Get ready for the lefties to start throwing Christmas ornaments (I just wanted to write Christmas in my post to piss off the far left no-fun-having-morons). Obama has again flip flopped on promises he made during the election. This time I accept his definition of change with open arms.
Throughout the election Obama attempted to discredit McCain by saying McCain’s tax plan was going to give more tax breaks to the oil companies who are making “obscene profits”. I hadn’t heard this much rubbish and fact twisting since the last Kevin Trudeau infomercial about “The (Fill in the Blank) Cure the Government Doesn’t Want You To Know About.” Here are the two major fallacies in Obama’s assertion.
1. McCain’s Plan was not going to give more tax breaks to the Oil companies as Obama made it sound. He just wasn’t going to raise their taxes because McCain planned on extending or making the Bush tax cuts permanent.
2. When a monopoly or an oligopoly (the oil industry is an oligopoly) is involved, profits grow exponentially when price increases. More importantly, extracting oil costs a lot of money and capital. Especially for American companies who face huge health and liability insurance costs and labor laws to enforce. However, Obama failed to mention that the american Oil companies only had an 8-10% marginal return on their investment last year. That is well below the return of other vital industries in this country. Again, Obama did not mention this point when talking about the “obscene profits”; he should have said obscene marginal revenue…which the Oil Companies did not have last year.
Again, during the election Obama promised a windfall profits tax on the oil industry. Essentially, this is a “redistribution of wealth” FROM those who dared take the expensive risk to raise capital in order to drill and refine oil TO those who the Government deems in need. Thank heavens Obama had a change of heart.
According to MM
President-elect Barack Obama has shelved a proposal to slap the oil and gas companies with a new windfall profits tax because oil prices have dropped so much in recent months, the transition team confirmed today.
“President-elect Obama announced the policy during the campaign because oil prices were above $80 per barrel,” a transition aide said. “They are currently below that now and expected to stay below that.”
Obama’s proposal had called for using the proceeds from the tax to give American consumers an energy rebate worth up to $500 per individual or $1,000 per married couple.
This is great for free market operations, but it raises an even more important question. Obama expected the windfall tax to pay for many of his programs; where is the money going to come from now?
Obama now claims that his tax relief, based on refundables rather than actual cuts in marginal rates, no longer relies on the supposed income that windfall-profits taxes would have generated. If so, it’s difficult to see where the money will originate in a sharp recession. They want to raise the marginal rates on top earners, with some suggesting an increase from 36% to as high as 44%, which will have the effect of halting capital investment and extending the recession. Under static analysis, that money might exist, but any dynamic analysis will show that the revenue from those rate hikes not only won’t fund the expansive vision of new government spending Obama promised, it won’t pay for the massive refundables either.
If Obama has reneged on his windfall profit tax, expect him to renege on most of his promises over the past year or so; there won’t be sufficent funds. If he continues on his trek for a “Great Civilization” or the installation of a “New Plan: Part Deux”, we will see deficits even larger than that of President Bush. The people wanted Change, but I don’t think this was the change his supporters expected.