" in Hollywood.

I think, too, that the PC ones are as much for indoctrinating and influencing the culture as they are for ideology’s sake.  As such, the excuses for the Hollywood Left don’t hold water.

[tags]Hollywood,movies,Ted Baehr,MOVIEGUIDE[/tags]

Tax-cutting Democrats?

Well, maybe they’re not being vocal about it, but Investor’s Business Daily did not something in Nancy Pelosi’s press release on the economic stimulus package making its way through Congress.

We’re so used to Democrats pushing tax hikes as the answer to all of America’s problems that we were taken aback to find the following words buried in Pelosi’s release on the stimulus deal: "Economists estimate that each dollar of broad tax cuts leads to $1.26 in economic growth."

Gee, that sort of sounds familiar. It’s almost, though not quite, like what the much-reviled supply-side economists have been saying for, oh, 30 years or so.

Pelosi, and other Democrats now suddenly touting tax cuts, may be on to something. We might demur on the notion that all tax cuts must be "broad" to be effective. Evidence really lies more strongly with giving tax cuts to those who would start new businesses or expand old ones. But it’s refreshing to hear a Democrat admit the obvious — that tax cuts work.

Now, their base may have other thoughts on this, which is why I’m sure we haven’t heard much about this being trumpeted by Pelosi’s office.  It has been Received Wisdom, from the Democrats’ point of view, that tax cuts — letting people keep their own hard-earned money back to them — is somehow bad, economically and morally.  Here we see that, behind closed doors (and within unread papers), they may, in fact, not think that, at least economically. 

IBD, though, notes that not every tax cut has the same effect.

But not all tax cuts are created equal — something, unfortunately, Democrats don’t seem to get. They think giving tax cuts — or, more accurately, cash — to those with lower incomes results — presto! — in stimulus. That’s not the case. Rebates are like welfare checks.

In fact, investors and entrepreneurs create economic growth, new jobs and higher incomes. They’re the risk takers who build our economy. But today they’re taxed at the most punitive rates.

The biggest bang for the tax-cut buck, therefore, comes from lowering rates for those who will actually take the money and create or expand a business with it — not just spend it at Wal-Mart.

New research shows this to be true. In the broadest such study ever, University of California economists Christina and David Romer looked at every tax change in the U.S. after World War II.

Their unambiguous conclusion: "Tax cuts have very large and persistent positive output effects." Indeed, a tax cut of just 1% boosts GDP by about 3% for several years, they found.

This is a truth that the Democratic base really isn’t ready for, but baby steps are good.

[tags]tax cuts,Democrats,Nancy Pelosi,Investor’s Business Daily,economy[/tags]

Hysteria Begets Cash

Given this statement…

“There was a tendency toward alarmism, and that fit perhaps a certain fundraising agenda.”

…what subject is it referring to? Global cooling in the 1970s? How about global warming of the 2000s? Don Sensing has a poll going about what people think this refers to. One of the seven is the right answer, but the statement applies just as easily to the other six. Alarmism spurs research grants, “carbon credits”, and all sort of cash transfers,so it’s no wonder that there’s a tendency to make things worse than they are.

In this case, the statement is referring to the AIDS epidemic. While there’s no doubt it is a scourge, the UN is revising it figures down; way down.

The United Nations’ top AIDS scientists plan to acknowledge this week that they have long overestimated both the size and the course of the epidemic, which they now believe has been slowing for nearly a decade, according to U.N. documents prepared for the announcement.

AIDS remains a devastating public health crisis in the most heavily affected areas of sub-Saharan Africa. But the far-reaching revisions amount to at least a partial acknowledgment of criticisms long leveled by outside researchers who disputed the U.N. portrayal of an ever-expanding global epidemic.

The latest estimates, due to be released publicly Tuesday, put the number of annual new HIV infections at 2.5 million, a cut of more than 40 percent from last year’s estimate, documents show. The worldwide total of people infected with HIV — estimated a year ago at nearly 40 million and rising — now will be reported as 33 million.

Having millions fewer people with a lethal contagious disease is good news. Some researchers, however, contend that persistent overestimates in the widely quoted U.N. reports have long skewed funding decisions and obscured potential lessons about how to slow the spread of HIV. Critics have also said that U.N. officials overstated the extent of the epidemic to help gather political and financial support for combating AIDS.

“There was a tendency toward alarmism, and that fit perhaps a certain fundraising agenda,” said Helen Epstein, author of “The Invisible Cure: Africa, the West, and the Fight Against AIDS.” “I hope these new numbers will help refocus the response in a more pragmatic way.”

But…but…I thought the scientific community didn’t work this way. If the science is settled, it’s settled, not bought. Right?


[tags]AIDS,global warming,United Nations,Helen Epstein[/tags]

Polls vs. Reality

I hate polls.

In a Bloomberg/Los Angeles Times survey conducted Oct. 19-22, two-thirds of the respondents said a recession is “likely” next year. A recent poll by CNN and Opinion Research Corp. found that nearly half of Americans believe the country already is in a recession.

And yet…

SECRETARY GUTIERREZ: Thank you. Good morning. Thanks for coming, and I’m here with my colleague, Dr. Ed Lazear, Chairman of the Council of Economic Advisers.

Today, the Department of Commerce announced that third quarter GDP growth was a robust 3.9 percent, making this the 24th consecutive quarter of economic growth. This growth is coupled with a record-breaking 49 consecutive months of job growth and historically low unemployment. The President’s policies have helped foster broad-based economic growth.

This third quarter was fueled by consumer spending, business investment, rising net exports and non-residential construction. Housing remains a concern, but its impact is being offset by growth in other sectors of the economy.

How much this good news is reported by the media, as often as, say, the housing market problems, affects these polls. This is all a matter of perception. Perception is important in the economy, but this points out, not that the economy is bad, but that news of its strength isn’t getting reported.

Hat tip: Power Line.

[tags]economy,polls,CNN,Bloomberg,Los Angeles Times,media[/tags]

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